ADBENASDAQThe short version
Adobe Inc.
Adobe sells the subscription software professionals use to create and manage digital content — Photoshop, Acrobat, Creative Cloud. Almost all of its revenue recurs, and it converts about 40 cents of every sales dollar into free cash flow.
The shares peaked near $688 in November 2021, fell to about $193 by mid-2026, and trade near $237 today — down roughly two-thirds even as free cash flow rose about 43%.
$237
Share price
$95B
Market cap
$23.8B
Revenue (FY2025)
10.5%
Free cash flow yield
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The statements
A decade of compounding: revenue up fourfold, free cash flow up fivefold
FY2018 → FY2025as reported · $
Revenue$23.8B+11%
Gross margin89.3%+0.2pp
Operating margin36.6%+5.3pp
Net income$7.1B+28%
EPS$16.70+35%
Free cash flow$9.9B+25%
As-reported income statement and cash flows, FY2018–FY2025.
- Revenue. FY2025 revenue reached $23.8 billion, up from $5.9 billion in FY2016 — roughly 17% a year — with 96% of it recurring subscription.
- Margins. Operating margin runs in the mid-30s (36.6% in FY2025), and the free-cash-flow margin has held between 34% and 44% every year of the decade.
- Cash. Free cash flow was $9.9 billion in FY2025, above net income of $7.1 billion, on capital spending under 1% of revenue.
Price vs per-share
Priced for a stall — for the whole company, not the owner of a share
~8.3%
FCF yield after stock comp
~0%
Implied aggregate FCF growth
+58%
Per-share FCF over a decade~4.7%/yr from buybacks
~115%
FY2025 buyback vs free cash flow
Reverse-DCF at a 10% discount; per-share effect at 4.5–5% annual share retirement.
- Adobe's roughly $95 billion equity value is consistent with owner cash flow growing about 0% a year in perpetuity even on the conservative stock-comp-charged basis (an ~8.3% SBC-charged trailing free-cash-flow yield, down from a ~10.4% headline),
- yet because Adobe retires 4-7% of its shares each year by repurchasing at about 9x free cash flow, per-share owner free cash flow still compounds mid-single-digits on flat aggregate cash — so the stall the price embeds applies to the whole company, not to the owner of a share.
- The counter. The FY2025 buyback ran about 115% of free cash flow, part-funded by ~$2.0 billion a year of note issuance — so continued retirement assumes free cash flow and the ~45% margin hold.
Growth vs rivals
Five years of slowing growth, as new rivals compound in the rooms next door
Digital Media ARR growth, year over year
Adobe-reported Digital Media ARR growth, constant currency, to an ending $19.20B.
- Adobe's Digital Media ARR growth decelerated five straight years — 19%, 15%, 14%, 13%, 11.5% — to an ending $19.20 billion, and its standalone AI products reached only ~$250 million of AI Direct ARR (about 1% of that book),
- even as Figma grows 41% with 136% net dollar retention in the adjacent collaborative-design pool, and Adobe folds its three segments into one from FY2026, removing the standalone Digital Media growth line as the competitive question sharpens.
- The counter. Net-new Digital Media ARR set a dollar record in FY2025, over 75% of it from cross-sell and upsell; Figma's $1.06 billion is about 6% of the segment, concentrated in the interface-design pool Adobe never won.
Revenue mix
Three-quarters of revenue is the creative and document core
FY2025 revenue by segment
Digital Media$17.6B74%
Digital Experience$5.9B25%
Publishing & Advertising$0.3B1%
Digital Media = Creative Cloud, Document Cloud, Express, Firefly.
- Digital Media. Creative Cloud, Document Cloud, Express and Firefly booked $17.6 billion in FY2025 — 74% of revenue, at a 95% gross margin.
- Digital Experience. The enterprise marketing suite added $5.9 billion, about a quarter of revenue, 92% subscription, growing roughly 9%.
- Recurring. Across both, subscriptions were $22.9 billion of the $23.8 billion total — 96% of revenue renews each year.
Sizing the field
Adobe is the largest, and the only clearly profitable name, in the field
Design-software field, FY2025
| Company | Revenue / ARR | YoY | Note |
|---|---|---|---|
| Adobe (Digital Media) | $17.6B | +11% | 95% gross margin |
| Autodesk | $7.2B | +18% | Listed design peer |
| Canva (est.) | ~$4B | +35% | Private; prosumer / SMB |
| Figma | $1.06B | +41% | 136% net retention |
Canva figures privately reported and unaudited.
- Scale. Adobe's Digital Media segment is larger than every design-software rival combined, and the only one earning a clear GAAP profit.
- Growth gap. Figma and Canva grow three to four times faster, but in adjacent pools — collaborative interface design and non-designer creation — not Adobe's imaging and video core.
- The tell. Autodesk, a mature listed peer, grows faster than Adobe while earning a real margin, placing Adobe's 11% at the low end of design software rather than an industry in decline.
Cash quality
The cash holds up under a forensic read
$0.4B
Net cash, after $6.2B of notes
108 days
Deferred revenuea forward-demand signal
36 days
Receivables (DSO)down from 43 in FY2021
~8.3%
FCF yield after stock comp
FY2025 balance sheet and cash-flow statement.
- Clean cash. Operating cash flow has topped net income every year for a decade (about 1.46x), and capex is under 1% of revenue — so operating and free cash flow are nearly the same number.
- Balance sheet. Cash of $6.6 billion sits against $6.2 billion of covenant-free notes laddered to 2035 — roughly net cash. Deferred revenue is a source of cash, not debt.
- The one deduction. Charging the full $1.9 billion of stock-based compensation moves the trailing cash yield from about 10.4% to 8.3% — still above the 8% an owner would demand.
Implied growth
The price assumes cash flow stops compounding; the company guides to ~10%
Price-implied growth vs company guide
Reverse-DCF vs Adobe's FY2026 targets and consensus.
- Reverse DCF. At about $95 billion, discounting free cash flow at 10%, the price embeds roughly 0% long-run growth once stock comp is charged — and about -3% on headline free cash flow.
- The multiple. That is 9.7x FY2026 non-GAAP earnings and under 10x EV to free cash flow, against a software-sector median near 22x.
- The judgment. Which rate is right is a call on the moat, not the arithmetic. The valuation is undemanding; whether it is cheap depends on the deceleration stopping above zero.
Capital allocation
Buying the most stock as the price fell the furthest
Buybacks vs free cash flow
Repurchases ran ahead of free cash flow in FY2024 and FY2025.
- Counter-cyclical. Adobe spent least on buybacks at its 2021 peak (~57% of free cash flow) and most as the stock fell — $11.3 billion in FY2025, about 115% of free cash flow. It has never paid a dividend.
- Share count. Repurchases retired about 20% of the shares over the decade, from 504 million to 402 million, at roughly 9x free cash flow — lifting per-share cash even if the business only holds.
- The limit. Spending above free cash flow is part-funded by ~$2 billion a year of new notes; it is prudent only while the balance sheet is net cash and the price stays depressed.
Digital Experience
The second engine grows with the core, not ahead of it
Segment revenue growth: Digital Experience vs Digital Media
Both engines have decelerated toward the same high-single-digit zone.
- A real second business. Digital Experience — the enterprise marketing suite — reached $5.9 billion in FY2025, up 3.6x over a decade, 92% subscription, at a rising 72% gross margin.
- Not a rescue. It grows about 9% a year, a point or two slower than the creative core — a genuine second leg, but it decelerates alongside Digital Media rather than offsetting it.
- Going dark. From FY2026 the segment folds into a blended customer-group line, so FY2025 is the last clean read on its growth and margin.
The M&A record
A decade of clean tuck-ins, and one $20 billion exception
Adobe acquisitions
| Acquisition | Year | Price | Status |
|---|---|---|---|
| Figma (intended) | 2022 | $20.0B | Abandoned 2023 |
| Marketo | 2018 | $4.75B | Integrated |
| Semrush | 2026 | $1.87B | Integrating |
| Workfront | 2020 | $1.52B | Integrated |
| Frame.io | 2021 | $1.18B | Integrated |
A decade of impairment tests has produced no goodwill write-down.
- Build first. Adobe's deals are small, cash-funded and concentrated in the enterprise segment, with no write-down in a decade. Its AI response was funded internally through R&D, not bought.
- The exception. The abandoned $20 billion Figma deal — roughly 50x revenue — cost more than $1.2 billion to walk away from, and the discipline held only because regulators blocked it.
- What it signals. The default is restraint; the ceiling on what Adobe will pay when strategically cornered is high.
Three paths
Even flat revenue leaves a high-single-digit cash yield, plus the buyback
Illustrative FY2036 revenue by scenario
Bear — substitution bites (0%)
$26B
Base — a growth ceiling (~5%)
$42B
Bull — AI is additive (~10%)
$67B
Illustrative bands from a ~$26B FY2026 base; margin held near 40%.
- Base case. The installed base renews at double digits while rivals keep the fastest-growing new pools; growth fades toward mid-single digits and revenue reaches about $42 billion by FY2036.
- Bear case. Generative tools commoditize enough of the creation step that revenue holds flat near $26 billion; margin protects cash flow, so free cash flow stays near $10 billion and the ~8.5% owner yield is close to the whole return.
- Ten-year test. Revenue is very likely higher in a decade: the book is 96% recurring, $22.3 billion is already contracted, and a decline needs sustained net contraction no subscription-era year has produced.
The dislocation
Down roughly two-thirds from the peak while cash flow rose
Adobe share price: the report weighs whether the derating reflects the AI risk or overstates it.
- The gap. The shares peaked near $688 in November 2021 and trade near $237 today; over the same window free cash flow rose about 43%, to a trailing $10.1 billion.
- Why. Generative AI arrived as a genuine shift, the $20 billion Figma deal collapsed, and from FY2026 Adobe stops disclosing its Digital Media growth line — a real, if unquantified, risk to the base.
- What decides it. Whether double-digit ARR growth holds or fades toward a stall, and whether Figma's 136% retention spreads from interface design into imaging and video.
What to watch
A high-single-digit owner yield priced for a stall Adobe has not yet shown — against an AI risk it cannot yet quantify.
- 01Organic ARR growth (ex-Semrush, constant currency) falling below high-single digits after Semrush laps.
- 02Net-new Digital Media ARR rolling over, or the freemium user base ceasing to grow.
- 03Consolidated non-GAAP operating margin slipping below ~45% as price increases are deferred.
- 04Figma's 136% net dollar retention spreading from interface design into imaging and video.
This distills a guided study of Adobe built chapter by chapter — the statements, the moat, the cash, and the price.
Compiled from the full report · 2026-07-18 · For information, not investment advice.