Adobe Inc. (ADBE): A Bull Case Theory

We came across a bullish thesis on Adobe Inc. on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on ADBE. Adobe Inc.'s share was trading at $322.85 as of December 1st. ADBE’s trailing and forward P/E were 19.96 and 13.70 respectively according to Yahoo Finance.

Adobe Inc. (ADBE) finds itself in a striking paradox—operationally stronger than ever, yet trading at a depressed valuation. The company posted record Q2 2025 revenue of $5.87 billion, raised full-year guidance, and continues to generate robust cash flow and elite profitability with gross margins near 90% and ROE above 50%. Despite these fundamentals, Adobe’s shares have lagged, driven by market fears that generative AI will commoditize creativity and undermine demand for its professional tools.

The anxiety is that easy-to-use AI platforms and low-cost competitors like Canva, Affinity, and Figma will erode Adobe’s long-standing dominance. However, this view overlooks the company’s formidable structure and adaptability. Adobe’s twin pillars—Digital Media, anchored by Creative and Document Cloud with $18 billion in recurring revenue, and Digital Experience, a $6 billion enterprise powerhouse—form a resilient and diversified foundation.

In response to AI-driven disruption, Adobe has launched a strategic counteroffensive through Firefly, its proprietary generative AI ecosystem. Built on licensed, commercially safe data, Firefly integrates seamlessly into Adobe’s flagship apps and now aggregates third-party AI models, transforming Adobe into the central hub for creative workflows. This open-platform pivot neutralizes competitive threats while preserving pricing power.

Financially, the company continues to outperform, yet trades at only ~16x forward earnings—half that of Microsoft. The market’s fixation on disruption overlooks Adobe’s enduring moat, operational excellence, and strategic reinvention. For long-term investors, the current disconnect between perception and reality offers a rare, compelling entry point into one of software’s most profitable and adaptable franchises.

Previously we covered a bullish thesis on Adobe Inc. (ADBE) by jackandjillonthehill in May 2025, which highlighted strong margins, cash flow, and disciplined buybacks. The stock has depreciated about 13.9% since then, as AI fears weighed on sentiment. The thesis still stands given Adobe’s durable model and profitability. Darius Dark Investing shares a similar view but stresses AI-driven mispricing and Firefly’s strategic importance.

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, 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.