{ "title": "Adobe at $238.79: AI Disruption, Cash Flow, and Reverse-DCF Sensitivity", "path": "/research/adobe-ai-disruption-valuation", "publishedAt": "2026-10-06", "dataAsOf": "2026-10-05", "marketSnapshot": { "sharePriceUsd": 238.79, "priceAsOfDate": "2026-10-05", "sharesOutstanding": 389200000, "equityValueUsd": 92937068000.0, "enterpriseValueUsd": 93661068000.0 }, "balanceSheet": { "cashAndCashEquivalentsUsd": 4359000000, "shortTermInvestmentsUsd": 1280000000, "currentDebtUsd": 1597000000, "longTermDebtUsd": 4766000000, "totalDebtUsd": 6363000000, "netCashUsd": -724000000 }, "fy2026Guidance": { "revenueLowUsd": 26576000000, "revenueHighUsd": 26626000000, "revenueMidpointUsd": 26601000000, "endingArrGrowthPct": 10.2, "gaapEpsLowUsd": 18.12, "gaapEpsHighUsd": 18.17, "nonGaapEpsLowUsd": 24.45, "nonGaapEpsHighUsd": 24.5 }, "trailingEconomics": { "revenueUsd": 25970000000, "operatingCashFlowUsd": 10806000000, "capitalExpendituresUsd": 214000000, "stockBasedCompensationUsd": 2073000000, "conventionalFreeCashFlowUsd": 10592000000, "economicFreeCashFlowUsd": 8519000000, "economicFreeCashFlowMarginPct": 32.80323450134771, "equityValueToEconomicFreeCashFlowMultiple": 10.909387017255547 }, "historicalEconomics": [ {"period":"FY2023","revenueUsd":19409000000,"operatingCashFlowUsd":7302000000,"capitalExpendituresUsd":360000000,"stockBasedCompensationUsd":1718000000,"conventionalFreeCashFlowUsd":6942000000,"economicFreeCashFlowUsd":5224000000,"economicFreeCashFlowMarginPct":26.91534854964192}, {"period":"FY2024","revenueUsd":21505000000,"operatingCashFlowUsd":8056000000,"capitalExpendituresUsd":183000000,"stockBasedCompensationUsd":1833000000,"conventionalFreeCashFlowUsd":7873000000,"economicFreeCashFlowUsd":6040000000,"economicFreeCashFlowMarginPct":28.086491513601487}, {"period":"FY2025","revenueUsd":23769000000,"operatingCashFlowUsd":10031000000,"capitalExpendituresUsd":179000000,"stockBasedCompensationUsd":1942000000,"conventionalFreeCashFlowUsd":9852000000,"economicFreeCashFlowUsd":7910000000,"economicFreeCashFlowMarginPct":33.27864024569818}, {"period":"TTM Q3 FY2026","revenueUsd":25970000000,"operatingCashFlowUsd":10806000000,"capitalExpendituresUsd":214000000,"stockBasedCompensationUsd":2073000000,"conventionalFreeCashFlowUsd":10592000000,"economicFreeCashFlowUsd":8519000000,"economicFreeCashFlowMarginPct":32.80323450134771} ], "shareCountHistory": { "observations": [ {"asOfDate":"2024-01-05","sharesOutstanding":452000000}, {"asOfDate":"2025-01-03","sharesOutstanding":435300000}, {"asOfDate":"2026-01-09","sharesOutstanding":410500000}, {"asOfDate":"2026-09-18","sharesOutstanding":389200000} ], "declineFromJanuary2024Pct": 13.893805309734509, "remainingRepurchaseAuthorizationUsd": 24549000000, "authorizationAsPctOfReferenceEquityValue": 26.41464867387467 }, "q3OperatingSnapshot": { "revenueUsd": 6760000000, "revenueGrowthYoYPct": 13, "subscriptionRevenueUsd": 6582000000, "subscriptionRevenueGrowthYoYPct": 14, "totalAdobeArrUsd": 27500000000, "creativeMarketingSubscriptionRevenueUsd": 4650000000, "creativeMarketingSubscriptionGrowthYoYPct": 13, "businessProfessionalsConsumersSubscriptionRevenueUsd": 1910000000, "businessProfessionalsConsumersSubscriptionGrowthYoYPct": 16, "subscriptionCostOfRevenueGrowthYoYPct": 24, "hostingDataCenterCostContributionToSubscriptionCostGrowthPct": 22 }, "aiSignals": { "aiFirstEndingArrMinimumUsd": 650000000, "aiFirstEndingArrGrowthMinimumYoYPct": 150, "totalMonthlyActiveUsersMinimum": 1000000000, "totalMonthlyActiveUsersGrowthMinimumYoYPct": 20, "creativeFreemiumMonthlyActiveUsersMinimum": 100000000, "creativeFreemiumMonthlyActiveUsersGrowthMinimumYoYPct": 70, "fireflyAppCreditPackArrGrowthQoQPct": 40, "adobeChatgptPluginToolCountMinimum": 70, "figmaQ2RevenueGrowthYoYPct": 48, "figmaNetDollarRetentionPct": 136, "figmaPaidCustomersOver10kArrUsingAiCreditsWeeklyMinimumPct": 80 }, "reverseDcf": { "commonInputs": { "targetSharePriceUsd": 238.79, "dilutedSharesOutstanding": 389200000, "netCashUsd": -724000000, "baseRevenueUsd": 26601000000, "baseYear": 2026, "forecastYears": 9, "startingFcfMarginPct": 30 }, "baseAssumptions": {"discountRatePct":9.5,"terminalGrowthRatePct":3}, "stressAssumptions": {"discountRatePct":10.5,"terminalGrowthRatePct":2.5}, "baseBreakEvenCases": [ {"horizonFcfMarginPct":15,"impliedRevenueGrowthPct":6.251118727917694,"horizonRevenueUsd":45909183244.91717,"horizonFreeCashFlowUsd":6886377486.737576,"explicitPeriodPresentValueUsd":45445462955.13534,"terminalPresentValueUsd":48215605044.86467,"terminalValueSharePct":51.47881192734709,"modeledEnterpriseValueUsd":93661068000.0}, {"horizonFcfMarginPct":20,"impliedRevenueGrowthPct":3.1008373824866213,"horizonRevenueUsd":35015287521.57442,"horizonFreeCashFlowUsd":7003057504.314883,"explicitPeriodPresentValueUsd":44628517085.55883,"terminalPresentValueUsd":49032550914.44124,"terminalValueSharePct":52.35104826526344,"modeledEnterpriseValueUsd":93661068000.00006}, {"horizonFcfMarginPct":25,"impliedRevenueGrowthPct":0.6537757738796279,"horizonRevenueUsd":28207760149.61704,"horizonFreeCashFlowUsd":7051940037.404261,"explicitPeriodPresentValueUsd":44286261536.31407,"terminalPresentValueUsd":49374806463.685974,"terminalValueSharePct":52.716467490725115,"modeledEnterpriseValueUsd":93661068000.00005}, {"horizonFcfMarginPct":30,"impliedRevenueGrowthPct":-1.345366010797672,"horizonRevenueUsd":23548072826.301334,"horizonFreeCashFlowUsd":7064421847.8904,"explicitPeriodPresentValueUsd":44198868992.73014,"terminalPresentValueUsd":49462199007.26983,"terminalValueSharePct":52.8097747158615,"modeledEnterpriseValueUsd":93661067999.99997} ], "stressBreakEvenCases": [ {"horizonFcfMarginPct":15,"impliedRevenueGrowthPct":8.936604498530187,"horizonRevenueUsd":57472815464.60051,"horizonFreeCashFlowUsd":8620922319.690077,"explicitPeriodPresentValueUsd":48690630980.12751,"terminalPresentValueUsd":44970437019.87242,"terminalValueSharePct":48.01401263102451,"modeledEnterpriseValueUsd":93661067999.99994}, {"horizonFcfMarginPct":20,"impliedRevenueGrowthPct":5.724443886493702,"horizonRevenueUsd":43901225933.132065,"horizonFreeCashFlowUsd":8780245186.626413,"explicitPeriodPresentValueUsd":47859534412.06992,"terminalPresentValueUsd":45801533587.93008,"terminalValueSharePct":48.901357379279595,"modeledEnterpriseValueUsd":93661068000.0}, {"horizonFcfMarginPct":25,"impliedRevenueGrowthPct":3.222165535787103,"horizonRevenueUsd":35387889105.82641,"horizonFreeCashFlowUsd":8846972276.456602,"explicitPeriodPresentValueUsd":47511457225.02996,"terminalPresentValueUsd":46149610774.97006,"terminalValueSharePct":49.272992247931704,"modeledEnterpriseValueUsd":93661068000.00003}, {"horizonFcfMarginPct":30,"impliedRevenueGrowthPct":1.1737444106504902,"horizonRevenueUsd":29546658580.649067,"horizonFreeCashFlowUsd":8863997574.194721,"explicitPeriodPresentValueUsd":47422645952.7224,"terminalPresentValueUsd":46238422047.27766,"terminalValueSharePct":49.36781422060832,"modeledEnterpriseValueUsd":93661068000.00006} ] }, "sensitivity": { "revenueGrowthPcts": [0,3,5,7,10], "horizonFcfMarginPcts": [15,20,25,30], "sharePriceMatrix": [ {"revenueGrowthPct":0,"values":[{"horizonFcfMarginPct":15,"impliedSharePriceUsd":160.93118114369776},{"horizonFcfMarginPct":20,"impliedSharePriceUsd":194.6781116632076},{"horizonFcfMarginPct":25,"impliedSharePriceUsd":228.4250421827174},{"horizonFcfMarginPct":30,"impliedSharePriceUsd":262.17197270222727}]}, {"revenueGrowthPct":3,"values":[{"horizonFcfMarginPct":15,"impliedSharePriceUsd":194.27759004206897},{"horizonFcfMarginPct":20,"impliedSharePriceUsd":237.2034409277219},{"horizonFcfMarginPct":25,"impliedSharePriceUsd":280.1292918133748},{"horizonFcfMarginPct":30,"impliedSharePriceUsd":323.05514269902767}]}, {"revenueGrowthPct":5,"values":[{"horizonFcfMarginPct":15,"impliedSharePriceUsd":220.51804801228056},{"horizonFcfMarginPct":20,"impliedSharePriceUsd":270.7935716010322},{"horizonFcfMarginPct":25,"impliedSharePriceUsd":321.06909518978387},{"horizonFcfMarginPct":30,"impliedSharePriceUsd":371.34461877853556}]}, {"revenueGrowthPct":7,"values":[{"horizonFcfMarginPct":15,"impliedSharePriceUsd":250.46944191338292},{"horizonFcfMarginPct":20,"impliedSharePriceUsd":309.2398851049095},{"horizonFcfMarginPct":25,"impliedSharePriceUsd":368.01032829643594},{"horizonFcfMarginPct":30,"impliedSharePriceUsd":426.78077148796245}]}, {"revenueGrowthPct":10,"values":[{"horizonFcfMarginPct":15,"impliedSharePriceUsd":303.43711098760605},{"horizonFcfMarginPct":20,"impliedSharePriceUsd":377.44426819959585},{"horizonFcfMarginPct":25,"impliedSharePriceUsd":451.4514254115856},{"horizonFcfMarginPct":30,"impliedSharePriceUsd":525.4585826235755}]} ], "referencePriceUsd": 238.79, "illustrativeFiveGrowthTwentyFiveMarginSharePriceUsd": 321.06909518978387, "stressFiveGrowthTwentyFiveMarginSharePriceUsd": 268.1758880147081 }, "disruptionBudget": { "base": [ {"revenueGrowthPct":0,"requiredHorizonFcfMarginPct":26.535688973444614}, {"revenueGrowthPct":3,"requiredHorizonFcfMarginPct":20.184802285749022}, {"revenueGrowthPct":5,"requiredHorizonFcfMarginPct":16.817181670466724}, {"revenueGrowthPct":7,"requiredHorizonFcfMarginPct":14.006350702910225}, {"revenueGrowthPct":10,"requiredHorizonFcfMarginPct":10.632374393031501} ], "stress": [ {"revenueGrowthPct":0,"requiredHorizonFcfMarginPct":33.300915676965175}, {"revenueGrowthPct":3,"requiredHorizonFcfMarginPct":25.499571450410528}, {"revenueGrowthPct":5,"requiredHorizonFcfMarginPct":21.3360890258418}, {"revenueGrowthPct":7,"requiredHorizonFcfMarginPct":17.844623441034777}, {"revenueGrowthPct":10,"requiredHorizonFcfMarginPct":13.631053195651166} ] }, "methodology": { "economicFreeCashFlow": "Economic free cash flow equals operating cash flow less purchases of property and equipment less stock-based compensation. This is a conservative analytical convention, not a GAAP measure and not Adobe guidance.", "trailingTwelveMonths": "TTM values equal FY2025 plus the first nine months of FY2026 less the first nine months of FY2025.", "reverseDcf": "The canonical Grizzly Bulls revenue + margin DCF engine holds the October 5 reference equity value fixed and solves the constant revenue CAGR required for each terminal FCF-margin assumption. Starting economic FCF margin is 30%; margins converge linearly over nine explicit forecast years.", "sensitivity": "The sensitivity matrix uses the same canonical DCF engine with fixed revenue-growth and 2035 FCF-margin assumptions, then converts enterprise value to equity value using net cash and divides by 389.2 million shares.", "disruptionBudget": "For each fixed revenue-growth assumption, the disruption budget solves the 2035 FCF margin that makes modeled enterprise value equal the October 5 reference enterprise value.", "boundaries": "The analysis does not estimate Creative Cloud seat counts because Adobe does not disclose them. AI-first ARR and MAU are management-defined operating metrics. Future buybacks are not added to DCF value; the repurchase authorization is shown only as capital-allocation context." }, "sources": [ {"id":"adobe-q3-2026-10q","title":"Adobe Inc. Q3 FY2026 Form 10-Q","publisher":"Adobe Inc. / U.S. Securities and Exchange Commission","url":"https://www.sec.gov/Archives/edgar/data/796343/000079634326000156/adbe-20260828.htm","asOfDate":"2026-08-28"}, {"id":"adobe-q3-2026-earnings-release","title":"Adobe Reports Record Q3 Results","publisher":"Adobe Inc.","url":"https://www.adobe.com/cc-shared/assets/investor-relations/pdfs/01906202/au56y4ter.pdf","asOfDate":"2026-09-10"}, {"id":"adobe-q3-2026-earnings-script","title":"Adobe Q3 FY2026 Earnings Script and Slides","publisher":"Adobe Inc.","url":"https://www.adobe.com/cc-shared/assets/investor-relations/pdfs/01906202/c6yetrerew.pdf","asOfDate":"2026-09-10"}, {"id":"adobe-fy2025-10k","title":"Adobe Inc. FY2025 Form 10-K","publisher":"Adobe Inc. / U.S. Securities and Exchange Commission","url":"https://www.sec.gov/Archives/edgar/data/796343/000079634326000003/adbe-20251128.htm","asOfDate":"2025-11-28"}, {"id":"adobe-fy2024-10k","title":"Adobe Inc. FY2024 Form 10-K","publisher":"Adobe Inc. / U.S. Securities and Exchange Commission","url":"https://www.sec.gov/Archives/edgar/data/796343/000079634325000004/adbe-20241129.htm","asOfDate":"2024-11-29"}, {"id":"adobe-fy2023-10k","title":"Adobe Inc. FY2023 Form 10-K","publisher":"Adobe Inc. / U.S. Securities and Exchange Commission","url":"https://www.sec.gov/Archives/edgar/data/796343/000079634324000006/adbe-20231201.htm","asOfDate":"2023-12-01"}, {"id":"adobe-october-5-price","title":"Adobe (ADBE) Stock Price History","publisher":"Stock Analysis","url":"https://stockanalysis.com/stocks/adbe/history/","asOfDate":"2026-10-05"}, {"id":"adobe-chatgpt-plugin","title":"Introducing Adobe for ChatGPT: Create, edit and get work done — all in ChatGPT","publisher":"Adobe Inc.","url":"https://blog.adobe.com/en/publish/2026/08/06/introducing-adobe-chatgpt-create-edit-get-work-done-all-in-chatgpt","asOfDate":"2026-08-06"}, {"id":"adobe-partner-models","title":"Partner models in Adobe products","publisher":"Adobe Inc.","url":"https://helpx.adobe.com/creative-cloud/apps/generative-ai/non-adobe-models-in-adobe-products.html","asOfDate":"2026-09-10"}, {"id":"figma-q2-2026-results","title":"Figma Announces Second Quarter 2026 Financial Results","publisher":"Figma, Inc.","url":"https://investor.figma.com/news-events/news/news-details/2026/Figma-Announces-Second-Quarter-2026-Financial-Results/default.aspx","asOfDate":"2026-06-30"}, {"id":"adobe-ceo-transition","title":"Adobe Announces Anil Chakravarthy to Become President and CEO","publisher":"Adobe Inc.","url":"https://news.adobe.com/news/2026/09/adobe-announces-anil-chakravarthy-to-become-president-and-ceo","asOfDate":"2026-09-03"} ] }