Tomislav Marinovic
Engineer, AI Value-Chain Research
Adobe's core value is being eroded because gen AI increasingly excels at what Adobe did better than anyone: generating and editing images, video, audio and designs. Adobe likely has no proprietary data advantage, or at least none visible, the gap a quoted post says would leave it more exposed to AI disruption. Bulls may know better. x.comÂ
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.comÂ
Adobe could eventually be dead as intelligence becomes an abundant commodity and anyone can edit their own videos and photos. Claude, OpenAI and open-weight models such as Kimi, Qwen and DeepSeek are in a price fight to zero, so years of developer work no longer form a moat. The new moats are trust, distribution and hard-to-get data. x.comÂ
Adobe is a bit undervalued, though not significantly, at 13x earnings with 13% revenue growth. Its falling profit margin is concerning, and AI threats are growing as image generation improves. x.comÂ
Adobe looks dead because AI can now generate images in 0.6 seconds, undercutting the value case for buying it. The stock is losing its 200-month average, a 20-year average price that only a truly dead name breaks, making it something to avoid. x.comÂ
Adobe is falling despite growing revenue and earnings because AI is disrupting its core image- and PDF-editing products, and that kind of disruption simply takes time to show up in the numbers. Newspapers after the internet and BlackBerry after the iPhone followed the same path. Anyone using AI to edit images or PDFs can see it. x.comÂ
Adobe is a strong company hit harder than it should be, as the market treats a temporary slowdown as permanent decline. It fits the undervalued setup of a real moat, temporary rather than structural problems and extremely negative sentiment, where the price has fallen more than the fundamentals, lowering risk and raising upside. Great companies adapt and recover. x.comÂ
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.comÂ
Adobe is hard to want to own after an open-source project reimplemented its full software suite, as @math_fournity reports. x.comÂ
Adobe trades at 10x forward earnings despite a massive creative-software moat, as the market writes it off as a dead legacy app because of AI tools. It has trained its AI on billions of proprietary assets, embedded Firefly in 75% of the Fortune 500 and reached $26 billion of recurring revenue, even after regulators killed its $20 billion Figma deal and its CEO stepped down. The next decade could be challenging for growth, though nothing shows signs of that yet. x.com x.comÂ
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
