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Again in November, I wrote about why I believed Adobe (NASDAQ:ADBE) inventory appeared glorious worth as we headed to the top of the yr. But up to now in 2026, the share worth is down 23%. Some individuals say the corporate shall be disrupted by AI. Right here’s why I merely don’t agree.
Dissecting the information
Let’s first delve into the AI disruption story that’s swirling in the mean time. Some traders fear that generative AI threatens Adobe’s core enterprise (inventive software program). New AI instruments from opponents (resembling Anthropic and Canva) promise simpler, cheaper inventive workflows. The concern is that this might cut back demand for Adobe’s legacy subscription merchandise, resembling Photoshop. If this proves to be the case, it will have a severe detrimental affect on the corporate.
The opposite AI angle hurting the enterprise proper now’s its skill to monetise improvements. Adobe is working onerous by itself AI improvements, which it believes can increase profitability sooner or later. Nonetheless, some are fearful in regards to the quantity of capex being allotted right here, given the restricted outcomes up to now.
Banging the drum
Don’t get me mistaken, these are dangers going ahead. The transfer decrease within the share worth exhibits these elements have to be taken severely. Nonetheless, the pessimistic view of the corporate’s long-term prospects is misplaced, I really feel.
The most recent quarterly outcomes from December confirmed report income of $6.19bn, up 10% from the identical interval final yr. If the corporate have been actually being overtaken by opponents and cheaper alternate options, the enterprise wouldn’t be recording report figures like this.
Total, Adobe isn’t a low-risk inventory for traders. It clearly has some powerful points to navigate this yr. Nonetheless, I believe the pessimism just lately surrounding the corporate is absolutely misplaced. If traders agree with my reasoning, it could possibly be an excellent inventory to contemplate including to a portfolio.
