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Adobe Inc. - Common Stock
Our verdict on Adobe Inc. - Common Stock isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
Management reaffirmed the timeline for RPO recognition, with 67% of the $19.69 billion total expected to be recognized as revenue within the next 12 months. (2 met across 2 tracked commitments)
“As of May 30, 2025, remaining performance obligations were approximately $19.69 billion... Approximately 67% of the remaining performance obligations... are expected to be recognized over the next 12 months with the remainder recognized thereafter.”
The company confirmed the execution of these agreements during the second quarter of fiscal 2025, which are primarily related to network infrastructure and AI inferencing capacity. (2 met across 2 tracked commitments)
“Subsequent to February 28, 2025, we executed agreements associated with certain of our long-term supplier commitments that increased our minimum purchase obligations by approximately $1.3 billion through December 2029.”
See the full cited Management analysis of Adobe Inc. - Common Stock
How durable is the business?
Adobe is aggressively expanding its moat through generative AI, specifically embedding Firefly and AI Assistants across its product portfolio to drive differentiation. (3 expanding)
“For creators and creative professionals, we offer an end-to-end, ideation-to creation platform powered by our commercially safe Adobe Firefly models... which offers customers brand safety, compliance, intellectual property protection, and reliability.”
Subscription revenue remains the dominant engine, increasing its share of total revenue to 96% and growing 11% year-over-year, driven by Creative Cloud and Acrobat strength. (4 expanding across 1 engine)
“Subscription $ 6,198 ... Percentage of total revenue 97 % ... % Change 13 %”
See the full cited Business Model analysis of Adobe Inc. - Common Stock
Where does growth come from?
Adobe has entered a definitive agreement for a $1.9 billion cash acquisition of Semrush, expected to close in Q2 FY26. (1 new trend across 1 signal, 1 leading indicator)
“On November 18, 2025, we entered into a definitive agreement to acquire Semrush Holdings, Inc., a publicly held brand visibility platform company, for approximately $1.9 billion... expected to close in the second quarter of fiscal 2026.”
Subscription revenue growth is accelerating, moving from 11% YoY in the three-month period to 12% YoY for the six-month period, driven by strong demand for Creative Cloud and Acrobat. (1 accelerating, 4 steady across 5 signals)
“Total subscription revenue of $6.20 billion during the three months ended February 27, 2026 increased by $715 million, or 13%, compared to the year-ago period.”
See the full cited Future Growth analysis of Adobe Inc. - Common Stock
What could break the thesis?
Cost pressures are intensifying as Adobe integrates AI (Firefly) across its portfolio. Subscription cost of revenue increased 11% year-over-year, driven by higher third-party hosting and AI inferencing costs. (3 intensifying, 1 stable, 1 high-severity)
“Cost of subscription revenue increased during the three months ended February 27, 2026... primarily due to: Hosting services and data center costs [14%].”
Adobe is facing a major legal and financial threat from a Department of Justice (DOJ) lawsuit regarding its subscription cancellation practices. While a settlement has been reached, the company remains under scrutiny for how it discloses terms and allows users to cancel. [REGULATORY]
“On March 12, 2026, we reached an agreement to settle the action... The complaint alleges that Adobe failed to clearly and conspicuously disclose material terms, failed to obtain express informed consent and failed to provide a simple cancellation mechanism.”
See the full cited Risk analysis of Adobe Inc. - Common Stock
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