Martin Bradstreet
Investor & Programmer, Former Poker Player
Adobe has a good chance of owning the tool for AI-era creative work. As people increasingly finish and approve work done by AI agents, typed instructions suit code or legal edits, but art touch-ups are likely faster with an art tool, so Photoshop might be more resilient than Microsoft Office. Against @finphysnerd's view that Adobe users dislike the product enough to leave, the question is what they would move to that Adobe would not own. Not a long yet, but it might be good. x.com x.comÂ
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.comÂ
Adobe is showing it can monetize AI, undercutting the bear case. AI ARR passed $650M and more than doubled year on year, monthly active users crossed 1 billion, and Creative freemium users topped 100M, up over 70%. New customers include Amazon, IKEA, DHL, Marriott and Wells Fargo. Revenue rose 13% to $6.76B with heavy buybacks, yet the stock is valued almost for bankruptcy. Guidance rose only slightly, perhaps to set a low bar for new CEO Anil. 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's professional switching costs make fears of a one-shot replacement look arbitrary. Users would have to retrain for years and migrate established production systems across its many apps; the comparison with Duolingo's streaks and virtual badges is about inconsistent disruption fears, not necessarily a bearish call on Duolingo. x.com x.comÂ
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.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 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'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 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