Adobe under pressure from AI, but the share price is becoming increasingly attractive

Adobe is increasingly attractive on valuation metrics following its sharp share price decline, with a P/E ratio of approximately 11.4 and a free cash flow yield exceeding 12%. The primary forecast for ADBE assumes a test of support near 160 USD, followed by a rebound towards 330 USD.

Adobe Inc. (NASDAQ: ADBE) delivered another strong quarter in Q2 of the 2026 financial year, extending the momentum seen in Q1. In the previous quarter, revenue increased by 12% to 6.40 billion USD, while growth accelerated to 13% in Q2, with revenue reaching a record 6.62 billion USD. Non-GAAP earnings per share came in at 5.96 USD, also exceeding the company’s guidance.

The key positive from the report was the resilience of the subscription business. Total Customer Group subscription revenue increased to 6.39 billion USD, while total ARR reached 27.10 billion USD, including the contribution from Semrush. This indicates that Adobe’s core business model remains strong despite growing competition from new AI-powered tools.

The company’s AI business also continues to develop. ARR from AI-first applications more than tripled year-on-year, surpassing 500 million USD. Adobe is actively integrating AI into Acrobat, Creative Cloud, Express, and its marketing products to retain users and gradually convert audience growth into paid revenue.

The company’s outlook for the next quarter and the full financial year remains strong. Adobe expects further growth in both revenue and earnings and anticipates maintaining solid momentum in the subscription business. The updated guidance already incorporates Semrush’s contribution and suggests that management expects demand for Adobe’s products to remain strong in the second half of the year.

This article examines Adobe Inc., outlines the sources of its revenue, reviews Adobe’s quarterly performance, and discusses expectations for the 2026 financial year. It also provides a technical analysis of ADBE shares, forming the basis for the forecast for Adobe stock in the 2026 calendar year.

About Adobe Inc.

Adobe was founded in December 1982 by John Warnock and Charles Geschke. The company specialises in software for businesses and individual users through the Adobe Acrobat, Illustrator, Photoshop, and Premiere Pro applications. It also provides digital marketing and document management solutions through the Creative Cloud and Experience Cloud platforms. The company went public on 20 August 1986, listing its shares on the NASDAQ under the ticker symbol ABDE.

Adobe Inc.’s main revenue streams

Adobe’s revenue comes from the following sources:

• Digital Media: products and solutions that help create, edit, and distribute digital content. This segment enables users to work with graphics, video, animation, web design, and other digital media. It forms the core of Adobe’s business.
• Digital Experience: business solutions that improve client interaction through digital channels. This includes Adobe Experience Cloud, which offers analytics, marketing campaign management, content personalisation, and client experience optimisation tools. It helps businesses analyse data, automate marketing processes, and create a seamless user experience across websites, apps, and other platforms.

Since Q1 of fiscal year 2025, Adobe has begun providing information on subscription revenue by creating two groups:

1. Business Professionals and Consumers Group: this group includes revenues from Acrobat, Adobe Express, and Document Cloud subscriptions.
2. Creative and Marketing Professionals Group: includes revenues from Digital Experience subscriptions and all other Creative Cloud subscriptions.

Adobe Inc. Q1 2025 financial results

On 12 March, Adobe Inc. released its Q1 2025 financial results for the quarter ended 28 February 2025. Below are its highlights:

• Revenue: 5.71 billion USD (+10%)
• Net income: 2.22 billion USD (+8%)
• Earnings per share: 5.08 USD (+13%)
• Operating income: 2.71 billion USD (+10%)

Revenue by segment:

• Digital Media: 4.23 billion USD (+11%)
• Digital Experience: 1.41 billion USD (+10%)
• Business Professionals and Consumers Group: 1.53 billion USD (+15%)
• Creative and Marketing Professionals Group: 3.92 billion USD (+10%)

Commenting on its record Q1 FY 2025 revenue, Adobe’s management emphasised the significant role of AI-based innovation. CEO Shantanu Narayen stated that Adobe’s AI achievements drive creative economic growth. In particular, he noted that AI-focused products (Acrobat AI Assistant, Firefly App, and GenStudio) generated over 125.00 million USD in revenue, which is expected to double by the end of fiscal year 2025.

As part of its Q2 2025 financial guidance, Adobe expects total revenue to be between 5.77 and 5.82 billion USD and EPS between 4.95 and 5.00 USD. The company also anticipates an operating margin of approximately 45%. In the Digital Media segment, Adobe expects revenue of 4.27-4.30 billion USD. Overall, these projections are broadly in line with analysts’ expectations. However, following their release, the company’s stock fell by over 14% as investors voiced concerns about the pace of monetising Adobe’s AI initiatives.

Adobe Inc. Q2 2025 financial results

On 12 June, Adobe Inc. released its Q2 2025 financial results for the quarter ended 30 May. Below are its key highlights:

• Revenue: 5.87 billion USD (+10%)
• Net income: 2.17 billion USD (+8%)
• Earnings per share (EPS): 5.06 USD (+13%)
• Operating profit: 2.67 billion USD (+10%)

Revenue by segment:

• Digital Media: 4.35 billion USD (+11%)
• Digital Experience: 1.46 billion USD (+10%)
• Business Professionals and Consumers Group: 1.60 billion USD (+15%)
• Creative and Marketing Professionals Group: 4.02 billion USD (+10%)

Adobe reported a strong performance in Q2 fiscal 2025, with revenue reaching 5.87 billion USD, up 11% year-on-year. Growth was underpinned by sustained demand for Creative Cloud products and robust performance in the Digital Experience segment.

Artificial intelligence remains a key driver of growth, with Firefly (image and video generation), Acrobat AI Assistant, Adobe Express and GenStudio contributing to increased user engagement. Adobe stated that it expects to exceed 250 million USD in annual revenue from AI products by year-end.

Management raised its full-year 2025 guidance. Revenue was expected in the range of 23.50-23.60 billion USD and EPS at 20.50-20.70 USD, both above previous estimates. For Q3 FY2025, Adobe projected non-GAAP EPS of 5.15-5.20 USD and revenue of 5.87-5.92 billion USD, also above analysts’ consensus forecasts. The operating margin was expected to be around 45.5%.

The company’s cash flows remained strong, with an operating cash flow of 2.19 billion USD and 3.5 billion USD spent on share buybacks. A further 10.9 billion USD remained in repurchase reserves, supporting shareholder value.

Nevertheless, the shares came under pressure as investors grew concerned about intensifying competition in AI-based solutions from players such as Canva, OpenAI, and Alphabet Inc. The market was also waiting for firm evidence that AI integration would deliver sustained margin expansion rather than remain just a buzzword.

Adobe Inc. Q3 2025 financial results

On 11 September, Adobe Inc. published its Q3 2025 financial results for the quarter ended 29 August. The key figures are as follows:

• Revenue: 5.99 billion USD (+11% year-on-year)
• Net profit: 2.25 billion USD (+8% year-on-year)
• Earnings per share (EPS): 5.31 USD (+14% year-on-year)
• Operating profit: 2.77 billion USD (+10% year-on-year)

Revenue by segment:

• Digital Media: 4.46 billion USD (+12% year-on-year)
• Digital Experience: 1.48 billion USD (+9% year-on-year)
• Business Professionals and Consumers Group: 1.65 billion USD (+15% year-on-year)
• Creative and Marketing Professionals Group: 4.12 billion USD (+11% year-on-year)

Adobe outperformed expectations in Q3 FY2025. Revenue was 5.99 billion USD (+11% year-on-year), while non-GAAP EPS reached 5.31 USD – both ahead of analyst estimates of 5.92 billion USD in revenue and 5.18 USD in EPS. Growth was driven primarily by subscription products, with Digital Media revenue rising to 4.46 billion USD (+12% year-on-year) and annual recurring revenue (ARR) in this segment reaching 18.59 billion USD (+11.7% year-on-year). Digital Experience contributed 1.48 billion USD (+9% year-on-year), while remaining performance obligations (RPO) rose to 20.44 billion USD, of which 67% are short-term. Operating cash flow totalled 2.20 billion USD, and the company repurchased around 8 million shares.

A positive development was management’s upward revision of the company’s full-year guidance: Adobe now anticipates revenue of 23.65–23.70 billion USD and non-GAAP EPS of 20.80–20.85 USD. Progress in AI monetisation was also highlighted: ARR linked to AI features surpassed 5 billion USD. At the same time, revenue from new AI products had already exceeded the full-year target of 250 million USD in the latest quarter.

However, the report also included factors that concerned investors. Growth in Digital Media ARR slowed compared with previous periods, and the outlook for monetising generative AI remained uncertain against a backdrop of intensifying competition. These issues tempered market optimism despite the strong results.

For Q4 FY2025, Adobe expected revenue of 6.075–6.125 billion USD, GAAP EPS of 4.27–4.32 USD and non-GAAP EPS of 5.35–5.40 USD. Expected revenue by segment was 4.53–4.56 billion USD for Digital Media and 1.495–1.515 billion USD for Digital Experience.

Adobe Inc. Q4 2025 financial results

On 10 December, Adobe Inc. released its Q4 2025 financial results for the quarter ended 28 November. The key figures are as follows:

• Revenue: 6.19 billion USD (+10%)
• Net income (non-GAAP): 2.29 billion USD (+7%)
• Earnings per share (EPS): 5.50 USD (+14%)
• Operating income: 2.82 billion USD (+8%)

Revenue by segment:

• Digital Media: 4.62 billion USD (+11%)
• Digital Experience: 1.52 billion USD (+9%)
• Business Professionals and Consumers Group: 1.72 billion USD (+15%)
• Creative and Marketing Professionals Group: 4.25 billion USD (+11%)

Adobe delivered record results in Q4 of the 2025 financial year and exceeded market expectations on both revenue and earnings. Revenue amounted to 6.19 billion USD (+10% y/y), compared with a consensus estimate of around 6.11 billion USD, while non-GAAP earnings per share reached 5.50 USD (+14% y/y), above expectations of approximately 5.40 USD. Non-GAAP operating income totalled 2.82 billion USD, and non-GAAP net income came in at 2.29 billion USD. The Digital Media segment generated 4.62 billion USD (+11% y/y), while Digital Experience contributed 1.52 billion USD (+9% y/y), indicating solid growth across the company’s core segments. Annual recurring revenue (ARR) increased to 25.2 billion USD (+11.5% y/y), with more than one-third of this base already attributable to products incorporating AI capabilities. This suggests that AI adoption is genuinely supporting subscription growth, rather than serving solely as a marketing tool. Operating cash flow for the quarter totalled 3.16 billion USD, and the company continued its active share repurchase program, buying back 7.2 million shares in Q4 and 30.8 million shares over the full year. This demonstrates management’s confidence in the sustainability of cash flows and the company’s business valuation.

For Q1 2026, Adobe had projected revenue of 6.25–6.30 billion USD and non-GAAP EPS of 5.85–5.90 USD. For the full 2026 financial year, revenue was expected to reach 25.9–26.1 billion USD, with adjusted earnings per share of 23.3–23.5 USD, reflecting expectations for continued double-digit growth in both ARR and profits. Management placed particular emphasis on AI initiatives: AI capabilities are being expanded across Creative Cloud, Document Cloud, and Experience Cloud; Adobe announced the 1.9 billion USD acquisition of Semrush; and its applications are being integrated with ChatGPT.

Overall, the report shows that Adobe is confidently leveraging AI as a growth driver while maintaining strong non-GAAP performance and a measured yet positive outlook for 2026.

Adobe Inc. Q1 2026 financial results

On 12 March, Adobe Inc. (NASDAQ: ADBE) released its Q1 2026 financial results for the quarter ended 27 February 2026. Key figures are as follows:

• Revenue: 6.40 billion USD (+12%)
• Net income (non-GAAP): 2.49 billion USD (+12%)
• Earnings per share (non-GAAP)*: 6.06 USD (+19%)
• Operating income*: 3.04 billion USD (+12%)

Revenue by segment:

• Total Customer Group subscription revenue: 6.17 billion USD (+13%)
• Business Professionals & Consumers subscription: 1.78 billion USD (+16%)
• Creative & Marketing Professionals subscription: 4.39 billion USD (+12%)

Adobe delivered a strong Q1 2026 financial year performance, with results exceeding market expectations. Revenue increased to 6.40 billion USD (+12% year-on-year), compared with consensus estimates of approximately 6.28 billion USD. Non-GAAP earnings per share reached 6.06 USD (+19% year-on-year), ahead of expectations of around 5.87 USD, while total ARR at the end of the quarter increased to 26.06 billion USD (+10.9% year-on-year). These results demonstrated that Adobe continues to deliver double-digit growth while maintaining exceptionally high profitability, with a non-GAAP operating margin of 47.4%.

Management once again highlighted AI as the primary driver of growth. The company reported that ARR from AI-first applications more than tripled year-on-year. Firefly continues to gain traction rapidly, while Acrobat AI Assistant and Express are delivering strong growth in both user adoption and monetisation. Adobe is also integrating its products into emerging AI platforms. During Q1, Acrobat and Express were launched for ChatGPT, while Photoshop gained a conversational editing feature within ChatGPT. However, the transition to the new AI-driven model has not been entirely smooth. Management separately noted that revenue from Adobe Stock – the platform for licensing photos, videos, and other digital content – declined more sharply than the company had expected.

For Q2 2026, Adobe expected revenue in the range of 6.43–6.48 billion USD and non-GAAP EPS of 5.80–5.85 USD, modestly ahead of market expectations. The company reaffirmed its full-year guidance unchanged: revenue of 25.90–26.10 billion USD, non-GAAP EPS of 23.30–23.50 USD, and ending ARR growth of 10.2% for the year.

Adobe Inc. Q2 2026 financial results

On 11 June, Adobe Inc. released its Q2 2026 financial results for the quarter ended 29 May 2026. Below are the key figures:

• Revenue: 6.62 billion USD (+13%)
• Net income (non-GAAP): 2.40 billion USD (+11%)
• Earnings per share (non-GAAP): 5.96 USD (+18%)
• Operating income: 2.95 billion USD (+12%)

Revenue by segment:

• Total Customer Group subscription revenue: 6.39 billion USD (+14%)
• Business Professionals & Consumers subscription: 1.85 billion USD (+16%)
• Creative & Marketing Professionals subscription: 4.54 billion USD (+13%)

Adobe delivered better-than-expected results for Q2 of the 2026 financial year, extending the strong momentum seen in Q1. In the previous quarter, revenue increased by 12% to 6.40 billion USD, while growth accelerated to 13% in Q2. Revenue reached a record 6.62 billion USD, exceeding Adobe’s own guidance range of 6.43–6.48 billion USD. Non-GAAP earnings per share came in at 5.96 USD, compared with guidance of 5.80–5.85 USD.

The key takeaway from the report is that Adobe’s business continues to grow despite increasing pressure from new AI-powered tools. Total Customer Group subscription revenue increased to 6.39 billion USD, while total ARR reached 27.10 billion USD at the end of the quarter. This figure already includes approximately 480 million USD from Semrush. This is an encouraging signal for the company, as the subscription model remains resilient and the Semrush acquisition is beginning to be reflected in the financial results.

AI remains the central theme for Adobe. The company reported that ARR from AI-first applications more than tripled year-on-year, surpassing 500 million USD. In Q1, Adobe highlighted Firefly, Acrobat AI Assistant, and Express as key growth drivers, and by Q2 it had become clear that these products were gradually gaining commercial scale.

However, investors remain cautious. On the one hand, the results are strong, guidance has been raised, and AI products continue to gain traction. On the other hand, investors are concerned that Adobe is increasingly relying on free and freemium tools to expand its user base. While this strategy may accelerate user growth, it also puts near-term pressure on ARR and raises questions about the pace of monetisation.

Additional concerns arose following the announcement of Chief Financial Officer Dan Durn’s departure. This intensified investor uncertainty, particularly as the company had previously indicated that a future CEO transition is also expected. As a result, Adobe shares declined following the release of the results. Investors now want to see not only revenue growth, but also clearer evidence that the company’s AI strategy will translate into faster monetisation.

Guidance for Q3 of the 2026 financial year remains strong. Adobe expects revenue in the range of 6.67–6.72 billion USD and non-GAAP EPS of 6.05–6.10 USD. The full-year outlook was also raised, with the company now expecting revenue of 26.50–26.60 billion USD and non-GAAP EPS of 24.35–24.45 USD. These targets already incorporate the acquisition of Semrush and suggest that management expects demand for Adobe’s products to remain robust in the second half of the year.

Analysis of key valuation multiples for Adobe Inc.

Below are the key valuation multiples for Adobe Inc. based on the Q2 2026 financial year results, calculated at a share price of 204 USD.

Calculation basis:

• TTM revenue: 25.20 billion USD
• TTM net income: 7.23 billion USD
• TTM EBIT: 9.09 billion USD
• TTM EBITDA: 9.85 billion USD
• TTM free cash flow: 10.28 billion USD
• Cash and short-term investments: 5.63 billion USD
• Total debt: 6.65 billion USD
• Net debt: 1.02 billion USD
• Adobe shareholders’ equity: 11.52 billion USD
• Enterprise value (EV): 83.48 billion USD
• TTM interest expense: 261 million USD
• Forward EPS FY2026: 24.40 USD

Valuation multiples analysis for ADBE – conclusion

Based on current valuation metrics, Adobe appears significantly more attractive than most large technology companies. A P/E ratio of approximately 11.4, a P/FCF multiple of around 8.0, an EV/EBITDA ratio of roughly 8.5, and a free cash flow yield above 12% indicate that, following the sharp decline in the share price, the market is valuing Adobe as a profitable business with strong cash flow generation and a meaningful discount to its underlying quality.

The primary risks lie in investor concerns about competition from new AI-powered tools, pressure on monetisation from the freemium model, and the departure of the Chief Financial Officer. As a result, the current low valuation multiples reflect not weak operating performance, but rather market uncertainty over whether Adobe can maintain its historical growth rates in an increasingly AI-driven environment.

Overall, Adobe appears to be a high-quality, profitable business with an attractive valuation, but it carries elevated strategic risk. If the company can demonstrate that AI is not undermining its subscription model but instead strengthening its products and expanding its user base, the current valuation multiples may prove overly conservative.

Expert forecasts for Adobe Inc.’s stock

• Barchart: 9 out of 38 analysts assigned a Strong Buy rating, 1 assigned a Moderate Buy rating, 24 rated the shares as Hold, and 4 assigned a Strong Sell rating. The upper price target is 460 USD, and the lower bound is 190 USD.
• MarketBeat: 5 out of 31 analysts assigned a Buy rating, 21 recommended Hold, and 5 recommended Sell. The upper price target is 440 USD, and the lower bound is 190 USD.
• TipRanks: 7 out of 25 analysts assigned a Buy rating, 16 recommended Hold, and 2 recommended Sell. The upper price target is 379 USD, and the lower bound is 187 USD.
• Stock Analysis: 10 out of 39 analysts assigned a Strong Buy rating, 2 assigned a Buy rating, 24 rated the shares as Hold, and 3 assigned a Strong Sell rating. The upper price target is 487 USD, and the lower bound is 190 USD.

Adobe Inc. stock price forecast for 2026

On the weekly chart, Adobe shares continue to trade within a descending channel. Despite the strong Q2 2026 results, investors remain concerned about the competitive threat posed by AI, as its development could erode Adobe’s market share and lead to slower revenue and earnings growth in the future.

Against this backdrop, investors have been reducing their exposure to the stock. Bearish positioning has also increased, as reflected in the Short Float ratio, which rose from 3.50% in March to 4.70% in June. At the same time, the increase in short interest creates the potential for a short squeeze. If market sentiment towards Adobe’s prospects improves, short sellers may be forced to cover their positions, potentially accelerating a rally in the shares.

On the chart, ADBE is approaching the lower boundary of the channel near 160 USD. This level is acting as a key area of support. In addition, the Stochastic indicator is in oversold territory, which may signal that the decline is nearing completion and that the probability of a rebound is increasing. Based on the current price structure of Adobe shares, the potential scenarios for 2026 are as follows:

The primary forecast for Adobe stock assumes a test of the lower boundary of the channel near 160 USD, followed by a rebound towards resistance at 330 USD. If the shares break above that resistance level, the price could advance towards 420 USD.

Risks of investing in Adobe Inc. stock

Investing in Adobe stock involves several risks that may negatively impact the company’s profitability, revenue, and investor returns:

• Macroeconomic factors: Adobe’s performance is influenced by the broader global economy. Economic downturns and geopolitical events may adversely affect the company’s financial position.
• Competitive environment: the emergence of new competitors, including affordable AI models from startups such as DeepSeek, threatens Adobe’s market share. Intensified competition may exert pricing pressure and reduce profitability.
• Market volatility: Adobe’s financial performance is subject to market fluctuations and other macroeconomic factors. Investors should consider diversifying their portfolio to mitigate the risks associated with investing in the company’s shares.

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