Adobe remains the best example of what not to buy because AI has had minimal impact and its backlog is slowing rapidly. Management chose user acquisition over monetization, as Duolingo did, leaving open whether users stay when prices rise; for now, waiting to monetize looks the same as being unable to. Free or cheaper tools that match its specialist subscriptions could cut usage, RPO and cash generation. When acceleration and margin expansion are everywhere, owning neither makes little sense. … Show more

Adobe is best avoided because a very low valuation comes with a highly uncertain future, making the situation amazingly complex. x.com 

Adobe's choice of Anil Chakravarthy as CEO signals that its next chapter is AI-driven growth, and a CEO change alone is no reason to alter the thesis. An internal operator with enterprise, data and AI-product experience, he takes over from Shantanu Narayen on December 1. The real risk is the departure of David Wadhwani, who ran Creativity and Productivity, the products most exposed to AI. Q3 results on September 10 must show whether AI is adding growth or just defending the franchise. x.com 

Adobe printed its first visible cost consequence of generative AI: cost of subscription revenue grew 24.1% versus 13.7% subscription revenue growth, cutting gross margin from 89.28% to 88.71%. Application companies rent compute rather than build data centers, so going compute-heavy shows up in cost of revenue while capex stays near 1.3% of sales. Nine-month margin is flat and the cost line isn't broken out, so this is one quarter; two or three more would confirm a trend. It trades at 14x. x.com 

Adobe's 8x P/E signals that its outlook numbers are unreliable, its capital allocation is poor and it is likely a casualty of AI. It spent all its free cash flow buying back shares at $400 and is on a direct collision course with AI; no one can say its products will be as crucial as in the last two decades. Unlike Meta in 2022, whose ads business was never impaired, there are too many unknowns. It could work or stagnate for years, so it sits in the too-hard bucket even if multiples scream buy. … Show more

Adobe's cash generation and growing AI subscriptions give its tentative turnaround fundamental support. It has $10.59B in free cash flow; revenue and EPS are expected to grow at double-digit rates through 2028, while AI-first ARR is up 150% year over year and Firefly ARR 40% quarter over quarter. Its Stage 1 base is attempting to break a long downtrend. x.com 

Adobe faces an existential AI question: if anyone can edit an image or generate a video with a text prompt, what is Photoshop for? Image and video generation is changing faster than almost any field but code, threatening the complex interfaces Creative Cloud was built on, and Adobe relies on Google, OpenAI, Midjourney and others for frontier models. Canva and startups are attacking pieces of the suite. Pixel-perfect editing and Firefly's $250M ARR, up 75% a quarter, are the bull case. x.com 

Adobe's ARR deceleration is not a one-off quarter but has been consistent for nine quarters. Whether recent freemium growth can drive revenue acceleration in coming quarters remains to be seen. x.com  x.com 

Adobe's AI-first ARR passing $500M and growing more than 150% year over year is a strong answer to the belief that AI will only hurt the company. AI is still a small part of the business, but the quarter was a really solid beat and raise. x.com 

Adobe's problem is no longer valuation but bad sentiment toward software companies. It fell after hours in sympathy with ServiceNow despite trading around 15x trailing and 10x forward earnings while still growing 10%, and none of that matters right now. To recover, Adobe needs more collaborative projects and joint events with leading AI companies so it is seen as definitively part of the future. x.com