Adobe (ADBE) AI Stock Analysis

• Market Cap: $147.13B
• Dividend Yield: N/A
• Average Volume (3M): 5.02M
• Price to Earnings (P/E): 21.6
• Beta (1Y): 1.13
• Revenue Growth: 10.69%
• EPS Growth: 35.19%
• Country: US
• Employees: 30,709
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 5.31
• Shares Outstanding: 418,600,000
• 10 Day Avg. Volume: 4,868,117
• 30 Day Avg. Volume: 5,020,239
• PEG Ratio: 8.80
• Price to Book (P/B): 16.35
• Price to Sales (P/S): 10.73
• P/FCF Ratio: 29.48
• Enterprise Value/Market Cap: 1.03
• Enterprise Value/Revenue: 6.56
• Enterprise Value/Gross Profit: 7.35
• Enterprise Value/Ebitda: 15.90
• 1Y Price Target: $459.92
• Price Target Upside: 32.64% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 27

• Rating: 78 Outperform
• Price Target: $402.00 ▲(15.94% Upside)

Adobe's strong financial performance and positive earnings call are the most significant factors driving its score. The company's robust growth, strategic focus on AI, and raised financial targets underscore its potential. Technical analysis and valuation are less favorable but do not significantly detract from the overall positive outlook.

Positive Factors

AI Integration

Adobe's strategic focus on AI integration enhances its product offerings, driving significant ARR growth and positioning it strongly in the evolving AI market.

Subscription Model Success

The successful subscription model in the Digital Media segment ensures a steady revenue stream and customer retention, supporting long-term financial stability.

Mobile Expansion

Expanding Adobe Premiere to mobile platforms broadens Adobe's market reach, catering to the growing demand for mobile content creation tools and enhancing user engagement.

Negative Factors

Competitive Pressure in AI

Increased competition from major tech companies in AI could challenge Adobe's market position, requiring continuous innovation to maintain its competitive edge.

Revenue Growth Slowdown

The recent slowdown in revenue growth may indicate market saturation or increased competition, potentially impacting long-term growth prospects if not addressed.

Customer Education Challenges

The need for extensive customer education on AI products could slow adoption rates, requiring additional resources and impacting short-term revenue from new offerings.

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 generates revenue primarily through subscription-based services. The Digital Media segment, which includes Creative Cloud and Document Cloud, constitutes the bulk of the company's revenue, with customers paying recurring fees for access to software and services. Adobe's transition to a subscription model has led to a steady increase in Annualized Recurring Revenue (ARR). The Digital Experience segment contributes additional revenue through its suite of marketing and analytics solutions, which businesses purchase to enhance their digital marketing efforts. Furthermore, Adobe establishes strategic partnerships with various enterprises and technology companies, enhancing its market reach and driving sales through integrated solutions. The company's focus on innovation and expansion into new markets, such as artificial intelligence and machine learning, also plays a significant role in its revenue growth.

Adobe Financial Statement Overview

Summary

Adobe demonstrates strong financial health across its income statement, balance sheet, and cash flow statement. The company exhibits high profitability, efficient capital management, and robust cash generation. While revenue growth has decelerated, Adobe maintains a solid financial position with moderate leverage and strong returns on equity.

Income Statement

Adobe's income statement reflects strong profitability with a high gross profit margin of 89.25% and a net profit margin of 30.39% in TTM. Revenue growth is steady at 2.57% TTM, indicating consistent performance. EBIT and EBITDA margins are robust at 37.82% and 41.61% respectively, showcasing effective cost management. The company demonstrates solid revenue growth over the years, though the pace has slowed recently.

Balance Sheet

Adobe maintains a healthy balance sheet with a manageable debt-to-equity ratio of 0.57 TTM, reflecting moderate leverage. The return on equity is impressive at 55.19% TTM, indicating efficient use of equity capital. However, the equity ratio is not explicitly provided, which limits a full assessment of asset financing.

Cash Flow

Adobe's cash flow statement is strong, with a free cash flow growth rate of 1.72% TTM and a high operating cash flow to net income ratio of 1.06. The free cash flow to net income ratio is also robust at 0.98, indicating efficient cash generation relative to net income. The company shows consistent cash flow growth, supporting its operational stability.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	23.18B	21.50B	19.41B	17.61B	15.79B	12.87B
Gross Profit	20.66B	19.15B	17.05B	15.44B	13.92B	11.15B
EBITDA	9.56B	7.96B	7.78B	7.05B	6.67B	5.05B
Net Income	6.96B	5.56B	5.43B	4.76B	4.82B	5.26B
Balance Sheet
Total Assets	28.75B	30.23B	29.78B	27.16B	27.24B	24.28B
Cash, Cash Equivalents and Short-Term Investments	5.94B	7.89B	7.84B	6.10B	5.80B	5.99B
Total Debt	6.64B	6.06B	4.08B	4.63B	4.67B	4.71B
Total Liabilities	16.98B	16.13B	13.26B	13.11B	12.44B	11.02B
Stockholders Equity	11.77B	14.11B	16.52B	14.05B	14.80B	13.26B
Cash Flow
Free Cash Flow	9.60B	7.82B	6.94B	7.40B	6.89B	5.31B
Operating Cash Flow	9.79B	8.06B	7.30B	7.84B	7.22B	5.73B
Investing Cash Flow	-1.02B	149.00M	776.00M	-570.00M	-3.54B	-414.00M
Financing Cash Flow	-11.01B	-7.72B	-5.18B	-6.83B	-4.30B	-3.49B

Adobe Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 346.74
• 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 346.74 is below the 20-day moving average (MA) of 355.29, below the 50-day MA of 353.50, and below the 200-day MA of 392.73, indicating a bearish trend. The MACD of -1.27 indicates Positive momentum. The RSI at 43.72 is Neutral, neither overbought nor oversold. The STOCH value of 25.10 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	83 Outperform	$3.83T	37.81	33.28%	0.64%	14.93%	15.50%
ADBE	78 Outperform	$147.13B	21.60	52.87%	―	10.69%	35.19%
ORCL	71 Outperform	$820.63B	66.85	71.15%	0.63%	9.67%	11.23%
PLTR	71 Outperform	$443.75B	575.17	15.30%	―	38.79%	78.37%
SNPS	67 Neutral	$87.15B	36.73	6.61%	―	3.21%	31.64%
ZS	67 Neutral	$48.69B	―	-2.70%	―	23.31%	31.04%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%