Adobe (ADBE): record quarter, the stock still fell

2026-06-12 · By Lubin Danilo, founder of Lubin Investment

Adobe posted a record quarter and raised its guidance, yet the stock fell about 6 %. The market punished a surprise CFO departure and its fear that AI will erode the model. The result: an elite company now trades at the cheapest cash multiple in its history. Here is how I separate quality from price.

• Record quarter: 6.62 billion dollars in revenue, up 13 % year over year, and adjusted earnings of 5.96 dollars per share, above expectations.
• The stock still fell about 6 %, mainly on a surprise CFO departure and the fear that AI will damage Adobe's model.
• AI-related recurring revenue now exceeds 500 million dollars: for now, AI feeds Adobe more than it destroys it.
• Adobe trades at roughly 10 times its free cash flow, versus a 33 average over ten years: the market treats it like a company in decline.
• A good company is not the same as a good price: I judge quality first, valuation second.

What happened last night

Adobe reported its second fiscal quarter of 2026 on the evening of June 11. Revenue reached 6.62 billion dollars, up 13 % year over year. That is a record. Adjusted earnings came in at 5.96 dollars per share, above what analysts expected (around 5.81 dollars).

On the topic everyone obsesses over, artificial intelligence, the numbers are strong. AI-related recurring revenue now tops 500 million dollars, several times more than a year earlier. Firefly, Adobe's generative AI tool, is approaching 300 million in recurring revenue. Management also raised full-year guidance, now targeting 20.5 to 20.6 billion dollars in revenue, with a 25 billion dollar buyback program in place. On paper, it is flawless.

Why the stock fell while the numbers were good

The main reason is not in the quarter's results. It is an announcement that came with them: Adobe's chief financial officer, Dan Durn, is leaving. The market hates that. A departing CFO always leaves a question hanging: why now, what does he know that we do not? In most cases it is an ordinary move. But the market sells first and asks questions later. The stock fell about 6 % despite excellent results.

Behind it lies an older worry. For months, one question has weighed on Adobe: will AI destroy its business? If anyone can generate a professional image or video by typing a sentence, why pay for an Adobe subscription? That fear had already pushed the stock to multi-year lows. It is exactly the context I described in my Adobe fundamental analysis, just before these results.

Is it a good company? Quality first

When I look at a stock, I always start with one question, and only one: is this a good business, regardless of its price? For Adobe, the answer is clearly yes. The company sells the tools that run professional creation worldwide: Photoshop, Illustrator, Premiere. Its competitive advantage, what we call its moat (the gap that stops a rival from taking its place), comes down to one thing. Ask an editor or a marketing team to drop these tools: they cannot. Years of files, habits, training. That translates into a huge share of subscription revenue that recurs every year.

And this quarter offers concrete proof that the moat holds against AI. The 500 million dollars of AI revenue did not appear from nowhere: they show Adobe can build AI into its own tools and charge for it, rather than be replaced by it. For now, AI feeds Adobe more than it eats it.

Is it a good price? The valuation

Once quality is confirmed, and only then, I look at the price. For that I use a simple ratio: P/FCF (price-to-free-cash-flow). It is the share price divided by the free cash flow the company generates each year. Free cash flow is the money that truly stays in the bank once every bill is paid. A P/FCF of 10 means you are paying ten years of that cash today. The lower it is, the cheaper it is.

Here is what the drop in the stock produced, in a few markers:

• P/FCF today: about 10 times free cash flow.
• Adobe's ten-year average: about 33 times.
• Free cash flow generated per share over a year: around 24 dollars, and growing.
• Read: the market is pricing one of tech's best cash machines as if its decline were a done deal.

A company still growing at 13 %, dominant in its field, throwing off billions in cash, priced at about a third of its usual valuation. Either the market is right and AI will truly break it, or the fear has gone too far.

The real debate: does AI feed or destroy Adobe?

The whole thesis sits in that question. If you think Adobe defends its turf and learns to sell AI, then the stock is unusually cheap today. If you believe in deep disruption, this low price is not a bargain, it is a trap. That is what we call a value trap: a stock that looks cheap because the company will in fact earn less tomorrow.

A low P/FCF is never a bargain on its own. It only is if the quality holds over time. That is exactly why I always judge quality before price, never the other way around.

How I decide, without emotion

These results do not change my method, they confirm it. Adobe remains an elite company, now at the cheapest cash multiple in its history. But today's drop is driven by an emotion (an executive leaving), not by weaker fundamentals. I do not rush into a market reaction. I keep a reasonable buy price in mind and let the stock come to me rather than chase it. You can follow the up-to-date numbers on my Adobe fundamental analysis page.

Knowing whether a company is good, and at what price to buy it, as two separate questions: that is all I wanted to be able to do in seconds for any stock. That is why I built my investing site, where I apply this grid to more than 5,000 stocks, including the ranking of undervalued stocks and my full methodology. The detailed Adobe analysis is on its analysis page.

FAQ

Why is Adobe stock falling if the results are good?

Mostly because of the surprise departure of its chief financial officer, which worried the market, and the underlying fear that AI will erode its model. In the short term, a stock reacts to emotions and surprises, not only to fundamentals. A record quarter can coincide with a drop.

What is free cash flow?

The money that truly remains with the company after paying everything it needs to operate and invest. It is harder to dress up than accounting profit, so I rely on it more to judge how solid a business is.

Is a low P/FCF always a bargain?

No. A low price can hide a company in decline (a value trap). It is only attractive if the quality of the business holds over time. Hence my rule: quality first, price second.

Will AI kill Adobe?

That is the real debate, and nobody knows for sure. But this quarter shows Adobe can, for now, sell AI rather than be replaced by it: more than 500 million dollars of AI-related recurring revenue. The risk is real and worth watching.

Should you buy Adobe now?

It depends on your conviction about AI and your price discipline. The stock is at the cheapest cash multiple in its history, but a great company bought too expensive is still a bad investment. This is not investment advice, do your own research.

Voir l'analyse ADBE sur Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I have analyzed stocks through their fundamentals for several years and invest my own money with this method. I codified it into a tool that judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).