Adobe (ADBE) AI Stock Analysis

• Market Cap: $153.15B
• Dividend Yield: N/A
• Average Volume (3M): 3.49M
• Price to Earnings (P/E): 22.6
• Beta (1Y): 1.13
• Revenue Growth: 10.69%
• EPS Growth: 40.10%
• Country: US
• Employees: 30,709
• Sector: Technology
• Sector Strength: 83
• Industry: Software - Infrastructure
• EPS (TTM): 5.06
• Shares Outstanding: 424,200,000
• 10 Day Avg. Volume: 3,740,655
• 30 Day Avg. Volume: 3,494,029
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.17
• Enterprise Value/Revenue: 7.92
• Enterprise Value/Gross Profit: 8.87
• Enterprise Value/Ebitda: 19.03
• 1Y Price Target: $482.08
• Price Target Upside: 36.40% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 28

• Rating: 82 Outperform
• Price Target: $414.00 ▲(17.14% Upside)

Adobe's strong financial performance and positive earnings call are the most significant factors contributing to the high overall stock score. The company's robust revenue growth, high profitability, and effective cash flow management are complemented by optimistic guidance and strategic focus on AI innovations. Technical analysis presents mixed signals, and valuation is reasonable, though the absence of a dividend yield may deter some investors.

Positive Factors

AI and Innovation

Adobe is viewed as an undervalued, high-quality software franchise that is primed for AI to bolster its growth vectors.

Pricing Strategy

Refined pricing and packaging unlock a structurally wider top-of-funnel, driving existing customers to expand engagement and seat count with the platform via Express and Firefly.

Strategic Partnerships

Strategic partnerships with companies like AWS, Microsoft, SAP, Workday, and ServiceNow enhance agentic use cases across customer service, ERP/HR, and data management, showing strong collaborative potential.

Negative Factors

Growth Expectations

Investors may have to be patient for the inflection in growth, current share price creates an attractive entry point at 16X P/E, relative to the large-cap software.

Market Valuation

Investors are not giving enough credit to Adobe for its product innovation, pricing power, and potential to improve growth.

Share Price Reflection

There is potential for mid-teens EPS CAGR that is not reflected in the current share price, indicating undervaluation relative to large-cap software.

Adobe Business Overview & Revenue Model

Company Description

Adobe Inc. is a multinational software company headquartered in San Jose, California, known for its innovative products in digital media and digital marketing. The company operates primarily in two segments: Digital Media and Digital Experience. Core products include Adobe Creative Cloud, which encompasses industry-leading design and multimedia software such as Photoshop, Illustrator, and Premiere Pro, as well as Adobe Document Cloud, which includes tools like Acrobat and Adobe Sign for document management and e-signatures. Additionally, the Digital Experience segment offers a suite of analytics, marketing, and advertising solutions, helping businesses optimize their digital engagement.

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 exhibits strong financial performance with consistent revenue growth, high profitability margins, and effective cash flow management. The company has low leverage and a high return on equity, which enhances its financial stability and positions it well for sustainable growth.

Income Statement

Adobe's income statement reflects strong financial performance with consistent revenue growth, highlighted by a 5.11% revenue growth rate in the TTM (Trailing-Twelve-Months) over the previous year. The company maintains solid profitability with a gross profit margin of 89.23% and a net profit margin of 30.39% in the TTM. Adobe's EBIT and EBITDA margins are also robust at 36.37% and 38.57% respectively, indicating efficient operational management.

Balance Sheet

Adobe has a strong balance sheet characterized by a low debt-to-equity ratio of 0.035 in the TTM, reflecting minimal leverage and a solid equity base. The company's return on equity stands at 60.01%, showcasing strong profitability relative to shareholder investments. However, the equity ratio has decreased slightly to 40.74%, pointing to a moderate reduction in equity relative to total assets.

Cash Flow

Adobe's cash flow statements reveal robust cash generation capabilities with a free cash flow growth rate of 20.61% in the TTM. The operating cash flow to net income ratio is healthy at 1.40, indicating strong operating efficiency. Furthermore, the free cash flow to net income ratio of 1.37 underscores the company's ability to convert revenue into cash effectively.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	21.50B	19.41B	17.61B	15.79B	12.87B
Gross Profit	19.15B	17.05B	15.44B	13.92B	11.15B
EBITDA	7.96B	6.65B	7.05B	6.67B	5.05B
Net Income	5.56B	5.43B	4.76B	4.82B	5.26B
Balance Sheet
Total Assets	30.23B	29.78B	27.16B	27.24B	24.28B
Cash, Cash Equivalents and Short-Term Investments	7.89B	7.84B	6.10B	5.80B	5.99B
Total Debt	6.06B	4.08B	4.63B	4.67B	4.71B
Total Liabilities	16.13B	13.26B	13.11B	12.44B	11.02B
Stockholders Equity	14.11B	16.52B	14.05B	14.80B	13.26B
Cash Flow
Free Cash Flow	7.82B	6.94B	7.40B	6.89B	5.31B
Operating Cash Flow	8.06B	7.30B	7.84B	7.22B	5.73B
Investing Cash Flow	149.00M	776.00M	-570.00M	-3.54B	-414.00M
Financing Cash Flow	-7.72B	-5.18B	-6.83B	-4.30B	-3.49B

Adobe Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 353.43
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ADBE, the sentiment is Neutral. The current price of 353.43 is above the 20-day moving average (MA) of 351.30, below the 50-day MA of 367.52, and below the 200-day MA of 415.84, indicating a neutral trend. The MACD of -3.21 indicates Negative momentum. The RSI at 53.68 is Neutral, neither overbought nor oversold. The STOCH value of 76.83 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ADBE.

Adobe Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	84 Outperform	$3.79T	37.37	33.28%	0.66%	14.93%	15.50%
ADBE	82 Outperform	$153.15B	22.60	52.25%	―	10.69%	40.10%
ORCL	76 Outperform	$659.01B	54.04	85.36%	0.76%	8.38%	16.96%
PANW	72 Outperform	$121.19B	115.11	17.45%	―	14.87%	-57.43%
CRWD	69 Neutral	$104.34B	721.64	-5.76%	―	25.94%	-226.80%
FTNT	67 Neutral	$59.84B	31.77	165.17%	―	14.46%	48.06%
Sector *	61 Neutral	$34.98B	7.37	-10.82%	1.91%	8.82%	-8.66%

Adobe Corporate Events

Adobe Stockholders Approve Equity Plan Amendment

On April 22, 2025, Adobe Inc. held its Annual Meeting of Stockholders, where the stockholders approved an amendment to the 2019 Equity Incentive Plan, increasing the share reserve by 7 million shares. Additionally, the Board of Directors adopted amendments to the company’s bylaws to address SEC’s universal proxy rules and update procedural mechanics for stockholder nominations and proposals. These changes aim to enhance governance and align with regulatory requirements, impacting how stockholder meetings and director nominations are conducted.