Is Adobe Really Getting Disrupted by AI, Or Should Investors Buy the Stock?

Core Viewpoint - Adobe has demonstrated solid financial performance despite a 35% decline in stock price over the past year, attributed to concerns about AI disruption [1][10] Financial Performance - Adobe's revenue for fiscal 2025 increased by 10% to $6.19 billion, surpassing previous forecasts [6] - Adjusted earnings per share (EPS) rose by 14% to $5.50, exceeding prior estimates [6] - Digital media revenue grew by 11% to $4.62 billion, with annual recurring revenue (ARR) increasing nearly 12% to $19.2 billion [7] - Revenue in the digital experience segment rose by 9% to $1.52 billion, with subscription revenue climbing by 11% to $1.41 billion [8] Future Guidance - For fiscal 2026, Adobe projects revenue between $25.9 billion and $26.1 billion, with total ARR growth of 10.2% [9] - The company forecasts adjusted EPS of $23.30 to $23.50 for fiscal 2026 [9] - For fiscal Q1, revenue is expected to be between $6.25 billion and $6.3 billion, with adjusted EPS forecasted at $5.85 to $5.90 [9] AI Integration and Growth - Adobe has embraced AI through its Firefly model and partnerships with third-party large language models, leading to a threefold increase in generative AI credit consumption [5] - The company is expanding its AI-powered tools, such as Acrobat AI Assistant and GenStudio, which has seen a 25% year-over-year growth in ARR [5][8] Valuation and Investment Outlook - Adobe's stock trades at a forward price-to-earnings (P/E) ratio of 15 times fiscal year 2026 estimates, considered reasonable for a SaaS company with strong gross margins [12] - The company is viewed as a solid earnings compounder, and patient investors may find current stock levels attractive for potential future gains [13]