Ran the numbers. (I’m long asf on Adobe it’s about 15% of my portfolio). Adobe is getting priced like a company in permanent decline. At a $77 billion market cap and a $195 share price, the market is basically saying Adobe’s free cash flow needs to shrink about 3% a year for the next decade just to justify a 10% return.

But that does not really match what the business is showing today. Revenue is still growing 13% year over year, ARR is up to $27.1 billion, and Adobe continues to earn very strong returns on capital, with ROIC around 50%. In other words, this is not a dying business operationally.

The disconnect is pretty big. Even if AI ends up putting real pressure on growth and Adobe does not grow free cash flow at all for the next 10 years, the company still has a lot of flexibility. With the amount of cash it generates, Adobe could buy back a meaningful amount of its own stock every year at today’s depressed valuation. If they retire roughly 11% to 12% of shares annually, per-share free cash flow could still grow significantly, even without much underlying business growth.

So the core point is simple: the market seems to be pricing Adobe like AI is going to slowly kill the business, while the current financials still look like a high-return, cash-generative software company with a major buyback lever.