TL;DR at the Bottom–This has some Takes you havent seen on other ADBE posts

"How is Adobe a War Play?"

$RTX, $LMT, $NOC, and $GD make the weapons, while ADBE makes the CoD montage you watched on the official White House twitter. Almost every image posted on government social media is created via Adobe.

While I am definitely stretching by calling it a war play, and the government gets a massive discount on the products the software is one of the few creative suites that have received FedRamp certification for use on sensitive government cloud environments (FIG has this as well).

This is sticky ARR with minimal cancelation risk. The concern isn't that the company will go away, it's that already slowing growth with turn into a plateau and begin to decline due to AI "seat compression."

Adobe/NVDA Partnership is Older than OpenAI:

Management calls AI "the opportunity of the decade" and is optimistic about new Firefly and other AI capabilities, while skeptics are concerned a pricey subscription can be replaced with AI directly or via cheaper competitive products.

NVDA's recent earnings showed a surprise 74% sequential increase in Professional Visualization revenue, to $1.3 billion in Q4. This was mainly due to increased demand from large enterprise customers like MSFT working on creative workflows.

This is directly beneficial to ADBE because its partnership with NVDA has allowed for CUDA optimization and seamless integration into high-intensity workflows. Simply put, creative demand is strong and ADBE is poised to keep their highest, most premium business because the cheap alternatives don't have the same capability.

When they do have equal capability, ADBE will benefit from "the last mile problem." Arguments exist that human input will not be necessary for output in the future, outside of just creative industries. Adobe (and many businesses) will struggle if AI truly replaces everything.

However, if AI is another revolutionary tool to enhance worker productivity, ADBE is likely a beneficiary as large enterprises will still need to finalize AI content. This could look like standardizing brand font/color, managing distribution and archiving, compliance, etc. While the number of licenses may decrease in that scenario, the company has a strong moat with large enterprise customers, secure environments, and with professionals with precise needs.

So Why would the Stock go Up?:

Q4 FY25 Revenes and Earnings

Over 2/3rds of ADBE's revenue comes from "Consumers and Creative & Marketing Professionals" which is where the creative cloud suite revenue is recorded and where the company is considered weak.

The weakness has not appeared in the financials yet, but as the market is forward-looking, future sentiment can outweigh current financials. FY25 growth in this segment remained above 10% and FY26 guidance from a conservative company was just under 10%. While this is significantly slower than even mature blue chips like AAPL and MSFT, double digit growers in high margin businesses typically trade for ~20x earnings.

The other 1/3rd comes from Business Professionals & Consumers which is Acrobat, Express, and PDF. This segment is showing stronger growth (15% vs 10% YoY last quarter) and is drawing less concern.

The Asymmetric Risk:

I have tried to avoid the "it's cheap" argument for as long as possible, but it matters when talking about a company still reporting record profits, a strong balance sheet, and double digit growth YoY. At ~$110B market cap it is trading at 15x trailing and ~12x forward earnings which both from a relative and peer stance is historically cheap.

Original 300/500C for 70 premium

Of course the stock can continue to go lower, I thought it was a buy in October, and my initial position suffered and had to be managed into my current position.

Positons:

I am currently holding two $250/$500C spreads acquired for $89 premium (considering the loss on previous 300/500 spread which was rolled down), and are currently worth $69.25 premium. These spreads expire 12/17/2027 and have a BEP adjusting for rolling of $339 per share. My napkin math has ADBE growing EPS another ~10% in FY27 to $25.85 where my BEP would put the stock at ~13x trailing earnings. A re-rating back to a near 20x multiple on similar growth would put the stock price near $517 (hence the short strike at $500).

Current Rolled-Down position and Gain (still negative overall)

Do you think ADBE is a buy or this is a donation? Thank you for reading, I am human, and this is not financial advice:

TL;DR

• ADBE makes CoD Montages in Real Life
• ADBE/NVDA partnership is older than OpenAI
• Security Certs and High-Quality Enterprise ARR
• Yes, the stock is cheap
• $250/$500C exp 12/17/2027 BEP ~$340