ADBE · Forward model · Bull case

The Bull case, 20 quarters out

Model as of 2026-08-31

Each segment is projected from its own operating driver, rolled up into consolidated cash flow, and discounted back to a fair value per share. The assumptions below are editable — change them and every number on this page moves with them.

Disclosed lines only, and there are only two of them. Adobe combined Digital Media, Digital Experience and Publishing and Advertising into ONE reportable segment in fiscal 2026 Q1 and recast prior periods, so no segment split exists to model. What Adobe still discloses is subscription revenue by customer group in Note 2 of the 10-Q, and this model carries exactly those two lines - Creative & Marketing Professionals and Business Professionals & Consumers - plus a third vertical that is the arithmetic residual of total revenue less the two. Ten contiguous quarters, 2024 Q1 to 2026 Q2. Seven of the ten customer-group quarters are read straight off a filed table; three are marked estimated because they are a filed full period less a filed year-to-date figure, and both derived fiscal years close exactly against the 10-K. Every quarter of the residual line is marked estimated for the same reason. The three verticals sum to reported consolidated revenue in all ten quarters by construction, and the residual decomposes correctly where its pieces are published: $89m of product plus $113m of services and other plus $26m of other subscription is the $228m of fiscal 2026 Q2. The driver is growth on all three lines, and that is a disclosure limit rather than laziness. Adobe publishes no subscriber count, no ARPU and no ARR by customer group - its stated key metric is Total Adobe ARR for the company as a whole, $27.10bn - so a subscription driver would need three invented numbers. There is no capacity to model either: capex was $58m in the basis quarter, 0.9% of revenue. All three lines are aseasonal, and that is a finding, not a gap: on a centred four-quarter moving average the Creative & Marketing Professionals shape has a 0.50% signal against a 0.65% worst window spread and Business Professionals & Consumers 0.76% against 0.47%, both below the rounding in Adobe's own guidance, with the same test on fourteen quarters of consolidated revenue giving 0.73% against 0.67%. This is a GAAP model throughout. Vertical margins are the disclosed gross margins - 90.9% consolidated subscription gross margin on both customer groups, because Adobe publishes no cost of revenue by group, and 42% on the residual, where a negative-margin consulting line drags a 94% product line down. Every operating expense sits in corporate overhead at 52.3% of revenue, the level that makes the first projected quarter print a 36.9% EBITDA margin, which is the guided 34.0% GAAP operating margin plus depreciation running at 2.9% of revenue. Stock-based compensation of $534m a quarter, 8.1% of revenue, is NOT added back. Free cash flow here is therefore EBITDA less capex less cash tax at the guided 22.5% GAAP rate, and it is deliberately well below both Adobe's reported $2,165m of quarterly operating cash flow and anything computed on the company's non-GAAP basis, where EPS is $5.96 against the GAAP $4.25. The model reproduces its target. Fiscal 2026 Q3 is the guided quarter, reporting 10 September 2026: the base case prints $6,719m of revenue against guidance of $6.67-6.72bn, $4,612m of CMP against $4.61-4.64bn and $1,888m of BPC against $1.87-1.89bn, and the full year lands at $26,555m, $18,224m and $7,446m against $26.50-26.60bn, $18.21-18.27bn and $7.44-7.48bn. One thing had to be resolved to get there: Adobe's own third-quarter guidance is not additive, because the customer-group midpoints of $6,505m plus the residual's $228m run rate exceed the $6.72bn top of the total-revenue range. The model resolves it by taking the customer groups near the low end of their ranges and decaying the residual at 4.0% a quarter rather than its 3.2% trailing rate, which is stated here rather than buried. Seventy-three percent of enterprise value sits in the terminal, so the exit multiple matters more than any single-quarter input: each 1.0x of exit EV/EBITDA is worth about $20.66 a share, 7.1% of the current price, and the multiple at which the base case equals today's $291.52 is about 10.1x against the 12.0x the market pays today. No consensus estimate is carried. Adobe reports on two EPS bases that differ by $1.71 a share in the basis quarter, and the only outside number available for this name is a 12-month price target, which is not an estimate of anything the model projects; the $272.22 average across 40 analysts is used only to check that the $234.84 to $378.83 scenario spread is not absurd.

Where each case comes from

From cash flow to fair value

The projected path

Every row is projected. A year-over-year change is shown only where the quarter it compares against exists — an em dash means there is no comparable quarter, not a flat year.

Model revisions

Assumptions are marked to reality as each quarter prints. Every change is appended here, with the fair value the model produced at the time, so the model's own history stays visible.