Adobe (NASDAQ:ADBE) is one of the most profitable and prolific software-as-a-service (SaaS) companies in the world. In fact, if you've browsed the internet lately, chances are you've seen content created with Adobe's tools. The software giant generated $12.9 billion in revenue in fiscal 2020, and the stock is up over 400% since 2016.

But the global push toward digitization should be a tailwind for Adobe, and could take the stock much higher in the coming years. Here's what investors should know.

Adobe powers creativity and productivity

Adobe's digital-media business has never been more relevant. In today's hyperconnected world, consumers are constantly bombarded by digital content. In order to stand out and capture consumer attention, enterprises need solutions that foster creativity and improve productivity.

Artistic profile of a human head, outlined in neon and vapor

Image source: Getty Images.

To address this, Adobe's Creative Cloud -- think Photoshop and Adobe Premiere Pro -- provides an array of software tools that help creative professionals and individual consumers with everything from graphic design and game development to virtual and augmented reality. For years, Adobe has been the clear leader in this market, and many of Adobe's software products have become industry standards. No single competitor can rival the depth of Adobe's Creative Cloud portfolio.

The other half of Adobe's digital-media business is Document Cloud. With products like Adobe Sign (an e-signature solution), the company aims to improve productivity by helping enterprises and individuals transition from paper to digital documents. In 1993, Adobe created the Portable Document Format (PDF) and launched the first version of Adobe Acrobat, which standardized the way documents are displayed across different applications and systems. Today, the PDF has achieved ubiquity: Over 2 billion devices have installed Adobe Reader or Acrobat, Adobe Sign usage rose 200% in the first nine months of 2020, and 300 billion PDFs were opened in Adobe's Document Cloud last year.

Adobe's ironclad leadership in these markets, coupled with an efficient SaaS business model, has helped the company drive consistently strong revenue growth in its digital media segment.

Subsegment / Segment

2017 Revenue

2020 Revenue

Compound Annual Growth Rate (CAGR)

Creative Cloud

$4.2 billion

$7.7 billion

23%

Document Cloud

$0.8 billion

$1.5 billion

21%

Digital Media Total

$5.0 billion

$9.2 billion

23%

Data source: Adobe filings with the Securities and Exchange Commission.

Adobe's strategy for future growth focuses on adding new customers, expanding mobile use cases, and empowering remote collaboration. To that end, Adobe recently introduced Liquid Mode, an AI-powered Acrobat feature that reformats PDFs (text and images) to simplify navigation on mobile devices. Likewise, Adobe Photoshop Mix brings advanced image editing to smartphones, making it easy to post the perfect picture on social media.

With these expanding use cases, management expects Adobe's opportunity in the digital-media market to reach $62 billion by 2023. That's a large figure, and it gives Adobe plenty of room to grow.

Adobe delivers digital experiences

In marketing, creative content alone is not enough. Brands must turn that content into highly personalized digital experiences if they hope to win consumer mindshare. That means putting the right content in front of the right consumer at the right time. And Adobe has the tools marketers need to make that happen.

Adobe's Experience Cloud offers industry-leading solutions that help marketers collect and analyze consumer data, create personalized content, and launch data-driven marketing campaigns that are synchronized across digital channels (web, mobile, and social media). What's more, Adobe's platform is powered by artificial intelligence, which helps marketers work more efficiently -- for example, Adobe's AI can predict consumer behavior, identify pain points, and provide intelligent suggestions in real time.

With these solutions, Adobe's management believes the company is "years ahead of the competition" in this space. And that has translated into strong revenue growth:

Subsegment

2017 Revenue

2020 Revenue

CAGR

Experience Cloud

$2.0 billion

$3.4 billion

19%

Data source: Adobe press release.

Adobe recently acquired Workfront for $1.5 billion. Workfront's industry-leading work management platform helps marketers improve content creation and workflow. With this acquisition, Adobe hopes to empower collaboration, helping marketing teams work more efficiently even if they're working remotely. After this latest addition to the company's portfolio, management estimates that Experience Cloud will have a shot at an $85 billion market opportunity by 2023. And Adobe's ability to combine its Creative Cloud products with data-driven marketing software makes the company an end-to-end solution, giving it a huge advantage over its rivals.

A final word

Investors should pay close attention to Adobe's Experience Cloud revenue. This platform represents the lion's share of the company's future growth opportunity, but Adobe faces more aggressive competition in this space from companies like Salesforce and Oracle. If Adobe's customer-experience products fail to gain traction, the company will have difficulty maintaining its historically strong sales growth.

That being said, Adobe is an exceedingly well-managed enterprise. The company has been around for almost 40 years and has managed to not only stay relevant, but also transform itself into one of the most dominant SaaS companies in the world. That doesn't happen by accident. What's more, Adobe has an incredibly robust portfolio that targets a massive market opportunity -- and that's why it could still make investors rich.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.