ADOBE INC. (ADBE) stock intrinsic value fair value estimate & owner earnings analysis

Adobe converts roughly a third of revenue into owner earnings - cash from operations less capital spending and the full cost of stock compensation - and that stream has compounded from about $1.6 billion in fiscal 2016 to $7.9 billion in fiscal 2025, or $18.52 per diluted share. Fiscal 2025 revenue rose 11% to $23.8 billion, 96% of it subscription, with remaining contracted obligations up 13%, and operating margins held near 37%. Capital needs are trivial at under $200 million a year, debt of $6.2 billion is more than covered by $6.6 billion of cash and investments, and roughly 5% of the shares have been retired annually. The conservative case assumes generative AI erodes the creative franchise: owner earnings flat for three years, then declining about 3% a year indefinitely, discounted at 12%, supporting roughly $142 a share. The central case assumes growth decelerating from 7% to 4% and settling at 2.5%, discounted at 10%, for about $342. The optimistic case, in which AI tooling expands rather than replaces Adobe's role in content creation, assumes 11% then 7% growth at an 8.75% discount, giving roughly $572. Because the principal risk - whether AI commoditizes creative software - is structural rather than cyclical and has no precedent in the ten-year record, the margin-of-safety price is anchored on the conservative case rather than the central one, with a further 25% margin of safety, giving about $106. Fiscal 2024 absorbed a $1 billion acquisition termination fee; adjusting for it, fiscal 2025 owner earnings grew roughly 12%, and the first half of fiscal 2026 grew about 9%.