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What’s Happening With Adobe Stock?

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Adobe stock (NASDAQ: ADBE) is seeing some gains after it recently reported strong quarterly results and provided an optimistic outlook, which was a bit of a surprise. Why do we say it’s surprising? Well, in the past, Adobe’s stock has actually dropped the day after its earnings reports 75% of the time.

So, the big question is, should you buy ADBE stock right now at around $360? We believe the answer is yes.

Adobe has been a bit of an underperformer this year, down about 20% while the S&P 500 is up 12%. Part of this is due to its slower-than-expected growth in the AI space. This past quarter, the company’s annual recurring revenue (ARR) from AI-influenced products reached over $5 billion, which is an increase from the $3.5 billion at the end of fiscal year 2024. To be frank, a $5 billion figure might seem small for a company of Adobe’s size, especially when other tech giants like Google and OpenAI are generating much more from the AI boom.

However, the market is smart and has likely already taken this slower AI growth into account. At its current price of $360, ADBE stock is trading at 18 times its trailing adjusted earnings. That’s half of its five-year average price-to-earnings (P/E) ratio of 36. This means that from a valuation standpoint, ADBE looks very attractive.

Beyond the valuation, our analysis of Adobe’s performance across key areas like Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a strong operational and financial foundation. We’ll delve into these factors in the sections below. That being said, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. Separately, see – XRP Price To Hit $10 In October?

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How Does Adobe’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, ADBE stock looks slightly expensive compared to the broader market.

  • Adobe has a price-to-sales (P/S) ratio of 6.8 vs. a figure of 3.2 for the S&P 500
  • Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 16.3 compared to 21.2 for S&P 500
  • And, it has a price-to-earnings (P/E) ratio of 22.5 vs. the benchmark’s 24.1

How Have Adobe’s Revenues Grown Over Recent Years?

Adobe’s Revenues have seen notable growth over recent years.

  • Adobe has seen its top line grow at an average rate of 10.6% over the last 3 years (vs. increase of 5.3% for S&P 500)
  • Its revenues have grown 11.8% from $20.7 Bil to $23.2 Bil in the last 12 months (vs. growth of 5.1% for S&P 500)
  • Also, its quarterly revenues grew 11% to $6.0 Bil in the most recent quarter from $5.4 Bil a year ago (vs. 6.1% improvement for S&P 500)

How Profitable Is Adobe?

Adobe’s profit margins are considerably higher than most companies in the Trefis coverage universe.

  • Adobe’s Operating Income over the last four quarters was $8.4 Bil, which represents a considerably high Operating Margin of 36.2% (vs. 18.6% for S&P 500)
  • Adobe’s Operating Cash Flow (OCF) over this period was $9.8 Bil, pointing to a considerably high OCF Margin of 42.2% (vs. 20.3% for S&P 500)
  • For the last four-quarter period, Adobe’s Net Income was $7.0 Bil – indicating a considerably high Net Income Margin of 30.0% (vs. 12.6% for S&P 500)

Does Adobe Look Financially Stable?

Adobe’s balance sheet looks very strong.

  • Adobe’s Debt figure was $6.6 Bil at the end of the most recent quarter, while its market capitalization is $150 Bil (as of 9/11/2025). This implies a very strong Debt-to-Equity Ratio of 4.3% (vs. 20.9% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
  • Cash (including cash equivalents) makes up $5.9 Bil of the $28.8 Bil in Total Assets for Adobe. This yields a strong Cash-to-Assets Ratio of 20.7% (vs. 7.0% for S&P 500)

How Resilient Is ADBE Stock During A Downturn?

ADBE stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on ADBE stock? Our dashboard Will You Be Comfortable Buying Adobe Stock? has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

  • ADBE stock fell 60.0% from a high of $688.37 on 19 November 2021 to $275.20 on 30 September 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
  • The stock is yet to recover to its pre-Crisis high
  • The highest the stock has reached since then is 634.76 on 4 February 2024 and currently trades at around $350

COVID-19 Pandemic (2020)

  • ADBE stock fell 25.6% from a high of $383.28 on 19 February 2020 to $285.00 on 12 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 20 May 2020

Global Financial Crisis (2008)

  • ADBE stock fell 66.7% from a high of $48.00 on 24 October 2007 to $15.98 on 3 March 2009, vs. a peak-to-trough decline of 56.8% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 12 July 2013

Putting All The Pieces Together: What It Means For ADBE Stock

In summary, Adobe’s performance across the parameters detailed above are as follows:

  • Growth: Strong
  • Profitability: Very Strong
  • Financial Stability: Very Strong
  • Downturn Resilience: Weak
  • Overall: Strong

Despite being more expensive than the benchmark index, Adobe’s valuation has become much more attractive recently. Given the company’s strong performance in the above parameters and attractive valuation, we believe ADBE stock is a good buy right now. Of course, we could be wrong, and investors may not be willing to pay a premium for the stock due to its slower-than-expected AI growth. However, if you have a 3-5 year investment horizon, our conclusion is that ADBE is a good stock to own at current levels.

While ADBE stock looks promising, investing in a single stock can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.