Adobe (NDQ:ADBE): The Company That Bought You Photoshop Has Been Unfairly Sold Off Over AI

Adobe (NDQ:ADBE) is one of the most recognisable names in global software, and rightly so. It is the company behind Photoshop, Illustrator, Acrobat, Premiere Pro and the Creative Cloud subscription model that reshaped the economics of creative tools. Yet despite its history of innovation and its dominant market position, Adobe has spent the past two years trading as if its best days are behind it. The rise of generative AI has triggered a wave of pessimism. Investors have asked whether Adobe’s creative suite is at risk of being disrupted by new AI‑native competitors.

But look at consensus numbers and it is clear that analysts beg to differ. Who is right here?

Adobe’s (NDQ:ADBE) history and overview

Adobe was founded in 1982 by John Warnock and Charles Geschke, two former Xerox PARC researchers who believed that computers could transform publishing. The company’s name came from Adobe Creek, a small stream running behind Warnock’s home in Los Altos, California. It was a fitting name for a company that would become one of the foundational forces in digital creativity.

The early years were defined by PostScript, a page‑description language that enabled precise digital printing. PostScript became the backbone of desktop publishing. Adobe then expanded into graphics software, acquiring Aldus (the creator of PageMaker) and launching Photoshop in 1990. Photoshop became a cultural phenomenon. It reshaped photography, advertising, design and digital art. Illustrator, Premiere and After Effects followed, each becoming industry standards.

The transition from founders to non‑founding executives was unusually smooth. Warnock and Geschke stepped back from day‑to‑day leadership in the early 2000s, handing the reins to Bruce Chizen and later Shantanu Narayen. Narayen’s tenure has been transformational. He led Adobe’s shift from boxed software to subscriptions, launching Creative Cloud in 2012 along with DocuSign. It was one of the most successful SaaS transitions in history: the company’s revenue became recurring, margins expanded and the customer base broadened. Not quite the heights of the Steve Jobs to Tim Cook transition, but things could’ve been a lot worst.

Adobe today is a global creative‑software powerhouse with a portfolio spenning design, video, marketing automation, document management and digital analytics. It is a company with deep roots and a long history of reinvention.

Is AI a real threat to Adobe, or is the market overreacting in thinking it is?

The rise of generative AI has created fear that AI‑native tools could replace Photoshop, Illustrator or Premiere. And you could say these are legitimate given that start‑ups have emerged offering AI‑driven image generation, video editing and design automation.

So far, the financials tell a different story in that Adobe’s revenue continues to grow. Consensus estimates show FY26 revenue of US$26.1bn, rising to US$28.5bn in FY27 and US$31.3bn in FY28. Its bottom line (EPS) is predicted to from US$23.56 in FY26 to US$26.49 in FY27 and US$30.00 in FY28 which would represent profits of $10.6bn, $11.9bn and $13.5bn respectively. There is no sign of a collapse in demand, nor is there any sign of customers abandoning Adobe’s ecosystem.

The company’s response to AI has also been more proactive than the market gives it credit for. Adobe launched Firefly, its generative‑AI engine, in 2023. Firefly is integrated directly into Photoshop, Illustrator and Premiere. It allows users to generate images, extend scenes, remove objects, create vector graphics and automate repetitive tasks. Crucially, Firefly is trained on licensed content, giving Adobe a defensible legal position in a world where copyright litigation is accelerating.

Adobe has also embedded AI into its document tools. Acrobat now includes AI‑driven summarisation, editing and form‑generation features. Marketing Cloud uses AI to automate campaign optimisation. The company is not being disrupted by AI. It is using AI to strengthen its moat.

The market’s fear is that AI will commoditise creativity. The reality is that AI is becoming another layer inside Adobe’s ecosystem. Professionals still need precision, control, reliability and integration. Adobe’s tools remain the industry standard for those requirements. The financials reflect that reality. The AI threat has not manifested in revenue, margins or customer churn. The sell‑off has been sentiment‑driven rather than fundamentals‑driven.

Analysts are confident

The company’s long‑term growth rate is forecast at 12.9%, with a median estimate of 12.7%. The target price consensus sits around US$329, implying significant upside from current levels. The high estimate of US$487 reflects the view that Adobe’s AI strategy could drive a re‑rating if execution remains strong.. These are not the numbers of a company in decline, or at least not one that analyst think is in decline.

We noted its bottom line consensus above. Its top line consensus implies strong growth too with US$26.1bn for FY26 (the 12 months to November 30, 2026), US$28.5bn for FY27 and US$31.4bn for FY28. They reflect a business with pricing power, recurring revenue and a global customer base.

The valuation is where the opportunity becomes clear. Adobe trades on 8.8x FY27 P/E. For a company with a long‑term growth rate of nearly 13%, that is unusually low. The PEG ratio of 0.7x reinforces the point. The market is pricing Adobe as if its growth is at risk. These numbers impy that the growth is intact and that the valuation disconnect is unjustified. The market has priced in disruption. Analysts see resilience.

Conclusion

Adobe is a company with a long history of reinvention and it is replicating this right now as AI rises.  The market has treated AI as a threat. But the company and analysts covering it see it as an accelerant, and the financials support the analysts. For investors, that disconnect is the opportunity.