Executive Summary

Adobe (ADBE) is the battleground stock for the "AI Disruption" narrative. Bears argue that Midjourney and OpenAI will commoditize creativity, making Photoshop obsolete. We take the contrarian view: In a world of infinite AI content, Workflow and Safety become the moats. Adobe Firefly's "commercial safety" guarantee makes it the only viable choice for the Fortune 500, preserving Adobe's monopoly on the creative professional.

1. Firefly: The Safe Haven

Enterprises cannot use Midjourney.

• Legal Risk: If Coca-Cola uses an AI image generated on Midjourney that accidentally infringes on a Marvel copyright, they get sued. Midjourney offers no protection.
• The Indemnification: Adobe trained Firefly exclusively on its own stock library (Adobe Stock). Because they own the training data, they offer "IP Indemnification" to enterprise customers. If you get sued for using a Firefly image, Adobe pays the legal bill. This is the killer feature for corporate legal departments.

2. Workflow Dominance

AI generates pixels; it doesn't build campaigns.

• The Last Mile: Generating an image is step 1. Editing layers, matching fonts, prepping for print, and exporting to specific formats is steps 2-100. All of that happens in Photoshop, Illustrator, and InDesign.
• Integration: Adobe is embedding generative AI inside the tools professionals already live in. "Generative Fill" in Photoshop is a feature, not a separate product.

3. Document Cloud (Acrobat)

While Creative gets the glory, the Document Cloud is a silent compounder.

• Liquid Mode: Adobe is using AI to make PDFs responsive and readable on mobile devices.
• Conversational PDF: The "Ask Acrobat" feature (chat with your document) unlocks the massive amounts of unstructured data trapped in the world's 3 trillion PDFs.

Risks to the Thesis

1. Canva: Canva is eating the bottom of the market (students, social media managers). As Canva moves upstream with enterprise features, they pose the single biggest threat to Adobe's "Creative Cloud" dominance.
2. Sora & Video: OpenAI's Sora creates video from text. This threatens Adobe's "Premiere Pro" and "After Effects" franchise more than image generation threatens Photoshop.
3. Seat Compression: If one designer with AI can do the work of three, agencies might reduce their headcount (and thus their Adobe subscriptions).

Conclusion

Adobe is the "Microsoft Office" for creatives. The network effects of its file formats (.PSD, .AI, .PDF) are enduring. We view the AI fear as overblown and the stock as attractively valued.