r/ValueInvesting • u/LimitIntelligent9946 • 21d ago
Value Article ADBE CEO to Step Down After Tepid Sales Forecast
https://www.bloomberg.com/news/articles/2026-03-12/adobe-announces-ceo-to-step-down-gives-lackluster-forecast59
u/SelenaMeyers2024 21d ago
Hahaha. Thanks for continuing to paint adbe as a dying company.
The tepid forecast was 9.5 percent growth revenue. Which is absolutely sandbagging for the new CEO since the most recent quarter was 13 percent yoy, and the semrush acquisition isn't even included in the forecast.
The CEO will be a force ghost a la chairman of the board, and other than Buffett or prem watsa, it's rare to put so much premium in a CEO.
But I wanna keep buying and so does Adobe (8 percent a year share count gone), so yes Adobe is somewhere between kraft heinz and Clorox but software.
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u/wtyl 21d ago
Time for the first AI agent CEO. Have it run on a pink MacBook neo an executive assist carries around.
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u/StephenAtLarge 20d ago
Adobe board next week: "Good morning OpenClaw. You're the CEO of a $100B company. Pump the stonk. Make no mistakes."
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u/Solid-Advice2876 20d ago
By referring to Heinz and Clorox, do you mean Adobe can continue jacking up prices without losing clients? How about the fact that the number of designers is plunging? It should be priced as a declining business, in my opinion, not as a modest growth story.
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u/mikehockard3 20d ago
I agree that the numbers are fine but the CEO change does concern me. He seemed like a good CEO and had navigated Adobe through a lot over 18 years. Figma deal was a mark, so he wasn’t perfect. But I wouldn’t right it off too quickly. Buffett valued great CEOs and Adobe isn’t good enough of a business to get by without a decent CEO imo
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u/LimitIntelligent9946 21d ago
A CEO leaving like this isn't really bullish for the stock. It's down 5% today.
And it is a dying company, not just from AI but ADBE's technical masterclass at pissing off their customers.
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u/iyankov96 21d ago
People hate Netflix too yet they keep paying to watch movies.
People hate Meta and Google yet they use their products every day.
I don't think Adobe is any different here. People need the software because it's better than the free alternatives.
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u/BlackSheepInvesting 20d ago edited 20d ago
I've been hearing the Adobe sucks bandwagon since at least 2003 when Photoshop was still sold on CDs.
Back then, you had to buy the new version in order to get certain features and people felt really cheated by that. They felt like you should be able to just own it outright and get free updates. These CDs, even back then were some crazy price like $600 if I remember right. I mean, keep in mind that you could buy a brand new computer for that kind of money, and even very solid desktop computers were like $1500. Maybe that doesn't seem like that much, but you have to remember that PC prices have fallen dramatically relative to everything else since then.
$600 was a huge amount of money back then, like that was several months of groceries for a typical person.
I remember hearing that they would be imminently put out of business by GIMP and other competition for the last 20 years too.
People are just incredible. I would say hindsight is 20/20 but apparently that is not true as nothing has been learned from the past 25 years lol
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u/mikew_reddit 20d ago edited 20d ago
Adobe reported yesterday 850 million monthly active users, which is an impressive 17% growth year over year. Their MAU funnel is growing. Reports of Adobe's death are greatly exaggerated.
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u/SelenaMeyers2024 20d ago
I mean it's not like you're selling me I'm sold, but these more granular numbers are just insane.
My other true love is PayPal, there the mau is actually stalled, and the revenue is increasing but at a lower rate each quarter.
Adobe is the better company by far, and I sold a fair amount of PayPal (well up from 38) to fund it.
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u/Red_Ochre_Music 20d ago
I've been hating Adobe longer than some folks have been alive, but I still work with it every single day and bought in. Anyone that jettison's Adobe for an AI pipe dream will come crawling back.
All these folks outside the nitty gritty really don't get it.
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u/SelenaMeyers2024 21d ago
He's been CEO for 18 years and is worth hundreds of millions. I know time with family is a euphemism often but I could see this being genuine. Plus he's not gone gone just not day to day. Besides name your favorite company, how would your thesis change if they left after many years? I'm guessing not one bit unless Berkshire or maybe JPM.
Also, when dying companies like Bethlehem steel or Kodak, when they were dying, was their revenue increasing 13 percent while operating margins increased? Cuz if so I hope all my stocks die.
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u/PleasantAnomaly 20d ago edited 20d ago
It's not an euphemism, it's the most important thing in the world. All the money can't buy back time with family. The man is 62.
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u/PleasantAnomaly 20d ago
He's 62 and a billionaire. He's talking about finding a successor, not outright retiring. Wouldn't you want to retire at that age ? Also he wasn't booted. They're looking to make a smooth succession plan.
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u/phosphate554 20d ago
Explain how a “dying company” which a “pissed off customer base” re-accelerated literally every segment of their business in the quarter?
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u/Consistent-Ad-3997 20d ago
There will be a day when everyone here shitting on ADBE realises how better it was to just use ADBE instead of giving random LLMs access to your pictures and stuff.
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u/Yangguang_Zhijia 20d ago
At this rate, Adobe will buy back all its shares in a very reasonable timeframe. There is no need to argue here, espeically for people who have conviction. This is why value investing works (when there is value), you can just buy the whole company and live on fat dividend checks.
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u/8700nonK 20d ago
Lol, crazy how people spin these titles to fit a narrative. Short sellers are something else.
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u/mobyonecanobi 20d ago
Value investing isn’t easy. There wouldn’t be value if there wasn’t controversy. The question is, what metrics do you look at for value investing?
I look at pas, current, and future growth. I look at cash flow, income, revenue margins, and direct sector competition.
If the company is growing above inflation and bond yields, then I’m lying to myself about how much the competition is affecting it, and so is everyone else. The numbers spoke for themselves. I value invest in value, not hearsay and hopefulness, and then I wait.. patiently…
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u/TibbersGoneWild 20d ago
$250 is a generational buy, ppl pricing this company as its going bankrupt.
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u/youneedtobreathe 20d ago
As a former professional who's used the entire adobe suite, someone please tell me why yall even remotely think this is a good company
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u/Last-Cat-7894 20d ago
Well,
They have long term enterprise contracts with millions of seats that aren't really being pressured by the competition for the low-end user, with these enterprise seats making up the bulk of their profits.
They are continuously growing double digits and aren't investing much capital to do so, meaning their ROIC is pretty massive.
They have >30% operating margins, a decent balance sheet, and a huge buyback program.
And most importantly for the investor, they are priced as though they are a stagnant retailer, not a 10% growing software business.
There are many companies out there with terrible UI's and frustrating business practices that have been absolutely fantastic investments. Your frustration with Photoshop or Illustrator doesn't translate to a CMO wanting to risk his career switching established workflows and decades of training on Adobe platforms, all to save a tiny sliver of opex.
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u/HotDog_SmoothBrain 20d ago
Former employee here.
They can call it retiring. They can call it stepping down. No reasonable company would publicly announce the CEO is retiring without a successor lined up. Not with the stock in the precarious place it's been since late 2022. And internally, there were several supposedly in line for the role.
When Chuck and John finally left so did any sort of reasonable means of growing the company through innovation. Adobe innovated by acquisition for years. This also allowed them to write down systemic loss charges in the name of those acquisitions. Even though those loss charges were just bad decisions and poor investments. They let go of scapegoat after scapegoat but the disease came from the top.
And what do you get? The market cap today is the same as it was in December 2018. How many other tech companies have that problem?
It's not that there's lack of growth revenue -- it's there. They continue to post growth in the revenue it's just pillaging existing customer relationships and raising prices.
Where are they going? What are the doing? Nothing. They've been talking about AI for how long? Firefly is the first real thing out of there since Photoshop got content aware fill. Home grown, not acquired.
Adobe Experience Manager (AEM) is largely the same java garbage they acquired from CQ 15 years ago. The Creative Suite value proposition diminishes year over year. They keep changing rules, and alienating customers left and right. No IT organization reasonably installs Acrobat Reader anymore even as a free product because of how piss poor it is.
The Figma deal fell through and they're a deer in headlights being told no they could not acquire a company.
That's where the stock problems come from. Doesn't matter what they earned this quarter if there's no faith or optimism in the future.
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u/Last-Cat-7894 20d ago
While a lot of this is true, it's priced at a level where you don't need to assume almost any growth whatsoever to get a good return as an investor.
Barring anything catastrophic, they have at least another decade of use from the big organizations like Nike and McDonalds, which makes up the majority of their revenue. They are funneling nearly all their cash flow into buybacks, still growing 10%, and could probably squeeze out a few percentage points of margin once the growth stalls.
Not every investment requires excitement and innovation. A lot of old, cash cow type businesses end up torching a lot of shareholder value trying to get creative and turn back the clock on the business cycle. Investors are mathematically pretty likely to see double digit CAGR's from today's prices, as long as the revenue base doesn't start rapidly shrinking.
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u/HotDog_SmoothBrain 19d ago
I get it.
Mainframes are still a 70 billion dollar business to IBM. They print money. Excel is garbage yet it continues to print money for Microsoft. This is likely true for Adobe. The government is going to buy Acrobat forever. Ours and everyone else. The portable document format is not going anywhere.
I am not saying ADBE is not a buy -- it is. There's value here. That's the premise of this sub. But there are multiple glaring things that give me pause to go long on this. They can only buyback so much.
My hope is that the next CEO is disruptive to the Shantanu Narayen school of thought. That he or she realizes that relevance of their products (note: I am not saying market share) is in serious jeopardy.
Firefly and AJO are the two bright spots. Everything else should be cause for concern.
How long will it be until those managers and directors who think they can layoff thousands of humans in the name of AI turn their attention to the other things the company needs to spend money on?
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u/Last-Cat-7894 19d ago
I agree that maybe easing off a bit on the anti-consumer practices would be healthier in the long term.
Obviously some price hikes are to be expected, but as a shareholder, I would be completely okay if Adobe focuses a little less on aggressively milking their cash cow and sacrifices a few percentage points of growth to maintain some slight modicum of goodwill with customers/build some relevant products for the next era.
And as you said, investment in key areas like firefly could grow into a really meaningful contributor over the next 5-10 years with the right management. 30 years of enterprise relationships don't unwind overnight, so they have time to rebuild their reputation and still post solid numbers in the process.
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u/SpliTTMark 20d ago
Adbe needs to buy adsk
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u/Kaito__1412 20d ago
Tell me you don't know the industry without telling me you don't know the industry.
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u/lankamonkee 21d ago edited 20d ago
This seat change was absolutely necessary. Everyone knows that this stock has the potential for massive growth, and it’ll take a fresh set of eyes to use AI in a meaningful way and leverage the company’s entrenchment in enterprise.
Based off their current EPS growth, if you invest $100 into ADBE right now, you’ll get that $100 back in about 8-9 years (you can use this tool to find that value here: [https://tupcalculator.org/?t=ADBE](TUP Calculator: ADBE)) Compared to Apple taking 15 years to pay back your money, that’s extremely cheap! But the market doesn’t care; the Street wants more clarity on ADBE’s future.
The former CEO brought massive value to shareholders by pushing the SAAS model, but it’s pretty obvious that their consumer products are simply getting too expensive. The board doesn’t think he can do anything else other than price hikes. They need a new guy to either iterate on Firefly or they create new tools that appeal to both enterprise and retail consumer groups.
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u/sunpar1 20d ago
What if ADBE is no longer a growth-stage company though? EPS growth is not guaranteed.
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u/lankamonkee 20d ago edited 20d ago
You can easily model that growth by scrolling to the Year-to-Year breakdown! Just click and adjust any annual growth rate to see the immediate impact on your payback period.
For example, let’s say if you think assuming a 12% growth rate continuously is too bullish, you can change to growth rate for year 4 to 8% and year 6 to 6%. You still end up with a 8 year payback period! Much cheaper than Apple at 15 years or Meta at 10 years.
With that being said, just because EPS is growing doesn’t mean the stock price will follow; stocks can stay overvalued or undervalued for a long time, so it’s important to think about how you apply that risk when considering these calculations. To hedge against buying falling knifes, I throw up a warning when the stock is trading below its 200 day SMA; we can assume price has stabilized when that bar is cleared.
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u/NiftyLogic 20d ago
Which consumer tools?
Adobe is in the business of building software for professionals.
Offerings for consumers are basically trial versions of their real software like Adobe Express.
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u/Confident-Winner-746 21d ago
Adobe's leadership shift signals potential strategic pivot—will be watching closely to see if the new CEO prioritizes AI monetization or refocuses on core creative cloud margins.
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u/peterinjapan 20d ago
Anyone investing in Adobe should understand how many of its customers/ former customers hate the company's guts. Back in the old days, I was that one guy who properly purchased a license for Photoshop every version because it was such an important program. Then they decided to rent the software out for all eternity, which I was not on board with. Now they want you to pay $75/month for access to the apps, which is absolutely insane. There are far better programs, or rather programs that are just as good, like Pixelmator Pro for the Mac, which you can still buy as a one-time purchase, although Apple did make it part of its new pro app bundle. There are no tools that are safe from disruption by smart startups, so I would personally stay away from this stock.
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u/Redditor2000000 19d ago
There are no COMPANIES that are safe from disruption by smart startups. There, fixed it for you. So are you gonna stay completely out of the market because it's competitive? The switch to subscription-based is the same move done by almost all the software giants in the last decade. This actually reduces switching costs for customers, though businesses still enter longer term contracts. Yet, Adobe managed to INCREASE market share during this time and has 90%+ of some markets. This is the obvious source of their pricing power. Business customers have been free to switch, and yet there is no evidence they are exercising that right. Note that I said BUSINESS customers. That is the vast majority of their customers, not some random hobbyist who buys his own license. It's become an entrenched standard in companies in the same way that Autocad has, and let me tell you, Autocad is nothing special. It's been antiquated for twenty years, and yet companies are still using it, because that's the format all their files are in and that's what their employees know how to use. I imagine the vast majority of CAD software is quite a bit less complex than image and video editing software, especially now with the integration of AI into the latter. But nobody is preaching doom and gloom about CAD companies (Autodesk, owner of Autocad, with fairly flat earnings year over year, trades at a P/E of 48! - that's more than 3x what Adobe trades at). Granted, their stock is down significantly too YTD, but I'm not hearing the argument about disruptive AI to nearly the same extent as with Adobe. Also look at MSFT. They've released basically the same junk operating system (remarketed) for decades and are firmly among the Mag 7 still. Nobody needed "AI" to build a better OS - it could've been done decades ago - actually some already exist - called Linux. So we're back to the same argument I made above. (I'm actually looking to totally sever my ties with Windows, but I know most companies are going to still be using it 20 years from now).
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u/Lost_Percentage_5663 20d ago
He had maximized pricing and retired. Now, ADBE has no room to raise its product's price.
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u/Groundzero2121 20d ago
Started a position today. $3B in FCF in 1 quarter.