Adobe’s Massive $25 Billion Stock Buyback

Adobe (ADBE) announced a massive $25 billion stock buyback yesterday.

At the company’s market cap of $101 billion at announcement, the buyback represents nearly 25% of the company.

I checked our history of Adobe’s buyback announcements and they also announced a $25 billion buyback in 2024. At that time the stock was trading at over $570 and so that authorization represented less than 10% of the company.

What is interesting is that they are one of the few tech companies that follow through on their buybacks and it is not just to offset dilution from stock based compensation. They have retired over 13% of their shares outstanding over the last four years.

The obvious question is whether they have enough cash to complete a buyback of this scale. The company has nearly $7 billion in cash and investments on the balance sheet but it also has over $6 billion in short-term and long-term debt.
Adobe generated nearly $10 billion of free cash flow last year. Considering this buyback authorization extends to 2030, there could be enough cash to execute on some or all of this buyback authorization.

The bigger question that has triggered the big drop in the stock over the last two years is the impact of AI on Adobe’s future revenue, and as a result its cash flows.

Last Sunday, I happened to go for an AI class focused on Claude Code that a friend was teaching. He also happens to work at Adobe as a Senior AI Engineer. On our drive back from the class, I asked him about AI at Adobe. Based on my conversation, it was quite clear that they are not watching this AI disruption from the sidelines and are integrating AI into their products just like Salesforce (CRM).

While we have not seen any insider buying since their CFO purchased shares in March 2025, this buyback announcement is a huge show of confidence. The CFO last sold shares in January and even if he wanted to buy, he would have to wait a little over two months before he can do so. If he buys stock any sooner, it will trigger the SEC’s short-swing rule and he will have to give any profits from the prior sale back to the company.

The stock trades for just 10 times free cash flow and 10 times forward earnings.

Net margin is almost 30% and revenue grew 12% year-over-year last quarter.

Long-serving CEO Shantanu Narayen’s upcoming departure is just as much of an overhang on the stock as the AI narrative.

Considering where the stock is currently trading, I would much rather they buyback stock instead of paying up to acquire AI-focused startups that are trading at an inflated valuations.

I have no position in the company but have been following the stock closely.

Disclaimer: Salesforce (CRM) is a position in the Inside Arbitrage model portfolio and I hold a long position as well. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.