Not much has changed for Adobe over the last 3 months. Despite delivering yet another beat-beat-raise quarter, the market remains skeptical regarding the company’s role in an AI-driven world.
First of all, this was very good. I'm biased, but this mirrors much of my thinking when I added $ADBE to my watchlist. You said "what will be Adobe’s inflection?...it might be revealed during the Q4 earnings when management shares its FY 2026 guidance". That's my guess too.
Also, the Google comparison feels spot on. The earnings multiple has contracted and is staying low because investors doubt the future. With each earnings release, if earnings hold up, then the stock will be forced to re-rate. Adobe could easily be on the "Best of 2026" lists a year from now.
I agree with your thesis, I started a position last week following two posts of mine. I also think it's worth mentioning Adobe is integrating external Gen-AI models into its product suite. Adobe has the distribution (750 Digital Media MAUs) and so AI businesses go to Adobe for customers.
In addition to that, Adobe's CEO has mentioned numerous times that Gen-AI expands the addressable market instead of eroding it. It lowers the barriers to be creative and it serves as the first step in the creative process (ideation), which is now possible within Adobe's suite.
What do you think about Adobe initiating a dividend?
By initiating a modest dividend alongside buybacks, Adobe would broaden its investor base, enforce capital discipline, and signal confidence in its future.
Meta and Alphabet have recently introduced dividends, proving that capital returns are not incompatible with growth and AI investment.
I understand the POV to initiate a dividend, but trading at these valuations I just don't see it. They will probably continue to spend all FCF on buybacks (never say never, though)
First of all, this was very good. I'm biased, but this mirrors much of my thinking when I added $ADBE to my watchlist. You said "what will be Adobe’s inflection?...it might be revealed during the Q4 earnings when management shares its FY 2026 guidance". That's my guess too.
Also, the Google comparison feels spot on. The earnings multiple has contracted and is staying low because investors doubt the future. With each earnings release, if earnings hold up, then the stock will be forced to re-rate. Adobe could easily be on the "Best of 2026" lists a year from now.
Agreed with all your points, lets see what Q4 brings!
I agree with your thesis, I started a position last week following two posts of mine. I also think it's worth mentioning Adobe is integrating external Gen-AI models into its product suite. Adobe has the distribution (750 Digital Media MAUs) and so AI businesses go to Adobe for customers.
In addition to that, Adobe's CEO has mentioned numerous times that Gen-AI expands the addressable market instead of eroding it. It lowers the barriers to be creative and it serves as the first step in the creative process (ideation), which is now possible within Adobe's suite.
What do you think about Adobe initiating a dividend?
By initiating a modest dividend alongside buybacks, Adobe would broaden its investor base, enforce capital discipline, and signal confidence in its future.
Meta and Alphabet have recently introduced dividends, proving that capital returns are not incompatible with growth and AI investment.
I understand the POV to initiate a dividend, but trading at these valuations I just don't see it. They will probably continue to spend all FCF on buybacks (never say never, though)