Adobe(US:ADBE) ZACKS·2025-06-10 13:01Core Insights - Adobe's stock is currently trading 40% below its all-time highs as it approaches its Q2 FY25 earnings release, raising concerns about slowing growth and valuation levels in the context of the tech sector [1][7][20] Financial Performance - Adobe's revenue growth has slowed to an average of 11% between FY22 and FY24, following a period of 15% to 25% growth for seven consecutive years after transitioning to a subscription model [4] - The company is projected to grow its revenue by 9% in FY25 and 10% in FY26, reaching $25.63 billion, with adjusted earnings expected to increase by 11% and 13% respectively [16] Competitive Landscape - Investors are concerned about the rapid rise of artificial intelligence offerings that allow users to create high-quality content with minimal skills, potentially threatening Adobe's creative software suite [2][5][11] - Adobe has responded by integrating AI features across its portfolio, including the launch of its generative AI platform, Firefly, which has generated over 22 billion assets since its debut [12][15] Strategic Moves - Adobe's decision to scrap its planned acquisition of Figma due to regulatory challenges has raised concerns about its ability to diversify and deploy cash effectively [5] - The company has emphasized the commercial viability of its AI features, positioning them as safer alternatives compared to other generative AI services that may face legal challenges [15] Market Position - Despite the recent selloff, Adobe's stock is trading at a 75% discount to its all-time highs and 33% below its median valuation at 23.5X forward 12-month earnings, indicating potential value for long-term investors [20] - Adobe's stock has appreciated nearly 1,500% over the past 15 years, significantly outperforming the tech sector, although it has seen a 2% increase in the last five years compared to the tech sector's 110% rise [18]