Adobe (ADBE): A Generational Value Trap or the Buy of the Decade at 7-Year Lows?
Adobe Inc. (NASDAQ: ADBE) finds itself in unfamiliar territory. The creative software giant — which spent the better part of a decade trading at 30x to 50x earnings as the poster child of the SaaS revolution — has been cut nearly in half from its 52-week high of $464.33, closing at $256.94 on February 17, 2026. That 45% drawdown has compressed Adobe's market capitalization to roughly $108 billion, a level that now prices the company at just 15.4x trailing earnings and roughly 7.2% free cash flow yield. For context, this is the cheapest Adobe has traded since 2019, and the valuation compression is approaching levels not seen since the Great Recession. The catalyst for this destruction is no mystery: generative AI. Investors fear that tools from OpenAI, Midjourney, Canva, and a wave of Chinese competitors like Alibaba's Qwen 3.5 will erode Adobe's creative monopoly, commoditizing the very workflows that sustain its $24 billion annual revenue base. Institutional holders are fleeing — Polar Capital's $12 billion technology fund recently dumped software positions outright, while Crestwood Advisors, Fifth Third Bancorp, and Cidel Asset Management have all trimmed their ADBE stakes in recent filings. The stock is down 19% from its 50-day moving average and 27% below its 200-day average, a rare capitulation signal for a company of this quality. And yet, beneath the fear, Adobe's actual business tells a starkly different story. Fiscal year 2025 revenue hit $23.77 billion, up 10.4% year-over-year. Net income surged 28% to $7.13 billion. Free cash flow exceeded $9.85 billion. The company repurchased $11.3 billion in stock — more than 8% of its current market cap — in a single year. The disconnect between Adobe's deteriorating stock price and its accelerating fundamentals is among the widest in large-cap technology today, and it demands a rigorous examination of whether the market is right to panic or profoundly wrong.