Adobe Inc. (ADBE)

Adobe is a suite of professional tools for images, video and documents, delivered by subscription.

The company has three parts: creative applications (Photoshop, Illustrator, Premiere), the document business around PDF and Acrobat, and a marketing platform for large enterprises. Moving from boxed licences to subscription made revenue recurring and predictable, while being the de-facto professional standard gives a durable user base.

The central question of recent years is the effect of generative models. On one hand Adobe embedded its own Firefly model across its editors and sells it as an advantage trained on licensed material. On the other, cheap third-party generators lower the barrier to the very tasks a subscription was previously bought for.

The business carries high margins and needs almost no capital expenditure, so free cash flow is consistently large and goes into buybacks; no dividend is paid. The weak point is exposure to advertising and media agency budgets, which contract with the economy.