ADOBE INC. (ADBE) Stock Analysis
ADOBE INC. (ADBE) Stock Analysis
Analysis from 10-Q filed 2025-09-24. Data as of Q1 2026.
Overall Grade: F (Concerning)
ADOBE INC. faces challenges in financial performance that warrant careful analysis.
| Metric | Value | Context |
|---|---|---|
| ROIC | 45.9% | Above industry average |
| FCF Margin | 42.2% | Strong cash generation |
| Debt/Equity | 0.1x | Conservative leverage |
Investment Thesis: Strong return on invested capital of 45.9% suggests durable competitive advantages and efficient capital allocation.
Explore ADOBE INC.: Earnings History | Filing Intelligence | ROIC Analysis
Profitability: ADOBE INC. earns 45.9% ROIC, Top 5% in Technology
ADOBE INC.'s trailing-twelve-month ROIC of 45.9% ranks Top 5% in Technology companies (sector median: 5.2%), driven by NOPAT margin of 29.4% combined with asset turnover of 0.8x. Source: 10-Q filed 2025-09-24. Gross margin of 89.4% with operating margin at 36.6% reflects strong pricing power.
| Metric | ADBE | Rating | Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 45.9% | Excellent | Above sector median of 5.2% |
| Return on Equity (ROE) | 61.2% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 89.4% | Excellent | Strong pricing power |
| Operating Margin | 36.6% | Excellent | Efficient operations |
Cash Flow: ADOBE INC. generates $10.3B FCF at 42.2% margin, positive NaN/8 quarters
ADOBE INC. generated $10.3B in free cash flow (TTM), a 42.2% FCF margin, a margin that ranks Top 5% in Technology. Operating cash flow exceeds net income by 1.5x, indicating high earnings quality. FCF was positive in N/A of the last 8 quarters. Source: 10-Q filed 2025-09-24.
| Metric | ADBE | Rating | Context |
|---|---|---|---|
| Free Cash Flow Margin | 42.2% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $10.3B | Good | Positive cash generation |
| OCF/Net Income | 1.5x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
Balance Sheet: ADOBE INC. at 0.1x leverage
ADOBE INC.'s debt-to-equity ratio of 0.1x reflects conservative leverage. Net cash position of $6.0B provides financial flexibility. Source: 10-Q filed 2025-09-24.
| Metric | ADBE | Rating | Context |
|---|---|---|---|
| Debt to Equity | 0.1x | Excellent | Conservative capital structure |
| Net Cash Position | $6.0B | Excellent | Net cash positive |
Valuation: ADOBE INC. trades at 15.3x earnings
ADOBE INC. trades at a P/E of 15.3x. Free cash flow yield of 9.4% offers attractive cash returns relative to price.
| Metric | ADBE | Rating | Context |
|---|---|---|---|
| P/E Ratio | 15.3x | Adequate | Reasonable valuation |
| EV/Sales | 4.2x | Good | Growth premium priced in |
| FCF Yield | 9.4% | Excellent | Attractive cash return |
Capital Allocation: ADOBE INC. returns 9.5% shareholder yield
ADOBE INC.'s total shareholder yield is 9.5% (dividends + buybacks 9.5%). Source: 10-Q filed 2025-09-24.
| Metric | ADBE | Rating | Context |
|---|---|---|---|
| Total Shareholder Yield | 9.5% | Excellent | Dividend + buyback yield combined |
| Buyback Yield | 9.5% | Good | Active share repurchases |
| Total Capital Returned (TTM) | $10.5B | Good | Dividends + buybacks returned to shareholders |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 45.9% | Top 5% | 8.8x above |
| Free Cash Flow Margin | 42.2% | Top 5% | 4.6x above |
| Gross Margin | 89.4% | Top 25% | 1.7x above |
| Operating Margin | 36.6% | Top 5% | 7.6x above |
| Return on Equity (ROE) | 61.2% | Top 5% | 12.5x above |
| P/E Ratio | 15.3x | N/A | - |
Financial Scorecard
| Metric | ADBE | Rating | Sector Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 45.9% | Excellent | Top 5% of sector (median: 5.2%) |
| Free Cash Flow Margin | 42.2% | Excellent | Top 5% of sector (median: 9.1%) |
| Gross Margin | 89.4% | Excellent | Top 25% of sector (median: 51.8%) |
| Debt to Equity Ratio | 7.4% | Excellent | Conservative capital structure |
| P/E Ratio (Price-to-Earnings) | 15.3x | Adequate | Fair value |
| Free Cash Flow Yield | 9.4% | Excellent | High cash return |
Frequently Asked Questions
Q: What is ADOBE INC.'s Return on Invested Capital (ROIC)?
ADOBE INC. (ADBE) has a trailing twelve-month Return on Invested Capital (ROIC) of 45.9%. This compares above the sector median of 5.2%. An ROIC above 20% indicates exceptional capital efficiency and strong competitive advantages.
Q: What is ADOBE INC.'s Free Cash Flow Margin?
ADOBE INC. (ADBE) has a free cash flow margin of 42.2%, generating $10.3 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is ADOBE INC. stock overvalued or undervalued?
ADOBE INC. (ADBE) trades at a P/E ratio of 15.3x, which is above the sector median of N/A. The EV/Sales multiple is 4.2x. Free cash flow yield is 9.4%, which represents an attractive cash return to investors.
Q: What is ADOBE INC.'s revenue and earnings growth?
ADOBE INC. (ADBE) grew revenue by 11.0% year-over-year. Earnings per share increased by 13.1% compared to the prior year. Solid growth above 10% suggests healthy business momentum.
Q: Is ADOBE INC. buying back stock?
ADOBE INC. (ADBE) repurchased $10.5 billion of stock over the trailing twelve months. This represents a buyback yield of 9.5%.
Q: How does ADOBE INC. compare to competitors in Technology?
Compared to other companies in Technology, ADOBE INC. (ADBE) shows: ROIC of 45.9% is above the sector median of 5.2% (Top 0%). FCF margin of 42.2% exceeds the sector median of 9.1% (Top 0% of sector). Gross margin at 89.4% is 37.6 percentage points higher than sector peers. These rankings are based on MetricDuck's analysis of all Technology companies with available SEC filings.
Q: What warning signs should I watch for with ADOBE INC.?
ADOBE INC. (ADBE) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-09-24. TTM metrics as of Q1 2026.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
Scope: This analysis covers SEC filing fundamentals — profitability, cash flow, balance sheet, and valuation metrics. For analyst estimates and price targets, consult sell-side research.
This analysis is for informational purposes only and does not constitute investment advice.