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Adobe (ADBE) stock is priced at 13.6 times earnings , compared with 22.8 for the median S&P 500 company. The shares lost 25.9% over the past year as the S&P 500 returned 11.8%. That represents a steep fall for a company whose sales rose 12.0% over its four fiscal quarters to August 2026. Is the business behind that price as healthy as the sales growth suggests?
Adobe's Latest Year Shows A Healthy Cash-Generating Business
Based on its latest four fiscal quarters, the answer is largely yes. Adobe sells software subscriptions like Acrobat, and its Digital Media segment generated $17.6 billion of the company's $23.8 billion revenue in fiscal 2025. Over the four quarters to August 2026, Adobe kept 35.7% of its sales as operating profit, compared with 18.6% for the median S&P 500 company.
This profit comes with cash . Operations generated cash equal to 41.6% of revenue over those four quarters, and Adobe spent $9.3 billion on buybacks. The diluted share count fell to 395 million from 424 million a year earlier. Management said the company had about $24.55 billion left under its April 2026 buyback authorization after fiscal Q3 2026. That represents about a quarter of Adobe's $99.3 billion market value.
Adobe Grows Far More Slowly Than In 2021
The current stock price appears to assume that the slower growth of recent years is here to stay. Adobe increased its revenue 21.4% during the four fiscal quarters to September 2021, and investors paid 47.0 times earnings for the stock at the end of that September. Growth then slowed to 9.9% by the four quarters to September 2023. The latest rate of 12.0% over the four quarters to August 2026 sits slightly above the 11.2% average of the company's last three twelve-month periods, this one included, but it falls far below the 2021 level.
Profit grew more slowly than sales in the latest year. Net income rose to $7.28 billion over the four quarters to August 2026 from $6.96 billion a year earlier, and the net margin slipped to 28.0% from 30.0%.
Revenue under contract but not yet booked reached $22.16 billion at the end of fiscal Q3 2026, up 8% from a year earlier. An analyst said on the September 10, 2026 call that this marked the first single-digit growth in that figure since early fiscal 2023. Management replied that this growth reflects the company's focus on winning new users through free versions of its products.
What Is Adobe Doing About Its Growth?
Adobe is prioritizing new users over price increases. Management said on the fiscal Q3 2026 call that pricing changes might have provided some short-term relief, but would matter less than winning new users. The number of business professionals and consumers using Adobe's products each month grew more than 25% from a year earlier to over 900 million.
Ending ARR, the yearly value of subscriptions, from Adobe's AI-first products exceeded $650 million, up more than 150% from a year earlier. That figure is still small next to the $27.5 billion of ending ARR for Adobe as a whole. Management set its own bar for fiscal 2026 at 10.2% growth in total ending ARR. The company also guided to revenue of $26.576 billion to $26.626 billion for the year.
A buyer at this price is betting either that the market has mispriced a business that still grows and returns cash, or that management's push for free users will translate into faster growth in paid subscriptions. Adobe's growth in total ending ARR for fiscal 2026, expected in its December 2026 report, is the figure to watch. That report will be the first under Anil Chakravarthy, who takes over as chief executive from Shantanu Narayen on December 1, 2026, when Narayen becomes executive chair.
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