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Is Adobe Stock A Real Bargain?
Is Adobe Stock A Real Bargain?
October 1st, 2026 · by Trefis TeamADBEYTD-31.4%SPYYTD+12.4%QQQYTD+20.7%Analyze ADBE →Adobe (ADBE) stock trades at 13 times its earnings over the last twelve months, against 21.4 for the median S&P 500 company. The stock has lost 33% in twelve months, while the S&P 500 returned 16.2%. A price that low can mean investors have turned too gloomy, or that the business is getting weaker. So is Adobe stock a real bargain at this low price?
Image from Pixabay Adobe Grows And Produces Cash
On the figures for the last twelve months, yes, Adobe looks like a bargain. The company sells software such as Creative Cloud and Acrobat, mostly by subscription. Subscriptions brought in $6.56 billion of its $6.76 billion revenue in fiscal Q3 2026.
Revenue was up 12.0% over the last twelve months, against 8.3% for the median S&P 500 company. Adobe also kept 35.7% of its revenue as operating profit, against 18.6% for the median S&P 500 company.
For every $100 of stock at today’s price, Adobe produced about $11 of free cash flow in the last twelve months. Free cash flow is the cash left after running costs and investment spending. One year can flatter a company, so Adobe’s three-year record matters more.
Does Adobe’s Three-Year Record Look As Sound?
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Yes on growth, and nearly on profit. Adobe’s revenue grew 11.2% a year on average over three years, close to the 12.0% of the last twelve months. Revenue rose in each of the last three fiscal years.
At 35.7%, Adobe’s operating margin has fallen about 0.5% in the last year, but sits comfortably above 34% levels three years ago.
A forward-looking figure is weaker. Contracted future revenue is what customers have signed for but Adobe has not yet delivered. That contracted revenue grew 8% from a year earlier in fiscal Q3 2026, while revenue grew 13%.
Management said on the fiscal Q3 2026 call that the slower growth comes from its focus on winning users through free versions, though it mentioned that contracted revenue steps up in the fourth quarter.
Adobe Put Free Users Ahead Of Pricing Changes
Adobe chose winning users over changing its prices. Management said on the same call that it was glad it had not focused on price changes. It said such changes might have brought short-term relief, but winning new users was more critical.
Adobe’s user numbers are rising. Monthly active users passed 1 billion in fiscal Q3 2026, up more than 20% from a year earlier.
Paid growth is above management’s target for now. The yearly value of Adobe’s subscriptions was up 11.2% from a year earlier in fiscal Q3 2026. Management’s fiscal 2026 target is 10.2%.
Management also targets an operating margin of 35.0% for fiscal 2026 under standard accounting rules, known as GAAP. Adobe’s fiscal 2027 starts at the end of November, so fiscal 2026 is nearly over.
Buying Adobe at 13 times earnings is mostly a bet that investors have marked a healthy business down too far. That reading fits three years of steady growth and the cash Adobe produces. The weak spots are the slipping margin and slower contract growth.
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You will see the result in Adobe’s fiscal 2026 report. Subscription value growing at least 10.2% would support the bargain reading.
Does This Mean You Should Act On ADBE?
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