One-glance verdict
Undervalued
$529.01 our estimate vs market $212.17
Wall Street consensus: $269.61 (-49.0% lower than our fair-value estimate)
60% below our estimate, below the bear case
Fundamentals snapshot
Adobe Inc.
ADBE · NMS · Technology · Software - Application
Current price
$212.17
52-week range
$190.12 - $376.16
Market cap
$84.34B
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: 0.2%).
What this company does
Adobe Inc.
Adobe makes software for creative professionals and businesses, including well-known programs like Photoshop for photo editing and Acrobat for PDFs. The company generates most of its money from monthly and yearly subscriptions to use its software, which creates predictable recurring revenue (income the company can reliably count on at regular intervals). Because Adobe's products are the standard in many creative fields, customers tend to stick with them, making the business very stable.
How the company got here
Founded in 1982 by two former Xerox researchers, Adobe started by creating PostScript, a technology that revolutionized desktop publishing by allowing computers to print text and images exactly as they appeared on screen. The company became a giant in creative software with the launch of iconic programs like Photoshop and Illustrator, and the creation of the PDF document format. A major turning point was its shift from selling software in a box for a one-time fee to a subscription model called Creative Cloud, which created a more predictable stream of revenue (money coming in regularly). Over the years, Adobe has grown by acquiring other companies to expand into digital marketing and e-commerce.
What it actually does
Adobe provides software and services that people and businesses use to create and manage all kinds of digital content. You might know them for popular applications like Photoshop for editing photos, Premiere Pro for editing videos, and Acrobat for working with PDF documents. Beyond these creative tools, Adobe also offers a large suite of products for businesses to manage their marketing, advertising, and sales online. Most of its products are now sold through monthly or annual subscriptions, giving users constant access to the latest versions.
Digital Media
This is Adobe's largest and most well-known business segment, making up the vast majority of the company's revenue. It includes the Creative Cloud, a subscription service offering more than 20 apps like Photoshop, Illustrator, and Premiere Pro for creative professionals and hobbyists. This segment also contains the Document Cloud, which is centered around Adobe Acrobat and Adobe Sign for creating, editing, and signing PDF documents. Customers, from individual artists to large companies, pay a recurring fee to access these tools and services.
Digital Experience
This part of the company provides a platform called Adobe Experience Cloud, which helps businesses manage and optimize their customers' digital journeys. It offers tools for marketing, analytics (understanding customer behavior), advertising, and e-commerce. For example, a large retail company might use these services to understand how people use its website, manage its online advertising campaigns, and personalize marketing emails. This segment serves a wide range of business clients, from marketers and data scientists to top executives, and it represents a significant and growing portion of Adobe's business.
Publishing and Advertising
This is Adobe's smallest segment and contains a mix of older, more specialized products and its advertising solutions. It includes software for things like e-learning, technical document publishing, and high-end printing. This segment also houses the Adobe Advertising Cloud, which provides tools for companies to manage and automate their advertising across different digital channels like search engines and social media. Revenue in this area often comes from licensing technology to other companies and from usage-based fees for advertising services.
What management is betting on now
Adobe is heavily focused on integrating artificial intelligence (AI) across all its products, especially with its AI model, Firefly, which can generate images and text. The company aims to make its creative tools more accessible to everyone, not just professionals, through easier-to-use applications like Adobe Express. Another key priority is expanding its offerings for large businesses, helping them connect their content creation with their marketing and customer data. Management is also pursuing a "freemium" strategy (offering basic versions for free) to attract millions of new users, with the goal of converting them into paying subscribers over the long term.
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 $529.01 vs current price $212.17
Wall Street consensus is the average analyst price target: $269.61 (-49.0% lower than our fair-value estimate).
Our most-likely fair value is $529.01 a share — about 149.3% above today's price of $212.17, 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 $125.43B Interest coverage 53.89x +63% vs ADBE Carries about 1.6x 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 $2.72B Interest coverage 25.27x -24% vs ADBE Carries about 1.3x 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: 0.2%).
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)
12.13x
Forward P/E
7.72x
P/B
7.35x
P/S
3.35x
EV/EBITDA
8.82x
PEG ratio
0.62x
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
17.49
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