Adobe: Deeply Mispriced - Entering Growth Mode With AI
Summary
- Adobe's Buy case remains promising, as the management's strategic choice to natively integrate AI capabilities into its legacy and new SaaS offerings trigger renewed growth opportunities.
- The same has been observed in the growing ARRs, the expanding multi-year RPOs, and the still rich profit margins as its subscriber base expands and cross-selling increases.
- These have led to Adobe's raised FY 2025 guidance, as posited in our last article, while building upon the double-beat performances over the past ten consecutive quarters.
- This is on top of the AI-influenced ARR "tracking ahead of the $250 million ending ARR target by the end of fiscal 2025," up from the $125M reported in FQ1 2025.
- This is aided by Adobe's intensified buybacks, the discounted valuations, the bottoming stock price action, and the raised consensus forward estimates for the first time in a year.
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