In short: RPK, bluntly: "Adobe still sucks" — a software have-not even as the rest of the group recovers into short-wave momentum.
26:11So there's that dynamic where you could have some of, say, the opticals, which look a little better, that might still look okay and stay within the momentum basket, where other things fall out of the momentum basket. Similarly in software: Adobe still sucks, but others — we're learning Snowflake, other things in that software basket, not only are not hurt, they're actually probably in really good competitive positions — or Twilio, where the narrative has
In short: BUY — on both the Forward-PE and Earnings-Growth top tens. Fwd PE 8.5 vs 24.0 (64.6% under); ER 19.95%; RDCF −0.1% vs 12.3% (+12.4pp). Fair value $758.3 vs $248.16. YTD −25.5%.
In short: A messy "both" story — the product is getting better, but ChatGPT can now make images and animations; hard to tell which side nets out.
In short: 100M free creators — adoption is proven, conversion is not. Q3 revenue +13% Y/Y to $6.8B ($60M beat), non-GAAP EPS $6.13 ($0.04 beat); total ARR +11% to $27.5B (chart: 19.3 Sep '23 → 27.5 Aug '26, 12.4% CAGR); margins expanded (gross 89% +5pp, operating 35% +2pp) and operating cash flow a Q3-record $2.5B. Creative freemium MAU >100M, +70%; Adobe crossed 1B total MAU; AI-first ARR >$650M, +150%, "but still only 2% of the total." The trade-off: the freemium shift "contributed to slower net new ARR and RPO growth" (RPO $22.2B, +8%) as Adobe puts acquisition and engagement before monetization; agentic products and credit-based AI usage are the path to revenue. Anil Chakravarthy (head of Customer Experience) becomes CEO Dec 1, Shantanu Narayen to Executive Chair — continuity. FY26 revenue guide nudged to $26.58–$26.63B; Q4 guide slightly below expectations, shares modestly lower. Bottom line: "Adobe is proving it can still attract users in the AI era. The harder part is converting them.… The next phase of the story is monetization rather than adoption."
Adobe makes Photoshop, Acrobat and other creative software, sold mainly as subscriptions. Its key number is ARR — annual recurring revenue, the yearly value of all active subscriptions — which grew 11% to $27.5 billion.
Adobe has been giving more of its tools away free ("freemium") to attract people who might otherwise use cheaper AI apps. It worked on audience: more than 100 million people use the free creative tools, up 70%. And revenue from its newer AI-first products grew 150%. But those AI products are still only about 2% of subscription revenue, and management admitted that pushing free versions slowed the growth of new paid subscriptions.
So the question has shifted. Adobe has shown it can still attract users in the AI era; it hasn't yet shown it can turn them into paying customers at a pace that speeds up overall growth. Plans to charge for AI through usage "credits" and AI agents are how it hopes to do that. A CEO change (Anil Chakravarthy replacing Shantanu Narayen in December) signals continuity rather than a new direction. Analysis, not a recommendation.
In short: The DIY-software evidence she concedes: "every day my feed… is like, oh look, I've recreated Adobe Lightroom in a weekend. Oh look, I've created Adobe After Effects in a weekend… this is going to continue happening and this is going to accelerate" — but for big businesses the saving is immaterial next to maintenance and liability (see Salesforce). No view on the stock.
In short: "In the center of the AI disruption debate" at $256 (−23% YTD, −61% over five years), with the narrative "building every single quarter" — competition catching up, image/video tools improving daily, pricing power falling. His counter is the gap between narrative and numbers: last quarter grew 12.5%, every segment still growing, and forward estimates of 13% EPS / 9% revenue are only a modest slowdown. "The thing to remember here is that Adobe has these concerns likely fully priced in at this point. It trades at a below 10 forward PE ratio… basically being treated like a car company, like Ford… getting close to the airline category. And it's a high margin, faster growing software company." Free cash flow yield above 10%, or ~8.5% after the 19% of FCF that goes to stock comp. Into Thursday's print he predicts another beat — "out of the past 14 quarters, they've literally never missed… they're going to beat by 2 to 3%" — and with sentiment this low, "any glimmer of hope… we could see the stock jump big in a single day."
Adobe makes Photoshop, Premiere and the rest of the creative software suite, and it sits at the centre of the argument about whether AI destroys software companies. The fear is straightforward: AI tools that generate and edit images and video get better every month, so Adobe's competition is catching up and its ability to charge premium prices is going away. Carlson does not dismiss the fear — he calls the concerns valid.
His point is about what is already in the price. Adobe trades below 10 times next year's earnings, which is what the market pays for car makers and airlines — capital-hungry, cyclical, low-margin businesses. Adobe is none of those: it grew 12.5% last quarter, every division is still growing, and it throws off cash equal to more than 10% of its market value each year (about 8.5% after accounting for the shares it hands to employees, which is a real cost to existing owners). At that valuation the disruption story is not a risk to be discovered — it is the assumption being paid for.
The near-term catalyst is Thursday's earnings report. Adobe has not missed its earnings estimate in fourteen straight quarters, so his prediction is another beat of 2–3%. What interests him is the asymmetry that low expectations create: when sentiment is this depressed, "any glimmer of hope, any magic… any type of positive guidance" can move the stock a long way in a single day — the same kind of jump Salesforce recently had.
13:31So, investors are worried that it's starting to show in the numbers. While these are valid concerns, the thing to remember here is that Adobe has these concerns likely fully priced in at this point. It trades at a below 10 forward PE ratio. So, this company is basically being treated like a car company, like Ford or something. It's getting close to the airline category.
In short: Week-in-AI highlight only: Adobe named a new chief executive as it aims to transform itself for the AI era. No stance argued.
In short: Named by Nathan only as the other half of the week's earnings calendar — "Oracle and Adobe earnings, which might be interesting" — and immediately subordinated to Oracle ("more on the Oracle side"). A calendar item, not a view.
1:08You saw some kind of movement one way or another. This week we're going to have Oracle and Adobe earnings, which might be interesting. More on the Oracle side, Guy, cuz that's probably the clearest connection between what SaaS and where it sits as far as AI build out and all that sort of stuff that we've been talking about.
In short: The catalyst arrived and went the wrong way — the direct sequel to Lebenthal's two-day-old CEO-replacement trade. Adobe named an internal candidate; the stock is down 6%. Lebenthal concedes the setup immediately: "the market wanted an outsider. It's just that simple. I wanted an outsider too. Now this doesn't mean that it's a sell… what a catalyst does is it speeds up a reaction — the recognition by the market that this stock is truly undervalued. That is clearly not going to happen with the selection of an insider." His fallback is the numbers into next week's print: net income "grown at 15% over the last three years annualized," free cash flow growing "over 10%" and funding both buybacks and R&D, share count down ~10% in a year and a half at 10× forward earnings — "a meaningful concentration of the earnings power in the shares that I retain," and the stock "is trading as if there's an existential threat… I may have to change my tune if the numbers don't come in as expected." Wapner calls it financial engineering that "doesn't deal with the fundamental questions." Weiss adds the sharper doubt: "they did cast a very wide net looking for a CEO. So the question has to be… could they not attract an outsider they thought was better than the insider, because they didn't want the job? So the questions for Adobe just haven't been answered. And still, it's in the crosshairs of the AI boom." Street split: B of A underperform, Citi neutral, JP Morgan overweight.
Adobe makes creative and document software. Lebenthal had been holding it for a specific event — the naming of a new chief executive — on the theory that an outsider, particularly one open to selling the company, would force the market to notice how cheap the shares had become. The company named an insider, and the stock fell 6%.
His response is the honest version of a failed catalyst trade: he says plainly that the market wanted an outsider, that he did too, and that the re-rating he was waiting for "is clearly not going to happen with the selection of an insider." He is not selling, but the reason for owning has changed from an event to the ordinary case — around 10 times forward earnings, growing free cash flow, a share count down roughly 10% in eighteen months, with next week's results as the test.
The exchange it triggers is the more transferable content. Wapner calls the buyback story "financial engineering." Lebenthal's distinction: buying back shares with borrowed money, or by starving research, is engineering; doing it out of cash flow that is also funding research is just capital allocation. Weiss's version is sharper than either — buybacks are not automatically bad, but shrinking the share count by 10% flatters earnings-per-share growth by 10%, so ask what the underlying growth was without it. And he raises an uncomfortable possibility about the CEO search: a wide net that lands on an insider may mean the outsiders did not want the job.
In short: Lebenthal's most-teased position, defended against the desk. The move so far: "this was a $200 stock just about a month and a half ago at the height just before situational awareness blew up. It's around 285 today." The catalyst is corporate, not fundamental: "one of the things that's held it back this year is the CEO departing. What happens if they name a CEO? What happens if they name a CEO who clearly has a design to selling this at 10 times earnings to another company?… the catalyst, Scott, is the CEO replacement. Let's see who they announce." Wapner presses that this makes it an event trade ("you can own it now for an event… for this company to be sold"). His evidence against the AI-disruption bear case is first-hand: "Cerity Partners, my fine firm, with 1800 people, just re-upped their Adobe contract. Now were there some price concessions? Of course there were. However, the idea that Adobe is going away… at 10 times earnings, look, I'm sticking with it."
Adobe sells the standard software for design and creative work, on subscription. The market has spent the year worrying that generative AI makes those tools optional, and the stock fell hard — from about $200 at the low six weeks ago to around $285 now, still cheap at roughly 10 times earnings.
Lebenthal's argument has two legs. The first is evidence rather than opinion: his own firm — 1,800 people, $200 billion under management — just renewed its Adobe contract. There were price concessions, which is the honest part, but a large enterprise did not leave. Big organisations do not replace the software their whole workflow runs on because a cheaper tool exists; that inertia is what a subscription business is.
The second leg is an event, not a fundamental: the CEO seat is empty, and naming one removes an overhang. He goes further and floats the possibility of a chief executive appointed to sell the company — at 10 times earnings, an acquirer could pay a large premium and still get it cheaply. Wapner correctly labels this what it is: owning a stock for a catalyst rather than for the business, which has a different risk profile, since the catalyst can simply not happen.
In short: Harrington's designated loser of the AI-disruption test, and she has been acting on it: "a couple of weekends ago I had a personal pet project — creating this calendar. To create the calendar that I created, I would have needed Adobe and some serious graphic design and Adobe skills. I can do that easily with ChatGPT." On the firm's position: asked whether she had "an intervention with Farmer Jim about his Adobe position," she answers "if we're being serious about that, I've tried throughout the year. It hasn't been well received." And on valuation: "Salesforce and Adobe — those are impossible to put a valuation on right now because the AI disruption is so overwhelming."
Adobe is the other half of Harrington's experiment, and it is the loser. The design work she used to need Adobe's tools and Adobe skills for, she now does with a chatbot in an afternoon. That is not a forecast — it is a customer describing her own switch.
She goes further and says Adobe (with Salesforce) is now "impossible to put a valuation on," because you cannot estimate future profits when you do not know how much of the product a free general-purpose model absorbs. Note that this is a live disagreement inside her own firm: asked whether she had "an intervention" with colleague Jim Lebenthal over his Adobe position, she says she has tried all year and it has not been well received.
In short: Named in the software basket he expects to benefit as the market "gets past" the idea that AI immediately disrupts software.
In short: Guest: one of the ~20-year-old legacy marketing clouds (with Salesforce, Oracle, SAP) "built over… a bunch of acquisitions," which he argues Zeta's unified stack out-activates in milliseconds.
In short: BUY — and the only name in the top ten of all three undervaluation screens. Fwd PE 8.5 against a 24.0 five-year average (64.6% under), ER 19.95%, RDCF 0.4% required vs 12.3% expected (+11.9pp). Fair value $777.1 against $254.31. YTD −23.7%.
In short: The named short leg of the book that blew up: Aschenbrenner was "long AI infrastructure like CoreWeave, SK Hynix, SanDisk, and he was shorting software companies like Adobe" — the crowding that created the software valuation reset Singh bought into.
9:23optical stocks and in the whole ecosystem. And the problem was he was using leverage and this is why I always caution people on using leverage. He was using about four times leverage and had 45 billion of exposure. He was long AI infrastructure like CoreWeave, SK Hynix, SanDisk, and he was shorting software companies like Adobe.
In short: Host's example of the AI-disrupted software cohort. Newton's read applies to the whole group: the software deterioration "has since bottomed" and the names have started to "push off the lows," ahead of semis and memory in the sequence.
Another of the host's examples of the AI-disruption fear trade — the worry being that generative AI tools could undercut the design software Adobe sells.
Newton offered no company-level view. What he did say applies to the whole software group: the deterioration that began late last year "has since bottomed," and those names have started to "push off the lows," ahead of semiconductors and memory in the recovery sequence.
13:27Initially we saw the software deterioration that started actually late last year. That has since bottomed. We've seen software start to push off the lows and then of course it shifted to more semiconductor semi-cap equipment weakness and then the final shoe to drop was really a lot of these memory names and one by one all of these areas have stabilized including the mag seven, the hyperscalers.
In short: Asked about the -36%/-63% drawdown and AI image-generation risk, he refuses to have a view: the whole question reduces to whether you have high conviction on the minimum cash flows over 5-15 years. "Adobe may be a no-brainer for one person and a too-hard pile for another. To me… it just goes in too-hard pile." Gun to the head, Adobe or Kaspi, he takes Kaspi — "or you could just say neither."
Adobe makes the creative software (Photoshop, Premiere and the rest) that most video and design businesses run on. Its shares have been crushed — down roughly a third in a year and about 63% from the 2024 high — because investors fear AI image and video generators will erode the business. That looks like the kind of hated, unloved setup Pabrai hunts for.
He still won't touch it, and his reasoning is a lesson rather than a verdict on Adobe. The only question that matters is whether you can say, with high confidence, what minimum cash the business will produce over the next 5, 10 or 15 years; discount that back to today's money and the decision "becomes obvious" one way or the other. If you can't answer with conviction, "the answer is we move on."
His honest conclusion: "Adobe may be a no-brainer for one person and a too-hard pile for another. To me, it just goes in the too-hard pile." Forced to pick between Adobe and Kaspi he takes Kaspi, because he can see Kaspi's cash flows and can't see Adobe's — but he tells the host the correct answer for most people is simply "neither," and keep looking among the other 50,000 companies.
29:45To me, if you look at it from Monish's point of view it just goes in too-hard pile. — Right. — Okay, because it's not What I'm saying is So, let's just say we compare Adobe to Kaspi. — Mhm. — Now, Kaspi also has risk in the sense that I don't know if something comes and hits their Kaspi cash flows from left field.
In short: Ives' loser: "names like Adobe, where you had such a moat, you have such an install base — and they essentially miscalculated what AI is going to do to the business model." His template is the company that "sits on a treadmill at 2.5 speed… no different than 1995, a typewriter company" that put out a press release saying "this internet thing… we're sticking to our guns" and "a year later they were bankrupt and gone."
Adobe sells the creative and document software (Photoshop, Acrobat, and the rest) that designers and marketers have used for decades — exactly the kind of work generative AI does cheaply.
Ives' criticism is not that the moat never existed but that management misjudged what AI would do to the business model: "you had such a moat, you have such an install base — and they essentially miscalculated." His comparison is a 1995 typewriter company that issued a press release insisting the internet changed nothing, and was "bankrupt and gone" a year later. The failure mode is denial, not competition.
38:58I would look at like names like Adobe where you had such a mo you have such an instal and they essentially they miscalculated what AI is going to do the business model. You could say the same thing for names like into it. How is AI going after into it? I just explain that to me because a lot of the technology they're going to create models like could it actually do your taxes? Are there other you won't need into it? you'll need but the point is like how are enterprises like what does it ultimately take out of its
In short: Cited by Brown (with Salesforce) as a SAS-apocalypse poster child — one of the names with real disruption concern in the software selloff. No individual call.
In short: BUY, the forward-PE screen's spotlight, and now top of the earnings-growth screen too — the only name on all three screens. "Adobe is currently trading near its lowest valuation level ever." The insider datapoint is specific: "In late June, David Ricks, an Adobe board director and the CEO of Eli Lilly, bought 10,000 shares of Adobe at a price of $194.5." The bear case is named and answered: "Industry experts are concerned with AI disrupting Adobe's business. But Adobe appears to be using AI strategically to further expand its ecosystem," with Fiscal estimates suggesting double-digit revenue growth. Sheet: fwd PE 8.5 against a 30.9 five-year average (72.5% under), ER 25.8% — the highest expected return of any name in the issue; RDCF −1.2% required vs 12.3% expected. YTD −34.0%. Framed with a risk warning: "for investors willing to take on more risk in pursuit of higher returns."
Adobe makes the software professionals use to create images, video and documents — Photoshop, Premiere, Acrobat — sold as subscriptions. The market has decided artificial intelligence will make that kind of creative work cheap and therefore make Adobe less valuable, and the shares have been priced accordingly: about 8.5 times expected profits, against an average of nearly 31 over the past five years, and the cheapest the company has ever been.
Two things are offered against the fear. The first is that Adobe is using AI inside its own products rather than being displaced by it, and independent estimates still show double-digit revenue growth ahead. The second is a purchase: in late June a director of Adobe — who is also the chief executive of Eli Lilly — bought 10,000 shares at $194.50 of his own money. Insiders sell for many reasons and buy for one.
On the firm's own models this is the single most attractive name in the whole universe this month, with an expected return of nearly 26% a year, and the market is currently pricing in a business that shrinks slightly. It is also explicitly labelled higher-risk: the AI concern is real, and the case depends on it being wrong.
In short: Down 19% in Q2 — an AI-disruption-fear casualty in software alongside Salesforce and Intuit.
13:18In consulting, Gartner and Accenture were down 18% and 35% respectively. In communication services, the sector was up 7% for the quarter, but much of that performance was just from Google being up 20%. There were quite a few losers. Netflix seems to have completely lost its mojo, down 25%. I suppose Netflix's growth story no longer seems that powerful.
In short: BUY — and the only name on all three undervaluation screens. FV $604.7 vs $251.4 = 58.4% under; ER 20.8%; fwd PE 10.8 against 30.9 (65.0% under); RDCF −0.1% required against 12.3% expected — the price implies no growth at all. YTD −25.1%.
In short: "The test case of whether AI is going to be a wrecking ball for incumbent software… the risk has never been more real" (Claude could disrupt the model). "It's just not somewhere I want to be trading."
Adobe makes creative and document software (Photoshop, PDF, etc.). Larson treats it as the market's live experiment — "the test case of whether AI is going to be a wrecking ball for incumbent software." The worry is real: AI tools (he name-checks Claude) could replicate or undercut what Adobe sells, so the risk to its business model "has never been more real." It's not that he's actively betting against it — he just says "it's not somewhere I want to be trading," and as an allocator he avoids the name entirely.
22:35It's the test case of AI whether it's going to be a wrecking ball for incumbent software. So, it's just not somewhere I want to be trading. — It's not. Okay. So you're out and that's, is it in the bucket of it's just too hard but it's like you just don't know because Claude could come out with something that does disrupt the business model.
In short: "A lot of financing that was done in the software space that's blowing up now because artificial intelligence is kind of destroying some software companies… in theory, Adobe is at risk." One of AI's two forms of credit risk (the other being the build-out/NIMBY problem).
Adobe is his example of AI's first kind of credit risk: not that AI fails, but that it works and destroys the businesses it replaces. "A lot of financing that was done in the software space… is blowing up now because artificial intelligence is kind of destroying some software companies… in theory, Adobe is at risk." When lenders financed those companies assuming subscription revenue would compound forever, an AI-shrunk revenue line becomes a credit problem, not just a stock problem.
27:28One form of credit risk is the fact that the exposure from some companies to software to artificial intelligence — in theory, Adobe is at risk, right, from artificial intelligence. So, you have that angle, then you have the build-out problem and NIMBY, right? And so, yeah, this is a credit crisis that's forming.
In short: Valuation case study: ~$200 (was $400 a year ago), ~$83B EV, ~$10–11B FCF → a 12.5% FCF yield (was 2% in 2023) at 89% gross margins. But it's the textbook terminal-value risk from generative AI ("toll bridge with a free bridge being built beside it") — watching from the sidelines as a cash cow, not a buy yet.
Adobe makes Photoshop, Illustrator and other creative software. The stock halved (from ~$400 to ~$200) even as profits doubled, so it now trades at a 12.5% free-cash-flow yield — extraordinarily cheap for a company with 89% gross margins. On today's numbers it looks like a bargain.
The catch is the future, not the present. Generative AI can now make images and videos from a prompt, threatening the skills Adobe's products are built around. Singh uses a toll-bridge analogy: if someone will build a free bridge next to yours in five years, your bridge loses value today even though it still earns the same. Because a tech stock's worth is mostly its profits 5–10 years out, that risk keeps him watching from the sidelines — a cheap "cash cow," not a buy until Adobe proves AI is a friend, not a killer. He prefers cybersecurity names like Datadog.
Full passage: premium transcript (PDF).
In short: Q2 rev +13% to $6.6B, AI-first ARR tripled to >$500M — but shares −6% AH, extending a ~40% YTD "SaaSpocalypse" decline. A deliberate freemium pivot for Firefly/Express (MAU 50→90M, "Acrobat Reader playbook applied to AI"), credit- not seat-based monetization, and CFO Dan Durn leaving for Marvell. 9x fwd EBITDA. The question: can the freemium funnel show visible paid conversion within a few quarters. A disclosed author holding.
Adobe makes Photoshop, Acrobat (the PDF reader), and a suite of creative and document tools, sold mostly as monthly subscriptions ("SaaS" = software as a service). Its stock has fallen ~40% this year — part of a broader "SaaSpocalypse" worry that AI will let people do this work cheaply without paying for big software suites. Despite that, revenue still grew 13% and its newer AI products are growing fast (AI-first revenue tripled to over $500 million). The stock is now cheap by its own history — about 9x forward EBITDA (a rough cash-earnings multiple).
The big strategic bet is "freemium": give a basic version of its AI tools (Firefly, Express) away free to pull in a huge audience — creative free users jumped from 50 to 90 million — then convert a slice of them to paid later. App Economy calls this "the Acrobat Reader playbook applied to AI": Adobe gave away the Reader for decades to make its paid PDF tools the standard, and it's trying that again. It's also switching from charging per "seat" (per user) to charging by "credits" (usage). The risk: this can depress revenue now while you wait for the free users to convert, and it's happening just as the longtime CFO leaves (for Marvell) and the company hunts for a new CEO. The whole thesis hinges on whether that free funnel turns into visible paying customers within a few quarters.
In short: "One of the cheapest high-quality companies" — ~10 forward PE, ~10% FCF yield — but only because the market prices in AI disruption. Reports this week; must prove organic seat/product growth to defend its pricing power. "A hard story to tell."
Adobe makes Photoshop and the rest of the creative-software suite. On paper it's one of the cheapest high-quality companies around — priced at only about 10× a year's earnings and throwing off cash equal to roughly 10% of its stock-market value — but it's cheap because investors fear AI image and video tools will eat its lunch.
It reports this week, and he says the numbers will look fine; the hard part is convincing investors that AI isn't hollowing out the business by showing real growth in paying customers and products. He calls it "a hard story to tell" with the market betting against them, so he stays on the sidelines.
6:32They need to create a stronger defense for that. Right now, Adobee's looked at as a company that has temporary pricing power and a high probability of being disrupted by AI. It trades at a 10 forward PE ratio, a 10% free cash flow yield. It is by the numbers one of the cheapest high-quality companies in the market simply because of the theme of AI disruption.
In short: Grouped with the "less predictable" SaaS at AI-disruption risk — could resurge, but AI is aimed directly at it; he stays out.
19:50We have Salesforce, Adobe, Intuit, Autodesk and generic SaaS and AI wrappers. Now, with Salesforce, Adobe, Intuit, and Autodesk, again, I don't know for sure if these companies will do poorly, and that's not what I'm saying here. They could have a big resurgence. They could rerate higher, but I just believe that they're far less predictable than the companies above.
In short: Rated BUY by the model and then personally declined — the clearest example in the archive of judgement overriding a screen. Top of the published list on expected return: EPS growth 12.3%, FWD PE 10.8 against a fair exit 20.0, expected return 20.8%, fair value 602.9 against a 250.7 price = 58.4% undervalued, "trading at its cheapest valuation level ever", with revenue compounded at 15% a year for a decade. And then: "this is under the assumption you don't believe Artificial Intelligence will disrupt their business model. For me personally, Adobe is in the 'too hard' pile."
Adobe makes Photoshop, Illustrator, Acrobat and the rest of the software creative professionals use, sold as subscriptions. Revenue has grown about 15% a year for a decade.
On this issue's own numbers it is the single most attractive company on the whole list: the shares cost under 11 times next year's profits, the model puts fair value at $602.90 against a market price of $250.70, and the expected return is 20.8% a year. It is described as trading at its cheapest valuation ever.
And then it is declined. The reason is stated plainly: all of that only holds "under the assumption you don't believe Artificial Intelligence will disrupt their business model" — and if image-generating AI makes professional design software less necessary, the cheapness is a trap rather than an opportunity. "For me personally, Adobe is in the 'too hard' pile."
That gap between the model output and the judgement is worth noticing. Anyone following the published Buy list mechanically would be buying something its author will not.
In short: BUY, and the sheet's highest expected return at 25.4%. 10.8x forward against a 30.9x five-year average — 65.0% under its own history, the widest multiple gap on the list — with a +9.4pp reverse-DCF margin (2.8% required against 12.2% expected). Down 23.7% year to date.
In short: Cited (with Salesforce) as a big-headcount software firm facing AI-driven job losses — the labor side of the disruption.
16:52I mean, Adobe and CRM employ maybe 100,000 people, right? So, we're going to have hundreds we're going to have hundreds of thousands of job losses that come from artificial intelligence. And so, whenever Wall Street starts to change the narrative in a short period of time, they've gone from oh, private credit risk is idiosyncratic to all of a sudden there's all these we've gone from two spots and first brands to 17 spots.
In short: One of the eight quality-fund buys and repeated in the conclusion's four-name summary. Reported only — no business or valuation comment in this issue.
In short: Best Buy #5. "Two things keep declining with Adobe. The first thing? The share price (a bad thing). Second? The number of shares outstanding (a good thing)" — buying back almost 9% of shares a year while revenue and earnings still rise. "It's a very interesting Cannibal Stock." Three reasons the AI-replacement thesis is wrong: professionals are trained on Adobe in school (retraining teams and rebuilding workflows is the switching cost); Adobe created the PDF and the creative industry's standard file formats; and Firefly AI is embedded in the existing tools — with AI credit usage up 3x quarter-on-quarter in December. "The market thinks AI will disrupt Adobe's business, but right now it looks like AI could be helping it."
Adobe sells creative and document software by subscription — Photoshop, Acrobat, the tools every designer and marketing department uses. Slegers sets up the case as a pair of declines: the share price is falling (bad) and so is the number of shares outstanding (good). Adobe is buying back close to 9% of itself every year, so each remaining share owns a bigger slice of a business whose revenue and earnings are still growing. That is what he calls a "cannibal stock."
The market's fear is that AI makes creative software unnecessary. His three counters are practical rather than theoretical: professionals learn Adobe in school and companies have built their workflows around it, so switching means retraining whole teams; Adobe invented the PDF and the standard file formats the industry exchanges work in, so collaborating with anyone else means using its products; and its own Firefly AI is built directly into the existing tools, with AI credit usage tripling in a single quarter. On the evidence so far, AI is adding to Adobe's usage, not subtracting from it.
In short: BUY — the month's standout, top of two of the three screens. 13.6x forward against a 30.9x five-year average (50.8% under) and the highest expected return in the Earnings Growth Model at 20.9% ($649.4 fair value against $296.12); the reverse DCF needs 3.2% growth against 12.5% expected. "The company is trading at its cheapest valuation level ever… Adobe has steadily grown its revenue at a 15% CAGR over the past decade… And now, management is also buying back shares." The caveat is stated: "This under the assumption you don't believe Artificial Intelligence will disrupt their business model."
Adobe is the month's standout on the numbers rather than on any new argument. It sits at the top of two of the three screens at once: it trades on 13.6 times next year's earnings against an average of 30.9 over the past five years, and the model that turns growth plus dividends into an annual return gives it 20.9% — the highest of any name on the list.
Slegers adds two supports and one caveat. The supports: revenue has compounded at 15% a year for a decade, so this is not a business in decline, and management is now buying back stock, which quietly raises every remaining holder's share of it. The caveat is stated rather than argued away — the whole case holds only "under the assumption you don't believe Artificial Intelligence will disrupt their business model."
In short: #QualityTuesday stock pitch. Photoshop, Premiere Pro, Illustrator and Acrobat, with "almost 94% of its revenue… generated via subscriptions" — "a quality business that benefits from stable revenue and predictable cashflows." Long-term growth expected at 14.3% a year with AI integrated into the software. The valuation is the pitch: "Adobe is trading at a Forward PE of 13.6x. Its cheapest valuation level ever." The cause is named plainly — "Investors are afraid AI will disrupt their business model" — and the conclusion is conditional: "If it doesn't, it could be a great buy at current prices. Especially because Adobe is buying back a lot of its own shares."
Adobe sells the tools professional designers, video editors and marketers use every day — Photoshop, Illustrator, Premiere, Acrobat — and almost all of it now arrives as a monthly subscription rather than a boxed purchase. That makes the revenue steady and predictable: people trained on these programs, and files saved in these formats, do not move easily.
The stock trades at 13.6 times next year's expected earnings, which Slegers says is the cheapest it has ever been, purely because investors think AI image and video generators will make Adobe's tools unnecessary. He does not claim to have settled that question — the pitch is explicitly conditional, "if it doesn't [disrupt them], it could be a great buy at current prices." Two things load the odds in the buyer's favour: growth is still expected at 14.3% a year with AI built into the products, and Adobe is buying back a large volume of its own shares while the price is depressed, so each remaining share ends up owning more of the company.
In short: #11 — and the only entry with no dividend yield quoted at all: "Buyback Yield: 8.9%". "A serious share cannibal: Adobe is using its massive free cash flow to buy back shares at a historic rate, reducing their share count by over 6% in 2025 alone." On price: "after being caught up in the AI hype cycle, the stock has recently traded at a much more reasonable valuation." And the AI answer as an upsell rather than a threat: "their Firefly generative AI is being rapidly adopted by enterprise clients, creating a new upsell lever that is just starting to impact the bottom line." Its inclusion is the list's own admission that cash returned matters more than the form it takes.
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