Adobe Stock Now 41% Cheaper, Buy?

Adobe (ADBE) stock deserves your consideration. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price

Adobe’s performance stems from Firefly’s deep generative AI integration across Creative and Document Clouds, driving record engagement. By Q2 2025, Firefly facilitated over 24 billion content creations, catapulting AI-influenced Annualized Recurring Revenue (ARR) past $5 billion. This powers Digital Media revenue, which hit $4.35 billion (up 11% year-over-year) in Q2 2025, underscoring strong subscription growth and a raised fiscal 2025 revenue guidance of $23.5-23.6 billion. The pervasive adoption by 99% of Fortune 100 companies using Adobe AI apps further solidifies its market position.

Here is some data

• Revenue Growth: Adobe saw growth of 10.7% LTM and 10.5% last 3 year average, but this is not a growth story
• Recent Profitability: Nearly 42.2% operating cash flow margin and 36.2% operating margin LTM.
• Long-Term Profitability: About 39.0% operating cash flow margin and 35.4% operating margin last 3 year average.
• Available At Discount: At P/S multiple of 6.0, ADBE stock is available at a 41% discount vs 1 year ago.

While revenue growth helps, this is not a growth perspective. Pricing power and high margins generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. Market tends to reward that.

As a quick background, Adobe provides diversified software solutions worldwide, including Creative Cloud subscription, serving enterprise customers through Digital Media, Digital Experience, and Publishing & Advertising segments.

*LTM: Last Twelve Months

But do these numbers tell the full story? Read Buy or Sell ADBE Stock to see if Adobe still has an edge that holds up under the hood.

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Stocks Like These Can Outperform. Here Is Data

Here is how we make the selection: We consider stocks > $10 Bil in market cap, and then include those with high CFO (cash flow from operations) margins or operating margins. We additionally consider only those stocks that have meaningfully declined in valuation over the past 1 year.

Below are statistics for stocks with this selection strategy applied since 12/31/2016.

• Average 12-month forward returns of nearly 19%
• 12-month win rate (percentage of picks returning positive) of about 72%

But Consider The Risk

Adobe isn’t immune to big sell-offs. The stock plunged 72% during the Dot-Com crash and 67% in the Global Financial Crisis. It also fell 60% during the 2022 inflation shock. Even the milder shakeups in 2018 and Covid wiped out more than 25% each. So, no matter how strong the company looks, sharp dips are part of the ride when markets turn sour.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ADBE Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.