One-glance verdict
Undervalued
$562.22 our estimate vs market $266.51
Wall Street consensus: $276.58 (-50.8% lower than our fair-value estimate)
53% below our estimate, below the bear case
Fundamentals snapshot
Adobe Inc.
ADBE · NMS · Technology · Software - Application
Current price
$266.51
52-week range
$190.12 - $370.86
Market cap
$105.94B
Balance sheet
Healthy
33.10x Strong cushion
Net debt $1.45B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
1 Risk
3 rewards · 1 risks
- Reward Revenue grew 6.0% last year.
- Reward Returns 63.0% on equity, ahead of 83% of its peers.
- Reward Free cash flow was positive in 10/10 years.
- Risk Insider ownership is only 0.2% (peer median: 2.4%).
What this company does
Adobe Inc.
Adobe is a software company famous for creative tools like Photoshop for photo editing and Acrobat for PDF documents. The company makes most of its money from selling monthly and yearly subscriptions, which provides a steady stream of recurring revenue (predictable income that comes in regularly, like a magazine subscription). This subscription model locks customers into Adobe's family of interconnected products, making it difficult for them to switch to a competitor.
How the company got here
Founded in 1982 by two computer scientists from Xerox, Adobe's first big breakthrough was PostScript, a technology that allowed computers to print text and images exactly as they appeared on screen. This innovation was a key part of the desktop publishing revolution. Over the years, Adobe created or acquired iconic software like Photoshop for photo editing, Illustrator for graphics, and Premiere Pro for video editing. A major turning point was its shift from selling software in a box to a subscription service called Creative Cloud, where users pay a monthly fee for access to a whole suite of tools.
What it actually does
Adobe is a software company that makes tools for creative professionals and businesses. If you've ever seen a digitally edited photo, watched an animated movie, or read a PDF document, you've likely encountered Adobe's work. Their products help people create and edit everything from photos and videos to websites and marketing materials. They are best known for their Creative Cloud subscription, which bundles together famous applications like Photoshop, Illustrator, and Premiere Pro.
Digital Media
This is Adobe's largest and most well-known business, making up the vast majority of the company's revenue (the money it brings in from sales). It includes the Creative Cloud, a subscription that gives users access to a wide range of software for photography, graphic design, and video editing. This segment also houses the Document Cloud, which includes products like Adobe Acrobat for creating and editing PDF files. Customers are typically creative professionals, students, and businesses of all sizes who pay a recurring subscription fee.
Digital Experience
This part of the company focuses on software and services for businesses to manage their marketing, advertising, and customer analytics (the process of finding meaningful patterns in customer data). Think of it as a toolkit for large companies to understand their customers and deliver better online experiences, from personalized websites to targeted advertising campaigns. This segment is a significant and growing part of Adobe's business, serving large enterprise customers.
Publishing and Advertising
This is the smallest of Adobe's business segments. It includes a variety of other software products, such as tools for creating e-learning content and technical documents. This segment also contains Adobe's advertising solutions, which help businesses manage and optimize their ad campaigns. While not as large as the other two segments, it provides important tools for specific business needs.
What management is betting on now
Adobe is heavily focused on integrating artificial intelligence (AI) into its products. They have introduced a family of AI models called Adobe Firefly, which can generate images and text, aiming to make content creation faster and more accessible for users within their existing software. The company is also betting on expanding its reach to a broader audience, including non-professionals, through easier-to-use applications like Adobe Express. Another key priority is to provide a complete solution for large businesses to manage their entire content process, from creation to marketing and analytics.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$1.96B
FY2024 Q4
$2.87B
FY2025 Q1
$2.46B
FY2025 Q2
$2.14B
FY2025 Q3
$2.13B
FY2025 Q4
$3.13B
FY2026 Q1
$2.92B
FY2026 Q2
$2.11B
Revenue
$6.62B
Net income
$1.71B
Diluted EPS
4.25
Operating cash flow
$2.17B
Free cash flow
$2.11B
Fetching…
Sources
Revenue
$6.40B
Net income
$1.89B
Diluted EPS
4.60
Operating cash flow
$2.96B
Free cash flow
$2.92B
Fetching…
Sources
Revenue
$6.19B
Net income
$1.86B
Diluted EPS
4.44
Operating cash flow
$3.16B
Free cash flow
$3.13B
Fetching…
Sources
Revenue
$5.99B
Net income
$1.77B
Diluted EPS
4.18
Operating cash flow
$2.20B
Free cash flow
$2.13B
Fetching…
Sources
Revenue
$5.87B
Net income
$1.69B
Diluted EPS
3.94
Operating cash flow
$2.19B
Free cash flow
$2.14B
Fetching…
Sources
Revenue
$5.71B
Net income
$1.81B
Diluted EPS
4.14
Operating cash flow
$2.48B
Free cash flow
$2.46B
Fetching…
Sources
Revenue
$5.61B
Net income
$1.68B
Diluted EPS
3.75
Operating cash flow
$2.92B
Free cash flow
$2.87B
Fetching…
Sources
Revenue
$5.41B
Net income
$1.68B
Diluted EPS
3.76
Operating cash flow
$2.02B
Free cash flow
$1.96B
Fetching…
Sources
Is it cheap or expensive?
Fair value $562.22 vs current price $266.51
Wall Street consensus is the average analyst price target: $276.58 (-50.8% lower than our fair-value estimate).
Our most-likely fair value is $562.22 a share — about 111.0% above today's price of $266.51, so the stock currently looks cheap (undervalued).
Is it drowning in debt?
Healthy
Net debt $1.5B. Interest coverage 33.1x.
Net debt
$1.45B
Interest coverage
33.10x
Adobe Inc.'s profit covers its interest bill about 33.1 times over. which is stronger than most peers shown here.
Healthy
Worse cushion
Baseline
Better cushion
ADBE
BASELINE
Adobe Inc.
Total debt $7.08B Interest coverage 33.10x This is the baseline the peer rows are being compared against.
Total debt $128.81B Interest coverage 50.88x +54% vs ADBE Carries about 1.5x more debt cushion than ADBE.
Total debt $167.43B Interest coverage 4.88x -85% vs ADBE Carries about 6.8x less debt cushion than ADBE.
Total debt $11.54B Interest coverage 19.55x -41% vs ADBE Carries about 1.7x less debt cushion than ADBE.
Total debt $8.34B Interest coverage 19.99x -40% vs ADBE Carries about 1.7x less debt cushion than ADBE.
What you should know
The case for and against ADBE
3 Rewards
1 Risk
Rewards
-
Revenue grew 6.0% last year.
-
Returns 63.0% on equity, ahead of 83% of its peers.
-
Free cash flow was positive in 10/10 years.
Risks
-
Insider ownership is only 0.2% (peer median: 2.4%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
15.25x
Forward P/E
9.69x
P/B
9.23x
P/S
4.20x
EV/EBITDA
11.04x
PEG ratio
0.65x
Profitability
How much profit each dollar creates
Gross margin
89.4%
Operating margin
35.3%
Net margin
28.7%
ROE
63.0%
ROA
19.9%
Health
Liquidity and balance-sheet strength
Debt / equity
0.61x
Current ratio
0.75x
Quick ratio
0.63x
Total debt
$7.08B
Total cash
$5.63B
Growth
How the business has been compounding
Revenue TTM
$25.20B
Revenue 5Y CAGR
10.8%
EPS TTM
17.48
EPS 5Y CAGR
18.2%
Cash flow
How much cash the business throws off
Operating CF TTM
$10.48B
Free CF TTM
$9.85B
FCF margin
39.1%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
2005-03-24