Adobe Inc. (ADBE): A Bull Case Theory

We came across a bullish thesis on Adobe Inc. on Summit Stocks’s Substack. In this article, we will summarize the bulls’ thesis on ADBE. Adobe Inc.'s share was trading at $353.27 as of September 24th. ADBE’s trailing and forward P/E were 22.02 and 15.13 respectively according to Yahoo Finance.

Adobe Inc. (ADBE) has seen its stock decline roughly 35% over the past year amid investor concerns about AI potentially commoditizing its creative software. The company remains the dominant provider of digital content tools, with its core Digital Media segment—Creative Cloud, Adobe Express, and Document Cloud—generating $15.9 billion in 2024, or 74% of total revenue, while its Digital Experience segment contributed $5.4 billion.

Both segments continue to grow in the low double digits, and Adobe is investing heavily in AI through Firefly, which leverages Adobe Stock to provide copyright-safe, professional-grade generative AI capabilities. This integration strengthens workflow efficiency, enhances creative output, and addresses the “blank-page” problem, making the suite more powerful rather than less.

Despite market fears of disruption from cheaper AI alternatives like MidJourney, OpenAI, and Google’s tools, Adobe’s professional user base—who rely on seamless integration, reliability, and legal-safe outputs—remains largely insulated. Competing platforms like Canva serve hobbyists and small businesses but do not threaten Adobe’s high-value creative customers. The market appears to conflate casual users drifting to free AI tools with Adobe’s professional ecosystem, leading to a mispricing opportunity.

Financially, Adobe’s fundamentals are strong: consistent 13% revenue CAGR over five years, gross margins around 89%, operating margins above 35%, ROIC near 25%, and a growing backlog of $19.7 billion as of Q2 2025. Management has aggressively repurchased $14 billion of stock since March 2024, reducing share count by 9%, and insiders are buying. Trading at 16x trailing free cash flow, Adobe requires only 8.2% annual FCF growth to justify its current price versus a historical 21% growth, signaling low market expectations. Adobe offers a compelling risk/reward profile, with AI adoption likely expanding its addressable market and the share price reflecting an attractive entry point.

Previously we covered a bullish thesis on Adobe Inc. (ADBE) by jackandjillonthehill in May 2025, which highlighted the company’s dominant digital content position, strong free cash flow, high margins, and growth potential in AI. The company's stock price has depreciated approximately by 5.7% since our coverage. The thesis still stands as Adobe remains resilient, while Summit Stocks emphasizes AI adoption, market mispricing, and recent stock weakness.

Adobe Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 104 hedge fund portfolios held ADBE at the end of the second quarter which was 111 in the previous quarter. While we acknowledge the potential of ADBE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HGTY and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.