Adobe’s stock has been on a downward spiral for two years, despite generating record-high earnings and free cash flow. Investors are worried about the company’s future direction, particularly its ability to stay competitive in artificial intelligence (AI). However, with its high margins, steady revenue growth, and exceptional balance sheet, Adobe is a deep-value stock that could benefit from a market rebound.
The company’s shift from a traditional software licensing model to a recurring-revenue model based on software as a service has been successful. Its Creative Cloud suite of apps has become the standard across various industries, and its stock price has historically reflected this success. However, investors are now concerned that AI may erode Adobe’s competitive advantages.
To address these concerns, investors should look for measurable ways Adobe is monetizing AI within its existing system. The company’s recent buyback activity has reduced the share count by 12.4% in five years and maintained an exceptional balance sheet with minimal long-term debt.
With its stock price at a steep discount to the S&P 500’s forward price-to-earnings ratio, Adobe is a compelling deep-value stock that could benefit from a market rebound. As investors wait for the company’s earnings report on December 10, they should focus on tangible evidence of Adobe’s AI monetization strategy rather than just its claims.
Source: https://www.fool.com/investing/2025/12/07/down-big-buy-adobe-value-growth-stock