Adobe Inc. (ADBE): A Bull Case Theory

We came across a bullish thesis on Adobe Inc. on Rebound Capital’s Substack. In this article, we will summarize the bulls’ thesis on ADBE. Adobe Inc.'s share was trading at $357.24 as of August 18^th. ADBE’s trailing and forward P/E were 22.89 and 15.41 respectively according to Yahoo Finance.

Adobe Inc. (ADBE) is a leading software company specializing in content creation, document productivity, and digital marketing, with flagship products including Photoshop, Illustrator, After Effects, Premiere Pro, and Acrobat PDF. Its business model is overwhelmingly subscription-based, generating highly recurring revenue, with Digital Media contributing 74% of revenue and Digital Experience 25%, while the remaining 1% comes from legacy print tools.

The company’s revenue is geographically diversified, with 60% from the Americas and strong growth across EMEA and APAC. Over the last 18 months, Adobe’s stock has fallen nearly 50%, driven primarily by investor concerns over intensifying competition from AI-driven creative tools and rival platforms like Canva, as well as saturation in its subscription model, which limits organic growth. Despite these headwinds, Adobe retains several catalysts for a potential rebound. Its proprietary AI model, Firefly, enhances image generation and editing across its suite, while enterprise integration allows for upselling of AI tools such as Acrobat AI Assistant, which has already delivered 15% YoY growth in document subscriptions.

Valuation is increasingly attractive, trading at roughly 19× forward earnings and 7× sales, below major peers like Microsoft and Autodesk. Concerns about AI replacing Adobe’s core products are likely overblown, as professional designers still rely on Adobe for high-quality work, using AI primarily to iterate rather than replace workflows. With a user base of 750 million monthly active users, Adobe possesses unmatched distribution and a strong ability to integrate AI into existing products, positioning the company to maintain leadership in professional creative software while capitalizing on AI-driven growth opportunities.

Previously we covered a bullish thesis on Adobe Inc. by jackandjillonthehill in May 2025, which highlighted the company’s high-margin subscription model, strong free cash flow, resilient balance sheet, and growth opportunities in AI and digital content. The company's stock price has depreciated approximately by 5% since our coverage, reflecting short-term market volatility. Rebound Capital shares a similar perspective but emphasizes competitive pressures and AI-driven upsell opportunities.

Adobe Inc. is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 111 hedge fund portfolios held ADBE at the end of the first quarter which was 117 in the previous quarter. While we acknowledge the potential of ADBE as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.