TLDR:
- Adobe has lost their monopoly to a free alternatives
- These alternatives will soon be at parity with creative cloud projects and then will start exceeding them in quality
- The free alternative is way worse for Adobe than most people expect
- Adobe's most vulnerable segments are small creatives (\~25% of revenue) and their Acrobat office services (\~27% of revenue), which leave roughly 50% of their revenue vulnerable to heavy impacts, with cracks starting in Q4 and showing more definitively in Q1 27
- Wall Street and big money will start pricing this in as the writing on the wall becomes more clear
- If ADBE only returns to recent lows of $190, there is significant upside in playing medium term puts
- ADBE RSI (14) is high, signaling a push down regardless
SUMMARY
Adobe has incurred heavy stock loses already this year on the fear of AI competition, but it is unlikely that a free alternative was expected. There are many people who are angry at Adobe's aggressive subscription tactics and fees and are highly motivated to recreate the product they love collaboratively to keep the product they know and screw over Adobe in return.
I made a post about this about a week ago and received a lot of backlash. I have addressed many of the arguments for my position in that thread, but I will cover the greatest hits here for why any bull case for ADBE is weak and why I believe Wall Street will quickly come to the same conclusion and start exiting their money
NO ONE WILL SWITCH TO UNSUPPORTED SOFTWARE (Open-Source)
Case For ADBE:
Adobe is a well-established company with a strong reputation as the front-runner for creative software. Historically any alternatives have either not had enough support (open-source) or were too different for creatives who had spent years to decades training with Adobe to justify switching. Additionally, for major corporations, using the flagship industry standard software came with the benefit of being able to attract top-tier talent familiar with the software and having access to Adobe's support for any issues the company may incur with the software. These large companies are already heavily locked-in with Adobe and switching solutions has to demonstrate immediate and clear justification for why such a turn-over would be justified. If companies swapped to new open-source software, who would they call when there is an issue with the software and they don't know how to fix it? How would they get guarantees of issue resolutions?
Case Against ADBE:
Open source software has changed with the advent of AI. Historically open-source was built on the goodwill of programmers who would do additionally development in their free time for passion projects or large corporations that would build core utilities either to earn goodwill of the public (React, Angular, etc) or to facilitate selling support services (ElasticSearch). For the hobbyist programmers there was never urgency to resolve user issues as this was a labor of love, not of profit. The high cost of time to develop solutions and low supply of developers willing to support these projects often meant slow paces for the software that could not meet the demands of large corporations. Additionally, these open-source software solutions often stayed distinct from flagship products to avoid legal issues because since these products moved so slowly and on the backs of individuals working in their spare time, there was credible fear that any encroachment on major corporations with legal teams could incur legislative wrath.
All of this equation has changed with AI assisted development, and especially with the newest models Opus 5.5 and GPT6 and it will only snowball from here.
Now, the public users who want open-source products donate a fraction of their time and some or all of their $200 Anthropic subscription (which is cheap compared to the $/hour time of good software engineers) and when the community collaboratively rallies toget