Adobe: The $37 Billion "Mistake" & The Divergence of Value

Date: December 9, 2025 Ticker: ADBE Current Price: ~$339.12 YTD Performance: -23.74%

The Core Dissonance

If you look solely at Adobe’s income statement, you would see a company in its prime. Revenue is up. Margins are healthy. The "Digital Media" engine continues to hum, generating record cash flows.

Yet, if you look at the stock chart, you see a disaster. Adobe is down nearly 24% year-to-date, shedding over $100 per share while the broader tech market has largely rallied.

This divergence—rising revenue, falling stock—is the defining story of Adobe in 2025. It is a crisis of narrative, not numbers. The market isn't punishing Adobe for what it is earning today; it is punishing Adobe for what it failed to acquire yesterday, and the AI shadow looming over its tomorrow.

The Figma Fallout: A $37 Billion Miss

In retrospect, the $1 billion termination fee Adobe paid to walk away from Figma in December 2023 was not the real cost. The real cost was the opportunity lost.

When regulators in the UK and EU effectively blocked Adobe’s $20 billion acquisition of Figma, the consensus was that Adobe had dodged a bullet, avoiding a massive overpayment for a niche tool. That consensus was wrong.

In July 2025, Figma went public. The IPO didn't just succeed; it exploded. Figma is now valued at approximately $57 billion—nearly triple Adobe's original offer price.

For Adobe shareholders, this is a bitter pill. Had the deal gone through, Adobe would own the future of collaborative design. Instead, they are now forced to compete against it—a competitor that is now flush with cash, publicly valid, and growing faster than Adobe’s own Creative Cloud. The "failure" to acquire Figma has effectively created a $37 billion gap between what Adobe could have owned and what it now faces as a rival.

The AI Shadow: Existential Dread vs. Market Reality

The second anchor dragging Adobe down is the "Generative AI Threat."

The narrative is simple, perhaps too simple: AI tools like Midjourney, OpenAI's Sora, and Canva's Magic Studio will democratize design so thoroughly that Adobe's complex, professional-grade tools will become obsolete.

Investors are pricing Adobe as if its moat is evaporating. Every time a new text-to-video model goes viral, Adobe stock ticks down. The fear is that "good enough" AI generation will cannibalize the "perfect" professional workflow that Adobe dominates.

However, this ignores Adobe’s counter-offensive: Firefly. Adobe has successfully integrated generative AI into the workflow (Photoshop Generative Fill, Illustrator Vector Recolor) rather than treating it as a novelty. By training on its own stock library, Adobe offers the one thing mid-journey cannot: copyright safety for enterprise clients.

The market views AI as Adobe’s executioner; Adobe views it as a feature update. The tension between these two views is responsible for much of the volatility.

The Financial Reality: Revenue Continues to Rise

While the narrative spins out of control, the machine keeps printing money.

• Fiscal 2024 Revenue: $21.51 Billion (+10.8% YoY)
• Trailing 12-Month Revenue (Aug 2025): ~$23.18 Billion
• Gross Margins: Remaining best-in-class at ~88%.

Adobe is not shrinking. It is growing at a double-digit clip at a scale where growth is supposed to be hard. The company raised its targets for Fiscal 2025, citing strong demand for the very AI features investors are afraid of.

The disconnect is stark. You have a company growing revenue at 10-11%, with nearly 90% gross margins, trading at a significant discount to its historical multiples because of hypothetical threats.

Conclusion: The Value Trap or The Value Play?

Adobe is currently in the penalty box. The market has punished it for the regulatory failure of the Figma deal and the perceived existential threat of AI.

But at $339, the stock is pricing in a future where Adobe loses. If Adobe merely survives—if Firefly retains the enterprise customer base and Creative Cloud remains the industry standard—the stock is significantly undervalued.

The "revenue rises" part of the headline is the anchor. As long as that number climbs, the narrative eventually has to align with the math. For now, however, Adobe remains a battleground between its profitable present and its uncertain future.