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Adobe (ADBE) shares have lost 55.1% since their December 6, 2024 high, and that fall is the reason to look again. Adobe's free cash flow over the last four quarters equaled 10.8% of its market value at the October 29 close, compared with 4.2% for the median S&P 500 company. Cash that plentiful for the price means a sound business on sale or one the market expects to shrink, so which is Adobe?
Adobe's Free Cash Flow Is Still Rising
Adobe generated $10.6 billion in free cash flow, the cash left after running the business and paying for equipment, during the four quarters to August 28, 2026. This was up from $9.6 billion a year earlier. Like profit, this cash belongs to shareholders whether Adobe pays it out or not. Over time, a company's share price tends to rise alongside the cash it produces for owners, especially when that figure is growing.
Subscriptions generate this cash, making up $6.56 billion of Adobe's $6.76 billion revenue in fiscal Q3 2026. Revenue rose 12.0% over the last twelve months, following a 10.7% increase the year before. Equipment took 2.0% of its cash from operations over those twelve months, showing Adobe spends little to stay in business. The company keeps a large share of each sale as profit, recording an operating margin of 35.7% against 18.5% for the S&P 500.
Adobe owed $6.76 billion on August 28, 2026, while holding $5.64 billion in cash and short-term investments. The company paid a $0.26 billion interest bill over the last twelve months, against $9.27 billion of operating profit. Looking solely at these accounts, Adobe resembles a growing business priced cheaply rather than one in decline.
Why Investors Pay So Little For Adobe's Cash
Investors may worry that Adobe's growth will fade as AI changes software. Leadership is also changing: the shares fell 6.7% on September 4, 2026, after Adobe named Anil Chakravarthy as its next CEO, starting December 1. During its September 10, 2026 call, management itself said every software-as-a-service company will go through a shift to AI agents.
Annual recurring revenue, the yearly value of Adobe's subscriptions, stood at $27.5 billion at the end of fiscal Q3 2026. This was up 11.2% from a year earlier. For the full fiscal year, management targets slower annual recurring revenue growth of 10.2%.
Management has chosen to win new users with free versions of its apps rather than raise prices. It said price increases might have brought short-term relief but would matter less than new user adoption. These free creative apps now draw more than 100 million monthly users, up more than 70% in a year.
Letting customers try a product free is often what builds its user base. Tesla offers the same kind of free start: every car it delivers in North America comes with a month of free FSD, and its paid FSD customers now number more than 1.7 million. Read Trefis Big Story: Musk's Massive Marketing Miss Cost $10 Trillion .
Adobe is also buying AI tools. It agreed to acquire Topaz Labs, whose AI enhancement models go into Firefly and Creative Cloud, and finalized the $340 million acquisition in late September 2026. So far, the doubt appears to be about the years ahead , not the results. In September, management said it was raising its full-year revenue and earnings targets.
What To Watch In Adobe's December Report
Adobe still has to show whether its cash keeps rising while it offers free versions of its apps to win users, and whether its debt stays easily covered. When the company reports fiscal Q4 2026 results, expected in December 2026, its free cash flow over twelve months is the number to watch. That figure stood at $10.6 billion at the end of fiscal Q3 2026.
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