Adobe ADBE
What does Adobe do?
Adobe is a software group that offers programs and online services for creating, editing, publishing and marketing digital content. The Digital Media segment includes, among other things, the Creative Cloud applications for photography, video, graphics and design, as well as document solutions built around PDF and Acrobat. Customers are creatives, students, businesses and private users. Most of its revenue comes from recurring subscriptions.
The Digital Experience segment offers businesses a platform to analyze, manage and optimize customer experiences, for example in marketing, advertising and commerce. It mainly addresses marketing departments, agencies and retailers. In competition, Adobe benefits from the wide adoption of its standard tools, high switching costs and the integration of its products into a common ecosystem. Competition comes from providers of web-based design tools, from large corporations with their own marketing clouds, and increasingly from AI-powered generators for images, video and text.
Score profile
Rank vs. Software - Application (71 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Adobe ranks among the best in the group Software - Application (9.2/10). On growth, the company ranks in the middle in the group Software - Application (5.5/10). On valuation (higher = cheaper), the stock ranks among the best in the group Software - Application (8.0/10). On financial strength, Adobe ranks in the middle in the group Software - Application (4.9/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 8.6x | 18.0x | better than 89 % |
| Trailing P/E | 13.2x | 32.7x | better than 92 % |
| PEG ratio | 0.6x | 1.4x | better than 86 % |
| EV/EBITDA | 9.4x | 19.7x | better than 86 % |
| Price/sales | 3.6x | 4.4x | better than 61 % |
| Price/book | 7.9x | 5.5x | better than 36 % |
| Revenue growth | 12.9% | 10.8% | better than 60 % |
| Earnings growth | 10.5% | 9.4% | better than 51 % |
| Gross margin | 89.3% | 71.8% | better than 96 % |
| Operating margin | 34.8% | 15.7% | better than 92 % |
| Net margin | 28.1% | 12.3% | better than 91 % |
| Return on equity | 61.9% | 13.2% | better than 87 % |
| Debt/equity | 57.7% | 46.9% | better than 42 % |
| Current ratio | 0.8x | 1.2x | better than 17 % |
| Free cash flow yield | 10.1% | 5.3% | better than 88 % |
| Dividend yield | 0.0% | 1.1% | – |
| Payout ratio | 0.0% | 31.2% | – |
| Beta | 1.38 | 0.96 | – |
Valuation: what is Adobe worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Adobe a model range of 398.04 USD to 498.31 USD per share.
33 analysts, average rating “Hold”, average price target 266.91 USD (+12.8%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Recurring subscription revenue with high customer retention forms the basis for predictable revenue and earnings.
- The use of Creative Cloud and Acrobat as industry standards supports pricing and additional sales.
- The digitization of marketing and customer experiences in companies drives demand in the Digital Experience segment.
Risks
- Generative AI tools from other providers could replace traditional creative software or reduce users' willingness to pay.
- Web-based and cheaper design platforms increase competitive and pricing pressure, especially among beginners and smaller companies.
- Regulatory intervention, for example on subscription models, competition or copyright in AI training, may weigh on the business model and costs.
What to look for with Adobe
Recurring subscription revenue together with customer retention is particularly informative, as it directly reflects the stability and growth quality of the business model.