Down 43% In Last 12 Months, Can Adobe Stock Recover in 2026?

Key Takeaways:

• AI Momentum: Generative credit consumption surged 3x quarter-over-quarter, signaling strong AI adoption
• Price Projection: Based on current execution, ADBE could reach $340 by November 2028
• Potential Gains: This target implies a total return of 29% from the current price of $264
• Annual Return: Investors could see roughly 10% growth over the next 2.8 years

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Adobe (ADBE) delivered a strong finish to fiscal 2025, achieving record revenue of $23.77 billion and non-GAAP EPS of $20.94. The company’s AI-first strategy is gaining traction across its entire product portfolio, from Creative Cloud to Experience Cloud.

CEO Shantanu Narayen emphasized the company’s leadership in AI innovation, highlighting partnerships with AWS, Azure, Google Gemini, Microsoft Copilot, and OpenAI.

• The company’s three customer groups—Business Professionals and Consumers, Creators, Creative Professionals, and Marketing Professionals—all showed strong momentum.
• Digital Media achieved quarterly revenue of $4.62 billion and full-year revenue of $17.65 billion, both growing 11% year-over-year. The segment exited with $19.2 billion in Annual Recurring Revenue, up 11.5% year over year.
• Adobe’s generative AI strategy centers on providing choice and flexibility.
• The company launched Firefly Image 5 while integrating over 25 partner models from Google, OpenAI, Black Forest Labs, and others. This ecosystem approach allows customers to access best-in-class models through a single platform.
• Generative credit consumption increased 3x quarter-over-quarter, demonstrating high-value usage across the customer base.
• As subscribers consume more credits, they upgrade to higher-tier Creative Cloud offerings or purchase Firefly credit add-ons.
• The company is successfully monetizing AI through multiple pathways rather than relying on a single revenue stream.
• Adobe Acrobat Studio combines AI Assistant’s conversational capabilities with Express’s generative creation power. Nearly 50% of commercial ETLA renewals in Q4 upgraded to this offering, reflecting strong enterprise demand for unified document workflows.

For fiscal 2026, Adobe guides to over 10% Total Adobe ARR growth, translating to approximately $2.6 billion in net new ARR—the highest beginning-of-year guide in company history.

This confidence stems from momentum across all three customer groups and accelerating AI adoption.

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What the Model Says for Adobe Stock

We analyzed Adobe’s transformation into an AI-first company serving three distinct customer segments with tailored solutions.

The company benefits from multiple growth drivers.

• Business Professionals and Consumers are adopting Acrobat AI Assistant and Express for quick content creation.
• Monthly active users across Acrobat and Express surpassed 750 million, growing 20% year-over-year.
• Creative Professionals are embracing the expanded Creative Cloud Pro offering with enhanced generative capabilities.
• The Firefly application serves as a one-stop shop for accessing industry-leading AI models integrated into creative workflows.
• Marketing Professionals are investing in Adobe’s content supply chain solution, GenStudio, which grew ending ARR over 25% year-over-year.
• The pending Semrush acquisition will strengthen Adobe’s brand visibility offerings across traditional search and LLM-powered discovery.

Using a forecast of 8.8% annual revenue growth and 44.6% operating margins, our model projects the stock will rise to $340 within 2.8 years. This assumes a 10.9x price-to-earnings multiple.

That represents compression from Adobe’s historical P/E averages of 16.5x (one year) and 28.4x (five years). The lower multiple acknowledges the transition period as Adobe shifts toward AI-first monetization models and integrates new product offerings.

The real value lies in capturing the massive shift toward AI-powered content creation and customer experience orchestration while expanding into new surfaces through partnerships with ChatGPT, Copilot, and other conversational platforms.

Our Valuation Assumptions

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Our Valuation Assumptions

TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.

Here’s what we used for ADBE stock:

1. Revenue Growth: 8.8%

Adobe’s growth centers on AI adoption across its customer base.

The company delivered 11% revenue growth in fiscal 2025, with Digital Media growing 11% and Digital Experience growing 9%.

Management expects this momentum to continue as generative credit consumption accelerates. Creative freemium MAUs grew by more than 35% year over year to over 70 million users, providing a strong conversion funnel for paid subscriptions.

The Firefly Services business is scaling rapidly, with over 100 new enterprise deals signed in Q4 alone.

Firefly Foundry enables custom model creation for individual brands and franchises, opening significant expansion opportunities with existing enterprise customers.

2. Operating margins: 44.6%

Adobe maintains industry-leading profitability with fiscal 2025 non-GAAP operating margins of approximately 46%.

The company targets 45% margins for fiscal 2026 as it invests in AI product innovation while maintaining disciplined cost management.

The shift toward consumption-based monetization through generative credits offers margin expansion opportunities as the infrastructure scales.

3. Exit P/E Multiple: 10.9x

The market currently values Adobe at 11.3x earnings. We assume the P/E will compress slightly to 10.9x over our forecast period.

Near-term uncertainty exists around the pace of AI monetization and the transition from traditional subscription models to hybrid approaches that include consumption-based pricing.

As Adobe demonstrates sustainable revenue growth from AI offerings and converts freemium users into paid subscribers, the company should command a premium multiple that reflects its leadership position in creative and marketing software.

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What Happens If Things Go Better or Worse?

Technology companies face execution risks and competitive pressures. Here’s how Adobe stock might perform under different scenarios through November 2030:

• Low Case: If revenue growth slows to 7.0% and net income margins compress to 34.3%, investors still see a 21.0% total return (4.1% annually)
• Mid Case: With 7.8% growth and 36.5% margins, we expect a total return of 51.3% (9.0% annually)
• High Case: If AI adoption accelerates to drive 8.6% revenue growth while Adobe maintains 38.3% margins, returns could hit 84.8% total (13.7% annually)

See what analysts think about ADBE stock right now (Free with TIKR) >>>

The range reflects execution on AI monetization, successful conversion of freemium users, and enterprise adoption of content supply chain solutions.

In low case, competitive pressure limits pricing power or AI features fail to drive meaningful upgrades.

In high case, consumption-based revenue accelerates faster than expected and the Semrush acquisition creates significant cross-sell opportunities.

How Much Upside Does Adobe Stock Have From Here?

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All it takes is three simple inputs:

• Revenue Growth
• Operating Margins
• Exit P/E Multiple

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!