This Growth Stock Is Down 13% in 2025. Should You Buy the Dip?

Mohit Oberoi

Fri, Jun 27, 2025, 11:07 AM 4 min read

The S&P 500 Index ($SPX) is hitting new all-time highs, putting tariff uncertainty, recession fears, and geopolitical turmoil on the back burner. Tech stocks have also participated in the rally with a few exceptions. Adobe Systems (ADBE), for instance, is down 13% for the year as of this writing.

The stock’s underperformance is not unique to 2025. It lost a quarter of its market capitalization last year, missing out on the tech rally. ADBE trades nearly 45% lower than its all-time high and has been out of favor with the market for quite some time now.

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To be sure, Adobe is no longer the kind of growth story it once was, and its revenues are expected to grow by less than 10% each in 2025 and 2026. The stock’s valuations have also adjusted to the kind of growth Adobe is delivering. However, are the valuations now at a level where Adobe enters the “buy” zone? Let’s discuss.

To begin with, let’s analyze why Adobe stock has sagged.

Firstly, the company is facing intense competition, particularly from Canva, whose paid users are now over half of Adobe Creative Cloud. Adobe tried acquiring Figma, which is its competitor in collaborative design tools and UX/UI design, but had to abandon that deal as it failed to get regulatory clearances.

Markets are also apprehensive about the company’s ability to monetize its artificial intelligence (AI) investments. Notably, AI is both an opportunity and a threat for Adobe as new competitors could put pressure on its pricing power, putting its juicy margins at risk.

In hindsight, it seems Adobe management wasn’t prudent with its capital allocation and spent aggressively on buybacks. While it still has a formidable balance sheet, the company repurchased shares at a much higher price than what they currently stand at.

But it’s not all over for Adobe. The company boasts significant recurring revenues through subscriptions. It reported digital media annualized recurring revenue (ARR) of $18.09 billion at the end of the quarter ending May, with the number rising 12.1% compared to the same time last year. The company expects its ARR book to rise 11% in the current fiscal year, which looks quite decent even as the growth has arguably come down.