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 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.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 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.com 

Adobe is priced below its Covid-crash intraday low even though it now makes 3x more money with 20% fewer shares, and its best run of profit growth has come during the AI era. It beat last quarter's guidance and raised its full-year outlook, yet trades around 10x current, a low price for growth that should destroy the bear narrative. It also bought back 9.5M shares for over $2.3B. x.com  x.com 

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 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.com 

Adobe's post-earnings drop looks like irrational sentiment, not a fundamental problem. Revenue and EPS beat, Q3 and full-year guidance rose, and AI-related revenue grew over 300% year over year, showing AI is becoming a growth engine rather than destroying Adobe. It keeps buying back stock at scale, and given its profitability and growth the valuation isn't expensive; long term it remains an undervalued software company. x.com 

Adobe looks cheap only if stock-based compensation is ignored: its 7x 2026 P/E becomes 11x including SBC, as Intuit goes from 9x to 14x and Salesforce from 10x to 19x. Blindly ignoring those real economic costs to shareholders is partly why software was in a bubble. 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