While most stocks started off strong in 2026, a few have seen sharp price declines. While they aren't all worth snatching up after the sudden fire sale, one that's caught my attention is Adobe (ADBE +0.47%).
Adobe stock has felt pressure from investors amid the rise of generative artificial intelligence (AI). Perhaps many investors are wondering why you would need to pay for fancy photo-editing software when you could just ask ChatGPT to touch up a photo for you? But Adobe's financial results show it's not only withstanding the pressures of AI but also seeing strong momentum in its own AI products. And with the stock down 14% to start the year, investors should consider buying it.
Image source: Getty Images.
The industry standard
Adobe's Creative Cloud is the industry standard for designers, photographers, videographers, and other creative professionals. That remains true even as many companies have challenged it over the years, and the rise of AI services like ChatGPT is unlikely to change it. If a professional designer wants to work with a client, they're likely going to expect delivery in Adobe's file formats. What's more, professionals have spent hours mastering the tools in Adobe's software. The switching costs of mastering another piece of software are very high.
That said, there's concern that AI services could hinder Adobe's ability to attract amateurs and novices to its expensive products. To that end, the company has pushed forward Adobe Express, a freemium cloud-based service. It also offers its generative AI software, Firefly, through Adobe Express, enabling ChatGPT and Claude-like services with the power of Adobe's software.
NASDAQ: ADBE
Key Data Points
Firefly has also helped it raise the average revenue per user for its premium Creative Cloud. Annual recurring revenue (ARR) climbed 11.5% year over year in 2025, reaching $25.2 billion. Management said AI-influenced ARR exceeds one-third of its overall business, suggesting it's a strong driver of growth and retention.
Remaining performance obligations grew more quickly than ARR, up 13% from the end of 2024 to reach $22.5 billion. That bodes well for the future, and management expects another year of double-digit ARR growth in 2026.
The impact of competing AI tools isn't showing up in Adobe's financial results. And it doesn't seem likely that they will, considering the wide competitive moat Adobe has carved out in the creative software space. It's an indispensable part of any professional's process, and it's actually benefiting from artificial intelligence by integrating generative AI features into its leading software. With the stock trading for just 13 times forward earnings expectations, right now is a great opportunity to buy up shares.
