Adobe Inc. · ADBE · NASDAQ
My estimate (a forecast, not a fact)
USD 270.69 / share
Market price, 4 Jul 2026
USD 219.80
Difference
+23.2%
Adobe sells software by subscription. Creative tools — Photoshop, Illustrator, Premiere. Document tools, meaning Acrobat and PDF. And marketing software sold to companies. $25.2 billion of revenue in the last twelve months, and 850 million monthly users.
From the first quarter of this year Adobe reports as one single segment, and splits its subscription revenue between two customer groups. Creative and Marketing Professionals — the creative apps and the marketing software — is $17.29 billion of the last twelve months. Business Professionals and Consumers, meaning Acrobat and Express, is $7.00 billion, and it is the faster growing of the two. Subscriptions are 97% of the company. Selling boxes and selling services is what is left.
| Last twelve months to 29 May 2026 | Revenue | Growth |
|---|---|---|
| Creative & Marketing Professionals (subscription) | $17.29bn | +12% |
| Business Professionals & Consumers (subscription) | $7.00bn | +16% |
| Other subscription, product and services | $0.91bn | falling |
| Total revenue | $25.20bn | +11% |
The growth break
Adobe grew at over 20% a year until 2021. Then growth halved, and it has stayed at 10–11% for four straight years. That is the AI disruption story, already visible in the numbers.
| Period | Revenue growth |
|---|---|
| 2016–2019 | +22% to +25% every year |
| 2020 | +15.2% |
| 2021 | +22.7% |
| 2022–2025 | +10.2% to +11.5% |
I think that break is real, and my forecast gives Adobe no recovery from it at all.
But growth is one thing and value is another. Adobe still earns about 35.5% on its capital, against a cost of capital of 10.7%. That gap is where the value sits, and it did not close when the growth halved. So the question that matters is not how fast Adobe grows. It is how long it keeps earning that spread — and in my forecast, the answer is: not forever.
The forecast
Revenue growth of 11.5% in year one, then 10% a year to year five, then stepping down to 4.47% — the risk-free rate — by year ten. That is the four-year plateau extended, with no recovery and no collapse. It implies Adobe's share of its own markets falls from 15% to 7% over the decade. Revenue goes from $25.2 billion in the base year to $56.8 billion in year ten.
Operating margin of 38% in year one, falling to 30% by year eight and staying there. 30% is the US software industry average, and it is below every year Adobe has posted since 2016. Its margin has been rising, so this assumes all of that reverses. After tax, that is $8.5 billion of operating income in year one, growing to $12.8 billion in year ten.
A sales-to-capital ratio of 1.3 — every dollar of new revenue needs about 77 cents of new capital — which gives reinvestment of $2.2 billion in year one, and roughly $2.0 billion by year ten.
Free cash flow to the firm is what is left: $6.3 billion in year one, rising to $10.8 billion in year ten.
Cost of capital of 10.66% for the first five years, then down to 8.42% in perpetuity. And 8.42% is also the return on capital I give Adobe in perpetuity — exactly its cost of capital, so no excess return at all. Adobe has a real moat today; I am assuming it thins to nothing over twenty to thirty years. This one assumption moves the value more than the growth rate and the margin combined.
The valuation
| $m | |
|---|---|
| Value of operating assets | 109,039 |
| Less debt | (7,065) |
| Plus cash | 5,626 |
| Value of equity | 107,600 |
| Value of options | 0 |
| Shares outstanding | 397.5m |
| Estimated value per share | $270.69 |
Against a price of $219.80.
What you'd have to believe
Three assumptions are doing the work: 10% growth, a 30% margin, and no excess return once the moat is gone.
The table below is the whole argument in one place: what the estimate becomes across how big Adobe gets by year ten, and how profitable it ends up. Rows grow revenue at a constant compound rate from today's $25.2 billion to the year-ten figure, which is why the base-case cell reads $263 rather than the $270.69 above — the headline number uses the actual year-by-year growth path, not a constant one.
The full video goes through where each of those numbers comes from, the bear case, and the places where I think I could be wrong.
| Files Subscribe to download |
|---|
| Principal solutions pricing summary Covers 25 individual Adobe solutions derived from the 'Principal Solutions' section of Adobe's FY2025 Form 10-K XLSX · 11 KB |
| Financials 2016 - 2026 (LTM) Income statement, balance sheet and cash flows from 2016 to 2026 XLSX · 41 KB |
| Sensitivity table Value per share across the two assumptions that matter most - revenues & target operating margin XLSX · 96 KB |
| Market data Market size and market growth data per industry XLSX · 51 KB |
Sensitivity
Estimated value per share in USD, across the two assumptions that move it most. Rows are revenue in year 10 ($bn); columns are target pre-tax operating margin (%). Shaded cells clear the USD 219.80 price at publication.
My own case is highlighted — USD 263. Every row here grows revenue at a single constant rate to its year-ten figure, so it does not land exactly on my USD 270.69 estimate.
| Revenue in year 10 ($bn) | Target pre-tax operating margin (%) | |||||||
|---|---|---|---|---|---|---|---|---|
| 5 | 10 | 15 | 20 | 25 | 30 | 40 | 50 | |
| 39.8 | 67 | 96 | 125 | 154 | 183 | 212 | 270 | 327 |
| 48.3 | 67 | 101 | 135 | 169 | 204 | 238 | 306 | 375 |
| 56.8 | 65 | 105 | 145 | 184 | 224 | 263 | 343 | 422 |
| 65.3 | 64 | 109 | 154 | 199 | 243 | 288 | 378 | 468 |
| 73.9 | 63 | 113 | 163 | 213 | 263 | 313 | 413 | 513 |
| 90.9 | 59 | 120 | 180 | 240 | 301 | 361 | 482 | 603 |
| 110.8 | 55 | 127 | 199 | 271 | 344 | 416 | 561 | 705 |
Disclosure
- Position
- As at 4 July 2026, I do not own shares in Adobe. This covers shares held by people closely associated with me. It is a snapshot: if it changes, it changes in a new valuation, never by editing this one. I hold no position, long or short, exceeding 0.5% of Adobe's issued share capital.
- Author
- Lucian Mesaroș, independent equity analyst, sole author of this publication, publishing in a personal capacity as an individual. I am not authorised or supervised by the ASF or by any other financial supervisory authority, I am not an investment firm, and I do not provide investment advice.
- Valuation date
- 4 July 2026. First published 7 August 2026.
- Market price used.
- USD 219.80 — Nasdaq closing price on NASDAQ, 4 July 2026. The percentage difference on this page compares my estimate to that price on that date, and is not updated afterwards.
- What the number is
- USD 270.69/share is my estimate of intrinsic value, produced by a discounted cash flow (FCFF) model. It is a forecast and an opinion, not a fact, not a price target I undertake to defend, and not a prediction of where the share price will go. A discounted cash flow valuation of the firm (FCFF), built on ten years of explicit forecasts and a terminal value, discounted at a cost of capital built from its components. Research and development is capitalised and amortised over three years, so the operating margin here is not the reported one. The full framework is at Methodology.
- Key assumptions
- Revenue growth 11.5% in year 1, then 10% a year to year 5, stepping down to 4.47% by year 10 · operating margin 38% in year 1 falling to 30% from year 8 · sales-to-capital 1.30 · tax rate 20.66% fading to 25% · cost of capital 10.66% falling to 8.42% in perpetuity · return on capital in perpetuity 8.42%, equal to the cost of capital · terminal growth 4.47%
- How wrong this can be
- Valuations are sensitive to assumptions I chose — the sensitivity table above shows what the estimate becomes when the two that matter most turn out differently. A small change moves the estimate materially. I can be, and have been, wrong.
- Time horizon
- At least 1 year Separately, this document stands until I next value Adobe — see What I've Published.
- Updates
- I revalue a company when it publishes annual results, or when something material changes. There is no guaranteed schedule, and no undertaking to update this page.
- Conflicts of interest
- I have no agreement of any kind with Adobe or with anyone connected to it, I have not been paid by anyone to produce this valuation, no one asked me to write it except through the public request page, no draft was shown to the company, and I am not a market maker, liquidity provider or adviser to it.
- Previous valuations of Adobe
- None in the last 12 months.
- Sources
- Adobe FY2025 Form 10-K · Q2 FY2026 Form 10-Q · Q2 FY2026 earnings call transcript · Nasdaq closing price All figures are as reported by the company unless I say otherwise.
- Everything I have published in the last 12 months:
- What I've Published