Adobe’s stock is down 41% from its high and trading at roughly 9 times forward earnings, about a third of its five-year average multiple. For a company still growing revenue in double digits at 44% operating margins, that’s an unusually steep discount. Here’s the case for the worry, and the case against it.

Three reasons to worry:

1. AI is eating the low end. Canva has grown to roughly $4 billion in annual recurring revenue at 35% growth, Figma dominates UI/UX design, and free tools keep chipping away at casual users who once needed Photoshop or Illustrator. A 17% Creative Cloud price hike didn’t help, visibly accelerating churn among smaller customers.

2. Adobe just lost both its CEO and CFO. Shantanu Narayen, who grew revenue from under $1 billion to over $25 billion across 18 years, announced in March he’s stepping down once a successor is named. Weeks later, CFO Dan Durn departed abruptly. That’s a leadership vacuum at the exact moment Adobe is making its biggest strategic bet: shifting toward free-to-paid AI monetization.

3. The freemium bet hasn’t proven itself yet. Adobe deliberately softened its second-half revenue guidance to fund a bigger free user base, betting those users eventually convert to paid subscriptions. Management hasn’t disclosed the conversion rate. Right now, that’s a bet made on faith.

Three reasons the market might be overreacting:

1. The numbers keep beating the narrative. Revenue grew 13% last quarter to $6.62 billion. Total annual recurring revenue reached $27.1 billion. None of that looks like a company in AI-driven decline.

2. Adobe’s own AI product is its fastest grower. Revenue tied to its Firefly AI tools tripled year-over-year past $500 million, and free monthly users nearly doubled to over 90 million. Three-quarters of the Fortune 500 already use Firefly, trained on licensed, commercially-safe data.

3. The cash keeps flowing regardless of who’s in the corner office. Adobe converts 42% of revenue to free cash flow, funding a $25 billion buyback that keeps shrinking the share count at today’s cheap price.

Put together, this reads as a strong business trading at a fear-driven discount, with genuine, not imaginary, execution risk attached. A permanent CEO announcement is the catalyst most likely to change the story. Until then, Adobe looks like a name worth owning in smaller pieces rather than all at once.

Full financials, valuation model, and scenario analysis are in the complete Adobe (ADBE) report on our Reports page.