The Setup
Adobe is one of the most debated names in large-cap software right now. The stock has been cut nearly in half from its 52-week high of $453, trading at roughly $284 as of Friday’s close. The trailing P/E sits around 17x — a 63% discount to its 10-year median of 49x. The forward P/E is approximately 11x. For a company that just posted record revenue of $23.77 billion, grew earnings 28% year-over-year, and generates nearly $10 billion in annual free cash flow, those are eye-catching numbers.
The de-rating has been driven almost entirely by multiple compression, not fundamental deterioration. Investors are pricing in a future where generative AI tools from Canva, Midjourney, and others erode Adobe’s creative software dominance. That fear is real — but Adobe’s financials have yet to reflect it.