ADBE — Adobe Inc.
- Net margin
- 30%
- ROIC
- 57%
- Owner Earnings
- $9.9B
Read as a Asset-light compounder business — little inventory and a 89% gross margin — the value is in IP and people, not factories.
The record — 2016–2025
realized figures from each filing — no estimates| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | TTMFeb 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $5.9B | $7.3B | $9.0B | $11.2B | $12.9B | $15.8B | $17.6B | $19.4B | $21.5B | $23.8B | $24.5B |
| Gross margin | 86% | 86% | 87% | 85% | 87% | 88% | 88% | 88% | 89% | 89% | 89% |
| Operating margin | 25.5% | 29.7% | 31.5% | 29.3% | 32.9% | 36.8% | 34.6% | 34.3% | 31.3% | 36.6% | 36.6% |
| Net income | $1.2B | $1.7B | $2.6B | $3.0B | $5.3B | $4.8B | $4.8B | $5.4B | $5.6B | $7.1B | $7.2B |
| EPS (diluted) | $2.32 | $3.38 | $5.20 | $6.00 | $10.83 | $10.02 | $10.10 | $11.82 | $12.36 | $16.70 | $17.55 |
| Owner earnings | $2.0B | $2.7B | $3.8B | $4.0B | $5.3B | $6.9B | $7.4B | $6.9B | $7.9B | $9.9B | $10.3B |
| Owner earnings margin | 34.1% | 37.5% | 41.7% | 36.0% | 41.2% | 43.6% | 42.0% | 35.8% | 36.6% | 41.4% | 42.2% |
| ROIC | — | — | 34% | 25% | 33% | 33% | 35% | 41% | 45% | 57% | 64% |
| Book value / share | $14.72 | $16.88 | $18.81 | $21.42 | $27.32 | $30.76 | $29.84 | $35.98 | $31.37 | $27.22 | $27.83 |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? 33.1×ComfortableOperating income $8.7B ÷ interest expense $263M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient — it says solvent, not cheap.
- How heavy is the debt? 0.7×ConservativeTotal debt $6.2B ÷ operating income $8.7B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- How long is cash tied up? -24dNegative — funded by othersDSO 36 + DIO 0 − DPO 60 days
Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”) — the company grows on other people's money. (Little or no inventory — a services / asset-light model, so the inventory leg is ~0.)
Is it a good business?
- Return on invested capital 57%ExceptionalNOPAT $7.1B ÷ invested capital $12.4B (debt + equity − cash)
The rate the business earns on the money tied up in it — Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high — pair this with Owner Earnings.
- Owner Earnings (free cash) margin 41%Cash machineOwner Earnings $9.9B = operating cash $10.0B − capex $179M
What an owner could take out without starving the business. That's 41% of revenue. Treating stock comp as the real expense it is (less $1.9B of SBC) leaves $7.9B. Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Are earnings backed by cash? 1.41×Cash-backedCash from ops $10.0B ÷ net income $7.1B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy — growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- Where do the earnings go? 115%Returns most of itDividends + buybacks $11.3B ÷ Owner Earnings $9.9B
Of $9.9B Owner Earnings, $11.3B (115%) went back to shareholders — $0 dividends, $11.3B buybacks. Net of $1.9B stock comp, the real buyback was about $9.3B. Returning most of it signals a mature cash machine; reinvesting most could mean a long runway — or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
- Investing or harvesting? 0.22×HarvestingCapex $179M ÷ depreciation $818M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth — or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency — or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat — 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says — judgments, not another chart of the numbers.
- Profitable years 10 of 10
Never lost money over the record — the earnings stability Graham insisted on.
- Return on capital ≥ 15% 8 of 8 yrs
A moat shows up as a high return on invested capital that holds year after year — not one good vintage.
- Operating margin 28% → 34%
Margins are widening — pricing power intact or improving.
- Reinvestment — incremental ROIC 250%
Every extra dollar the company reinvested earned a high return — it is still compounding, not coasting on an old moat.
- Owner earnings growth +16%/yr
Free cash to owners grew about 16% a year over the record.
- Worst year 2016 · 25.5% op. margin
Stayed profitable even in its hardest year — the resilience that survives recessions.
- Share count −1.8%/yr
The share count is shrinking — buybacks are quietly growing your slice of the business.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict — the judgment is yours, and the filing is one click away.
Peers — Asset-light compounder
The same business model, side by side on owner economics — compare, don't rank by a single number. ● marks best in the group.