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QS Research · Michael Burry's Scion Capital analyst template · 2006

ADOBE INC. (ADBE)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: LONG

Conviction medium · base case +30% · downside -14% · upside +75%

Using section 13's TTM base, I set a base case at 12.9x EV/EBITDA (the midpoint of DBX's 8.5x and CRM's 17.3x); applying that to TTM EBITDA of $10.04B, subtracting net debt of $0.72B, and dividing by 389.2M shares gives $330.9/sh, +30.3% vs the $253.92 price. The downside case at DBX's 8.5x gives $217.4/sh (-14.4%) and the upside at CRM's 17.3x gives $444.5/sh (+75.0%). Adobe's current 9.9x EV/EBITDA and 13.6x P/E look too cheap for a company generating $10.59B FCF and buying back $9.29B annually, even after accounting for AI-disruption fears. The market appears to be pricing in permanent damage while actual Q3 FY2026 showed 13% revenue growth and AI-first ARR up >150%. I would be long, but not with high conviction because the downside case is still a loss and the AI bear case is real.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    Adobe Inc. sells productivity, creativity, and marketing software mainly through subscriptions (SaaS, term, and pay-per-use) across Digital Media, Digital Experience, and Publishing/Advertising. Revenue reached $23.77B in FY2025, up from $12.87B in FY2020, with operating income of $8.71B and operating cash flow of $10.03B. The FY2025 10-K highlights an AI-first portfolio (Acrobat Studio, Firefly, GenStudio, Experience Platform agents), and from Q1 FY2026 Adobe will combine its three segments into one.

  2. ✓ 2. Competitive advantage

    Adobe's competitive advantage rests on brand/category leadership and integrated creative, productivity, and marketing ecosystems, not on structural entry barriers—the 10-K itself cites limited barriers to entry and short product lifecycles. FY2020-FY2025 revenue rose from $12.87B to $23.77B, with FY2025 operating income of $8.71B and operating cash flow of $10.03B, indicating high operating margins and cash conversion. The moat depends on continued innovation and brand trust, as management warns that AI-native and other competitors are intensifying pressure.

  3. ✓ 3. 10-Q takeaways

    Adobe's Q3 FY2026 (ended Aug 28, 2026) revenue grew 13% y/y to $6.76B, driven by 14% subscription growth and 11.2% ARR growth to $27.50B. Operating costs rose faster: cost of revenue +19%, opex +15%, and tax rate up to 22%, limiting net income growth to 3% to $1.83B. Nine-month operating cash flow was $7.65B (+11%), with financing outflows dominated by buybacks; RPO rose 8% to $22.16B. Updated risk factors emphasize AI and competitive threats.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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