Is Adobe Stock Riskier Than It Looks?
Adobe (ADBE) stock trades at 13.3 times earnings. That multiple compares with 22.9 for the S&P 500, and a valuation that low can make it look as if the bad news is already priced in. Yet on the fiscal Q3 2026 call, executives detailed a trade-off they have chosen to make with customers, and they faced pointed questions about that choice. So what is Adobe giving up, and who is uneasy about it?
Adobe Is Holding Back On Pricing To Win Users
Adobe has chosen to sign up new users rather than push through price changes. On the fiscal Q3 2026 call, executives noted they were glad they avoided focusing on pricing actions. Such moves might have offered short-term relief, but they would ultimately matter less than drawing in new users. The impact of this push is most visible in the free tier: monthly users of Adobe’s free creative products surpassed 100 million and grew more than 70% from a year earlier.
Adobe faced questions about that choice on the same call. Analysts asked when the deferred Creative Cloud price changes would resume. One question pointed out that net new ARR, the yearly subscription value Adobe added during the period, was down 36% to 37% from a year earlier. Executives responded that their approach requires balancing new customer acquisition with growing ARR.
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How Much Of Adobe’s Revenue Is At Stake?
The segment of Adobe that appears most exposed is its subscriptions for creative and marketing professionals. These subscriptions brought in $4.65 billion of the company’s $6.76 billion revenue in fiscal Q3 2026. That subscription revenue grew 13% from a year earlier, indicating the largest part of the business continues to expand. This group also came up on the call. A question highlighted that Adobe’s fiscal Q4 2026 guidance implies only modest growth in that group’s revenue from the prior quarter.
Adobe’s valuation currently sits near the bottom of its historical range. At the end of September 2026, Adobe’s P/E was 13.0. The multiple had been lower at only one of its last 40 fiscal quarter ends, touching 11.4 in fiscal Q2 2026. At its peak in fiscal Q3 2020, the P/E reached 61.0. Moving to October 16, 2026, the stock closed 31.9% below its highest close of the past year.
The open question is whether Adobe’s free users will eventually become paying subscribers. Executives stated that credit consumption, a metric tracking how heavily customers use its AI features, is accelerating from quarter to quarter across Creative Cloud and the Firefly app. Against that, remaining performance obligations, the contracted revenue Adobe has yet to book, grew 8% from a year earlier. A question on the call noted that this marked the first single-digit rise since fiscal 2023.
How Worried Should Adobe Holders Be?
The stock looks riskier than its low P/E suggests, even if the risk appears to be materializing slowly. Adobe’s revenue still grew 12.9% in fiscal Q3 2026 from a year earlier. However, a P/E near its lowest in ten years does not protect against the slower subscription additions raised on the call.
It is also worth noting how far the stock has fallen when markets turn. Adobe stock fell 51% during the 2022 inflation shock and Fed tightening, compared with a 24% drop for the S&P 500. During the 2025 US tariff shock, it fell 26%, compared with 19% for the index.
For the risk to be worthwhile, Adobe’s free users need to become paying subscribers. Total Adobe ending ARR, the yearly value of all its subscriptions, grew 11.2% in fiscal Q3 2026. Moving forward, that growth is the measure to watch when Adobe reports on or around December 9, 2026.
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