Adobe (ADBE) AI Stock Analysis

• Market Cap: $156.52B
• Dividend Yield: N/A
• Average Volume (3M): 4.01M
• Price to Earnings (P/E): 24.2
• Beta (1Y): 1.34
• Revenue Growth: 10.65%
• EPS Growth: 44.84%
• Country: US
• Employees: 30,709
• Sector: Technology
• Sector Strength: 39
• Industry: Software - Infrastructure
• EPS (TTM): 15.18
• Shares Outstanding: 426,200,000
• 10 Day Avg. Volume: 4,113,418
• 30 Day Avg. Volume: 4,008,743
• PEG Ratio: 0.54
• Price to Book (P/B): N/A
• Price to Sales (P/S): 7.84
• Price to Cash Flow (P/CF): 14.40
• P/FCF Ratio: 14.70
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $530.89
• Price Target Upside: 44.56% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 30

Adobe's stock is well-positioned with strong financial performance and promising earnings call highlights, particularly in AI innovation and revenue growth. However, technical indicators suggest caution due to current bearish momentum, and valuation metrics imply moderate pricing in the software industry.

Positive Factors

AI and Innovation

Adobe is well-equipped to capture the expanding addressable market with its innovations and strategic acquisitions, supported by the introduction of the Firefly platform offering AI tools.

Digitalisation and SaaS Transformation

Adobe benefits from continuous digitalisation and has an early mover advantage with its SaaS transformation, achieving above 80% SaaS revenue since 2017.

Negative Factors

Competitive Environment

Adobe participates in a highly competitive environment, which could create downward pressure on product pricing and margins.

Higher Costs

Higher costs associated with Adobe solutions were noted as potential sticking point in a more budget-conscious environment.

Revenue Clarity

The removal of ARR metrics was concerning, especially since management had explicitly said it would provide them.

Adobe Business Overview & Revenue Model

Company Description

Adobe Inc. operates as a diversified software company worldwide. It operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers products, services, and solutions that enable individuals, teams, and enterprises to create, publish, and promote content; and Document Cloud, a unified cloud-based document services platform. Its flagship product is Creative Cloud, a subscription service that allows members to access its creative products. This segment serves content creators, workers, marketers, educators, enthusiasts, communicators, and consumers. The Digital Experience segment provides an integrated platform and set of applications and services that enable brands and businesses to create, manage, execute, measure, monetize, and optimize customer experiences from analytics to commerce. This segment serves marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, data scientists, developers, and executives across the C-suite. The Publishing and Advertising segment offers products and services, such as e-learning solutions, technical document publishing, web conferencing, document and forms platform, web application development, and high-end printing, as well as Advertising Cloud offerings. The company offers its products and services directly to enterprise customers through its sales force and local field offices, as well as to end users through app stores and through its website at adobe.com. It also distributes products and services through a network of distributors, value-added resellers, systems integrators, software vendors and developers, retailers, and original equipment manufacturers. The company was formerly known as Adobe Systems Incorporated and changed its name to Adobe Inc. in October 2018. Adobe Inc. was founded in 1982 and is headquartered in San Jose, California.

How the Company Makes Money

Adobe makes money through a subscription-based revenue model, primarily driven by its flagship product lines: Creative Cloud, Document Cloud, and Experience Cloud. Creative Cloud offers a suite of products like Photoshop, Illustrator, and Premiere Pro, which are widely used by creative professionals for design, video editing, and digital art. Document Cloud includes Adobe Acrobat and Adobe Sign, facilitating document management and electronic signatures. Experience Cloud provides a comprehensive set of tools for digital marketing, analytics, and customer experience management. Adobe's revenue is significantly boosted by its strategic shift to cloud-based services, fostering recurring revenue streams from subscriptions. Additionally, Adobe partners with various technology companies to enhance its product offerings and expand its market reach.

Adobe Financial Statement Overview

Summary

Adobe demonstrates strong profitability with high gross and net profit margins, robust cash flow generation, and prudent balance sheet management. Despite some reliance on liabilities, its strong equity base and cash flow mitigate potential risks.

Income Statement

Adobe's income statement shows strong profitability with a consistent increase in both gross and net profit margins. The TTM gross profit margin stands at 89.0%, and the net profit margin is 30.6%, highlighting efficient cost management and strong pricing power. Revenue growth has been steady, with a TTM growth rate of 2.5%, indicating stability and resilience in the software industry. The EBIT margin is at 36.3%, reflecting solid operational performance, while the EBITDA margin of 40.1% showcases the company's ability to generate cash from operations effectively.

Balance Sheet

Adobe's balance sheet is robust, with a low debt-to-equity ratio of 0.03, indicating minimal leverage and reduced financial risk. The return on equity (ROE) is healthy at 51.5%, showcasing the company's ability to generate substantial profits from shareholders' equity. However, the equity ratio is 43.7%, suggesting that a significant portion of the company's assets is financed by liabilities, which could pose some risk if not managed properly. Overall, the balance sheet indicates good financial health with a strong equity base and prudent debt management.

Cash Flow

Adobe's cash flow statement reflects strong cash generation capabilities with a free cash flow growth rate of 17.3% TTM, indicating efficient cash management and reinvestment strategies. The operating cash flow to net income ratio is 1.39, and the free cash flow to net income ratio is 1.36, underscoring the company's ability to convert profits into cash effectively. This strong cash flow position supports future growth initiatives and provides a buffer against potential economic downturns.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
22.04B	21.50B	19.41B	17.61B	15.79B	12.87B
	Gross Profit
19.61B	19.15B	17.05B	15.44B	13.92B	11.15B
	EBIT
8.00B	6.74B	6.65B	6.10B	5.80B	4.24B
	EBITDA
8.85B	7.96B	6.65B	7.05B	6.67B	5.13B
	Net Income Common Stockholders
6.75B	5.56B	5.43B	4.76B	4.82B	5.26B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.47B	7.89B	7.84B	6.10B	5.80B	5.99B
	Total Assets
8.14B	30.23B	29.78B	27.16B	27.24B	24.28B
	Total Debt
1.52B	6.06B	4.08B	4.63B	4.67B	4.71B
	Net Debt
772.57M	-1.56B	-3.06B	397.00M	829.00M	230.00M
	Total Liabilities
2.95B	16.13B	13.26B	13.11B	12.44B	11.02B
	Stockholders Equity
5.19B	14.11B	16.52B	14.05B	14.80B	13.26B
Cash Flow		Free Cash Flow
9.18B	7.82B	6.94B	7.40B	6.89B	5.31B
	Operating Cash Flow
9.36B	8.06B	7.30B	7.84B	7.22B	5.73B
	Investing Cash Flow
-401.00M	149.00M	776.00M	-570.00M	-3.52B	-414.00M
	Financing Cash Flow
-8.44B	-7.72B	-5.18B	-6.83B	-4.30B	-3.49B

Adobe Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 367.25
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADBE, the sentiment is Negative. The current price of 367.25 is below the 20-day moving average (MA) of 399.12, below the 50-day MA of 426.93, and below the 200-day MA of 492.18, indicating a bearish trend. The MACD of -13.86 indicates Positive momentum. The RSI at 34.51 is Neutral, neither overbought nor oversold. The STOCH value of 24.36 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ADBE.

Adobe Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	81 Outperform	$2.77T	30.05	34.29%	0.85%	15.04%	12.38%
PANW	78 Outperform	$109.36B	93.31	23.38%	―	13.86%	-46.44%
ADBE	75 Outperform	$156.52B	24.19	47.28%	―	10.65%	44.84%
CRWD	73 Outperform	$86.11B	721.64	-0.69%	―	29.39%	-119.62%
FTNT	70 Outperform	$68.78B	39.58	338.74%	―	12.27%	54.69%
ORCL	67 Neutral	$384.83B	32.24	108.79%	1.17%	6.23%	12.37%
Sector *	57 Neutral	$20.94B	10.43	-13.41%	2.52%	4.53%	-23.34%

Adobe Corporate Events

Adobe Announces Leadership Change and New Incentive Plans

On January 24, 2025, Adobe Inc. announced the resignation of Scott Belsky, Chief Strategy Officer, effective March 15, 2025, as he pursues other opportunities. Additionally, Adobe’s Executive Compensation Committee approved the 2025 Performance Share Program aimed at enhancing stockholder value and attracting talent, with performance shares tied to stockholder return and sales goals over a three-year period. This program is designed to align executive interests with those of stockholders and serves as a retention mechanism. The committee also approved the 2025 Executive Annual Incentive Plan to drive revenue growth, profitability, and strategic priorities, with cash bonuses tied to revenue and earnings per share targets.