Adobe: Equipping the Architects of Digital Expression

If you've ever handled a PDF file, watched a movie, seen an advertisement, or consumed any type of media, there's a good chance Adobe software made the production possible. The company was founded in the early 1980s to fix formatting issues when printing and has since become an integral part of our daily lives, even if we don't always notice it. From two people in a garage, Adobe has grown into one of the largest software companies in the world, inventing arguably the most influential file format ever, and maintaining complete dominance over its niche. This is how it happened.

• The founding idea: Adobe's first product, PostScript, enabled precise, high-quality printing and imaging at a time when it was desperately needed.

• Early collaboration with Apple: Adobe got off to a flying start thanks to an early partnership with Apple, which was coupled with crucial investment.

• The inventors of the PDF: John Warnock, one of Adobe's founders, invented the PDF in the early 90s. Since then, it has gone on to become arguably the most influential digital format in the world.

• Switching from licenses to subscriptions: In 2013, Adobe transitioned from a traditional perpetual licensing model to a subscription-based model. This shift, initially met with some criticism, led to a massive boost in earnings.

• The industry standard: Today, Adobe has a near monopoly on creative software, and its products have in most cases become the standard tool of the trade for professionals.

• A massive portfolio: The company offers over 100 different software, with a majority of them being the leaders in their niche.

Before we dive into the Adobe story, we're going to take a closer look at the company's returns over the last 40-odd years, because it really is spectacular. Since the IPO in 1986, the company has returned close to a mind-blowing 170,000% with a 22% CAGR. Today, it has a market cap just north of $170 billion, and has been profitable every single year it has been in operation.

Adobe's stellar track record over roughly 40 years as a public company.

Adobe's stellar track record over roughly 40 years as a public company.

As you can see for yourself, the stock has performed remarkably well. One thing stands out however: Adobe experienced steady growth from its IPO up until 2013, when the stock started soaring. This is directly correlated with the company's decision to switch from offering one-time licenses to a subscription model. We're going to get into that, and much more, as we examine how Adobe went from a small upstart to the dominating force in creative software.

We're starting our story in 1982, and just like so many other Silicon Valley success stories, it begins with two talented people in a garage. In this particular instance, their names are John Warnock and Charles Geschke, two computer scientists who had previously worked together at Xerox's research center in Palo Alto.

They got the name for their newly formed company from Adobe Creek, which ran behind Warnock's house. It was from his garage that the duo would make their vision a reality: revolutionize how digital documents and graphics were created, displayed, and shared. Roughly four decades later, Adobe is one of the biggest software companies in the world.

To understand the motivation behind Adobe's founding and the environment it operated in during its first years, we're going to take a short sidetrack to explore the technological and business environment of the early 1980s and why Adobe's first product, PostScript, was such a big deal.

In the early 1980s, personal computers were becoming more powerful, and their use was growing both in homes and in work environments. However, high-quality printing and digital document handling were complicated and there was little to no standardization across the board.

Computers could produce text and images like there was no tomorrow, but there wasn't a standard method for displaying or printing them with consistent formatting. If a user created a document on one system, it often looked entirely different when printed or viewed on another computer. In other words: printing a document you had received could be everything from frustrating to nigh-on impossible.

The main problem was that most printers used proprietary methods to render texts and images, meaning that documents had to be reformatted or manually adjusted for different printers. This meant an additional layer of labor, and in many cases, the know-how of what was wrong and how to fix it (even then, it could still be undoable).

Additionally, many printers were limited in their ability to handle complex graphics and fonts, which made professional-quality printing difficult. There was a screeching need for a solution that allowed computers to communicate effectively and accurately with printers – and Warnock and Geschke had just built the solution that could meet that demand.

Before Warnock and Greschke founded what would become a multibillion-dollar business in a garage, they had worked at Xerox's legendary Palo Alto Research Center (PARC). While at PARC, the pair developed InterPress, a page description language (PDL) that was used to describe the layout, graphics, and text of a printed or displayed page in a way that a printer or screen can interpret.

InterPress was designed to control Xerox laser printers by describing how a page should be rendered – essentially translating high-level descriptions of text and graphics into instructions that a printer could understand. While this might not sound like the most exciting thing in the world at first glance, InterPress had the potential to fix all of the formatting and printing issues that were such a frequent cause of frustration.

Xerox at first showed little interest in commercializing InterPress, which to put it mildly, frustrated Warnock and Geschke. The duo was pressingly aware of the challenges in digital printing and publishing, and their work was living proof that it could be fixed. Eventually, the fact that there was such a need for a solution like InterPress led management at Xerox to attempt to put it into practice.

It failed spectacularly. Xerox's PARC had time and time again come up with new innovative solutions and programs, with corporate management failing to turn these breakthroughs into anything tangible. Examples of this include ethernet networking, graphical user interfaces (GUIs), and most pertinent to our story, InterPress.

While we could spend a couple of pages writing about the strategic missteps taken and why the eventual commercialization failed to bear fruit, we're not here to discuss Xerox's shortcomings in the 80s.

At the end of the day, it boils down to three major issues: the hyperfocus on its copier business meant that it was slow to embrace new innovations, internal systems that weren't optimized to support new and advanced technologies (leading to a poor and clunky user experience), and lackluster execution.

But Geschke and Warnock knew they had come up with a winner. If management at Xerox were unable to put it into practice, they would simply have to do it themselves.

At its core, Adobe was born out of frustration with Xerox's failures to commercialize InterPress and the conviction that it had a solution to one of the major problems of the era.

Their goal was to create a powerful, flexible language that could describe texts and graphics with high precision, ensuring that documents would appear exactly as intended when printed. This vision materialized in the form of PostScript, a language that would launch Adobe from Geschke's garage to the front of a software market that was growing by the day.

Just after the formation of their company, they would make acquaintances and strike a deal with perhaps the most famous resident of Palo Alto at the time: Steve Jobs.

The mastermind behind Apple was (obviously) well aware of the problems that PostScript promised to fix. By the early 1980s, Apple was experiencing rapid growth. The company had released the Apple II, which became one of the most popular computers of its time and was preparing to launch the Macintosh.

Famously, Apple's vision was centered around making computers more user-friendly and straightforward to use, and part of that included bringing high-quality graphical capabilities to personal computing. If this was to be successful, printing and publishing needed to be as smooth as possible.

We've been over this several times already, but due to it being the reason for Adobe's founding, we're going to hammer it home for the last time: there was no standardized way for computers to communicate with printers in a consistent manner at the time. Jobs, like Adobe's founders, saw PostScript as the key to bridging this gap, enabling the Macintosh to produce high-quality printed materials for a broad audience.

Seeing the potential of PostScript, Jobs offered to buy the then merely months old company outright for $5 million, which Geschke and Warnock turned down. Instead, they proposed an investment deal rather than a pure acquisition – and Apple became the first outside investor in Adobe, purchasing 19% of the company for approximately $2.5 million in 1983. In addition to the financial backing, Apple also agreed to license PostScript for its upcoming Apple LaserWriter printer.

The investment was made at a premium compared to what Adobe was worth at the time, a clear indication that Jobs was a believer in the technology right from the start. The purchase and the associated advance for PostScript made Adobe the first company in the history of Silicon Valley to become profitable in its first year.

Apple's involvement with Adobe helped establish PostScript as the industry standard for high-quality digital printing, and when Apple's LaserWriter was introduced in 1985, it was launched with PostScript technology integrated into it. The combination of the Macintosh, the LaserWriter, and Aldus PageMaker (one of the first desktop publishing applications) created a complete ecosystem that enabled small businesses, designers, and individuals to produce high-quality printed materials in a relatively simple and straightforward way.

The first Apple LaserWriter, which came equipped with PostScript.

The first Apple LaserWriter, which came equipped with PostScript.

While it might sound somewhat undramatic (you would be forgiven for holding the opinion that standardization for printers is not the most exciting thing in the world), it was monumental.

This was the birth of desktop publishing, a field that revolutionized the printing and publishing industries by making professional-grade typesetting accessible to anyone with a personal computer. But more importantly to our story: it launched Adobe from a small operation based out of a garage, into a major player in the software industry.

It's difficult to overstate the importance of the investment and subsequent work with Apple for Adobe during the early years. First and foremost, it provided Adobe with the capital it needed to scale up and continue to develop PostScript – but it also provided them and their new product with a massive boost in credibility. Apple was already a major player in the industry, and working closely with them in turn helped attract more customers.

At the same time, Adobe gained access to a massive user base. The Macintosh was designed for creative professionals, and integrating PostScript into Apple's ecosystem ensured rapid adoption of the technology, further driving the credibility of both the company and the software. The fact that the LaserWriter became a massive success was in large part thanks to the possibilities enabled by PostScript.

The software made it possible to resize fonts and graphics without losing quality, enabled compatibility, and documents printed exactly as they appeared on the screen. In other words: it just worked. Adobe had, together with a good dose of help from Apple, succeeded where Xerox had failed: commercialize a solution to one of the most frustrating problems in the computing world at the time.

The two companies would continue to cooperate for decades to come, but the relationship would become more and more strained as Adobe expanded and began developing software compatible with other operating systems. Despite disagreements and various arguments between the two parties, Adobe and Apple continued to work together on various projects during the years to come.

Adobe had gotten a flying start, and the company refused to rest on its laurels. They might've moved out of Geschke's garage but had taken the willingness to innovate with them.

But we're getting ahead of ourselves slightly here, as just four years after the company was founded, it conducted its IPO. With a growing portfolio of products and a booming demand for digital publishing tools, the company sought additional capital to fuel its expansion. Going public was the logical next step, and in 1986 Adobe was listed on the Nasdaq at a valuation of roughly $95 million, with only $16 million in revenue.

In the year following the IPO, Adobe released its second-ever product: Illustrator. But this time, it wasn't the close-to-desperate demand for better printing capabilities that had led to a need to innovate. Illustrator came to see the light of day because John Warnock wanted to help out his wife, graphic designer Marva M. Warnock.

The pair had married in 1965, and while John had spent his days toiling away at PARC, Marva worked as a graphic designer at Marsh Design in Palo Alto. She was a skilled designer and had reached partner status at her firm.

But her main contribution to this story, apart from more than likely listening to her fair share of her husband's grievances at Xerox's shortcomings, is twofold. Firstly, she designed Adobe's first logo. While it has changed throughout the years, the stylized and now iconic “A” has remained the same.

John Warnock infront of the first iteration of the Adobe logo.

John Warnock infront of the first iteration of the Adobe logo.

Secondly, it was some of her more menial and manual tasks that sparked the inspiration for Adobe Illustrator. The drawing software that John Warnock developed for her (yes, it's very romantic) used lines and bézier curves to automate and simplify Marva's work processes. She started using the program in 1986, and after some additional development and testing, it was released to the public in 1987.

But the time has come to bring one of Adobe's most famous products into our story: Photoshop. Today, it is one of the most recognizable software programs in the world, but its origins trace back to a small, independent project by two brothers in the late 1980s. Thomas and John Knoll, Photoshop's creators, developed the program out of a personal need rather than a commercial ambition. However, their innovation ultimately caught the attention of Adobe.

In 1987, Thomas Knoll, a Ph.D. student at the University of Michigan, began working on a program called "Display." His initial goal was to create a tool that could display grayscale images on a monochrome monitor, which was a significant challenge at the time due to hardware limitations. Meanwhile, his brother John Knoll, who worked as a visual effects specialist, recognized the potential of Thomas' software.

Over the next year, the two brothers worked together, improving the program’s functionality by adding tools for cropping, adjusting colors, and performing basic retouching. They realized that Photoshop had commercial potential, but lacked the resources and knowledge to market and distribute it themselves. In 1988, they began pitching the software to various tech companies, including Apple and Adobe.

Apple showed some interest but did not commit to the product. Adobe, however, saw a clear opportunity. At the time, Adobe was still primarily known for PostScript, and was looking to expand its dominance in desktop publishing – and Photoshop was a perfect fit.

John Knoll demonstrated the software to Adobe executives, including Russell Brown, Adobe’s art director at the time. They were impressed by its capabilities, particularly its ability to work with layers and color correction tools. In 1989, Adobe agreed to license Photoshop from the Knoll brothers, rather than outright purchasing it. This meant that Thomas and John Knoll retained ownership, but Adobe would distribute and market the software.

Under Adobe's guidance, Photoshop underwent further refinement. Thomas Knoll worked on improving the software's technical aspects, while Adobe's team helped shape it into a polished, commercial product. In February 1990, Adobe Photoshop 1.0 was officially released for Macintosh computers.

A program disk with Photoshop 1.0, ready to be installed on a Macintosh.

A program disk with Photoshop 1.0, ready to be installed on a Macintosh.

The software quickly gained popularity among graphic designers, photographers, and publishers. At the time, digital image manipulation was a complex and expensive process requiring specialized hardware. Photoshop provided a powerful yet accessible alternative, at a time when there was a strong demand for software like it.

Though it was initially a licensed product, its success made it clear to management that Adobe needed full control over its development. In 1995, Adobe officially acquired the software from the Knoll brothers, bringing it permanently under its umbrella.

Today, some 35 years after its introduction, it continues to be one of the most recognizable software programs in the world. It has influenced everything from advertising and film to photography and digital art. Without the development efforts of Thomas and John Knoll – and Adobe's decision to bring Photoshop into its portfolio – modern digital imagery as we know it might look very different.

While Photoshop is far from the only impactful software that Adobe has in its portfolio, it is the only one of its products that has turned into a commonly used verb.

Your less tech-savvy friends would more than likely look at you weirdly (and let's be honest, more than likely all of your friends) if you described a photograph as “Lightroomed”, whereas describing an image as “Photoshopped” will render agreeing nods. However, the use of Photoshop as a verb or to describe an image is something that Adobe itself disproves, they have very little actual say in the matter.

Today, PDFs are an integral part of everything from work tasks to paying taxes, and the format is so universal that it’s difficult to imagine a time before its existence. But in the early 1990s, digital documents were constrained by compatibility issues, making it difficult to exchange files without losing formatting, fonts, or layout integrity. Sounds somewhat familiar to issues present in printing before PostScript, doesn't it?

While PostScript was an excellent technology for printing, it was not designed for digital document distribution. Users could create visually rich documents, but sharing them electronically was a cumbersome process. Documents often appeared differently when opened on different computers, especially if the recipient lacked the necessary fonts or software.

Adobe had come up with a solution before, so why not do it again?

In 1990, John Warnock wrote a paper titled “The Camelot Project,” outlining his vision for a universal document format. His idea was simple but ambitious: create a way for documents to maintain their original appearance, regardless of the device or software used to view them.

This meant embedding fonts, images, and layouts directly into the file, making it self-contained and platform-independent. The Camelot Project envisioned a file format that would allow users to create documents, view them on any device, and print them with perfect accuracy.

In 1993, after years of development that required Warnock and his team to overcome numerous technical challenges (which we won't get bogged down with here), Adobe released the first version of the Portable Document Format alongside Acrobat, a suite of tools for creating, viewing, and managing PDFs.

Despite some initial challenges, Adobe remained committed to making PDF a standard. The breakthrough came when the company decided to release Acrobat Reader for free. By removing the cost barrier for viewing PDFs, Adobe encouraged widespread adoption, ensuring that people could open and read PDF files without additional software purchases.

As the PDF gained traction, Adobe found new ways to monetize the format. The company began offering premium features through its paid Acrobat software, including tools for creating, editing, and securing PDFs. This freemium model – giving away the reader for free while charging for editing features – proved highly effective. Businesses that relied on PDF for critical documents soon became dependent on the features locked behind Acrobat - which meant that in the end, Adobe generated revenue.

One of the turning points for the PDF came when government agencies and large corporations began recognizing its potential for document preservation and distribution. Unlike traditional word processing files, which could change in appearance depending on software versions, PDFs remained visually consistent.

This made the format ideal for archiving official documents, contracts, manuals, and legal papers. Over time, industries that required precise document formatting, such as publishing and engineering, also adopted PDF as a standard.

By the early 2000s, PDF had become the de-facto standard for digital documents. Its adoption was further solidified when the International Organization for Standardization (ISO) recognized it as an open standard in 2008, ensuring its continued use beyond Adobe's proprietary control. Due to it now being an international standard, the use and distribution of the format is completely free of charge.

Today, PDF remains one of the most widely used document formats worldwide, supporting everything from simple text documents to complex interactive forms – and while the format is largely free and can be displayed in a myriad of different ways, Acrobat is still the best way to edit them. So although Adobe has lost its “monopoly” around PDFs, its tools for handling and editing them are still the best out there – and the tools are not free to use.

While PDF and Acrobat were reshaping the way businesses handled documents, Adobe was also making strides in the creative software industry. Throughout the 1990s, the company expanded and improved its products, while acquiring and developing new tools for designers, photographers, and publishers.

Adobe enhanced Illustrator's capabilities, positioning it as a leading tool for logo design, typography, and digital illustration. Illustrator and Photoshop also complemented each other excellently, helping to establish what has now become a hallmark of Adobe's products: cross-platform compatibility.

Another major addition to the portfolio came in 1999 with the introduction of Adobe InDesign. This desktop publishing software was designed to compete directly with QuarkXPress, which had dominated the publishing industry for years. By offering advanced typographic controls, layout flexibility, and integration with Photoshop and Illustrator, InDesign gradually gained traction, especially among designers and publishing professionals.

But Adobe was also growing through acquisitions. In 1994, it acquired Aldus, the company behind PageMaker, one of the first widely used desktop publishing programs. Despite Adobe’s growing influence, it faced significant competition in various markets. To stay ahead, the focus shifted to improving the interoperability of its products.

The company recognized that many professionals used multiple Adobe applications in their workflows, so it began enhancing the ways these programs complemented together. However, at this time, Adobe's software was still sold separately, which sometimes led to compatibility issues and inconsistent user experiences across different products. This, as you may already be aware, was about to change.

By the early 2000s, Adobe was looking for ways to streamline its product offerings, improve the user experience, and of course: continue to gain market share.

While Photoshop, Illustrator, InDesign, and Acrobat had all become industry standards in their respective categories, they were still treated as independent software products. Customers who relied on multiple Adobe applications often had to manage separate licenses, purchase costly individual upgrades, and deal with varying levels of integration between programs.

At the same time, software bundling was becoming an increasingly popular strategy among tech companies. Microsoft had successfully bundled its Office products (Word, Excel, PowerPoint, and Outlook), creating a cohesive package. Adobe saw an opportunity to apply a similar approach to the creative industry by bundling its design software into a single product. What they came up with was (very aptly named) the Adobe Creative Suite.

Adobe Creative Suite 1.0 launched in October 2003, combining Photoshop, Illustrator, InDesign, GoLive, and Acrobat Professional. The suite introduced a more cohesive experience, with improved integration between applications and a unified licensing model. One of the most significant features was Adobe's introduction of the Adobe Bridge, a file management system that helped users organize and preview assets across different programs.

At the time, Adobe faced competition from companies like Quark, which dominated the page layout software market with QuarkXPress. InDesign, which had launched in 1999, was still trying to establish itself as an alternative. By bundling InDesign with Creative Suite, Adobe was able to accelerate its adoption, giving users an added incentive to switch from QuarkXPress. Over time, this strategy proved successful, and InDesign eventually became the industry standard for desktop publishing.

With each iteration of Creative Suite, Adobe expanded the package to include more powerful tools and improved integration between applications. Creative Suite 2 (CS2), released in 2005, refined the software lineup and introduced innovations like Adobe Bridge for better file management.

CS3, which debuted in 2007 after Adobe's acquisition of Macromedia, integrated former Macromedia products such as Flash, Dreamweaver, and Fireworks. This merger gave Adobe an even stronger hold on the web design and interactive media industry.

CS4 and CS5 continued to build on this success, enhancing features for video editing, digital imaging, and web development. By this time, Adobe had firmly established itself as the go-to software provider for creative professionals. However, as technology and consumer habits evolved, Adobe recognized the need to shift toward a new business model – one that would ultimately replace Creative Suite entirely – and completely transform the company.

We've arrived in 2013, and with that, the most important decision and strategic shift in Adobe’s history. During a financial analyst briefing (available in its entirety via Quartr Pro), the company’s long-term CEO Shantanu Narayen together with other members of Adobe management announced that the Creative Suite was going to be phased out in favor of the Creative Cloud.

The Creative Cloud had been introduced in the year prior and was now going to replace the Creative Suite entirely. This is what Narayen had to say about Adobe's reasoning behind the switch:

With this, Adobe was shifting away from its one-time payment structure in favor of subscriptions. The company had slowly started to introduce subscriptions back in 2010, with the Creative Cloud following in 2012, and saw an increasing focus during the time leading up to the announcement of the switch.

One of Adobe's primary reasons for moving to a subscription-based model was improved stability and more predictable revenue. Under the traditional licensing model, customers paid a large upfront fee for a perpetual license of Adobe software, which granted them indefinite access to that version of the product. This meant that Adobe's revenue spikes were tied to major software releases, with long gaps in between.

Once a customer purchased software, there was little incentive for them to upgrade unless the new version offered significant improvements. Sure, someone buying, for example, Photoshop for the first time will more than likely go for the new model.

But someone satisfied with the current offerings of an old version was very unlikely to switch until the benefits of doing so became impossible to ignore. By switching to a subscription model, Adobe ensured a steady flow of revenue through recurring payments, reducing the financial uncertainty tied to new software launches.

This approach also allowed the company to invest in continuous updates rather than relying on major version releases to drive sales. Instead of users waiting years for a new version of Photoshop or Premiere Pro, Adobe could now roll out incremental updates, fixing bugs and introducing new features more frequently. This was something that Narayen really pushed during his opening statement:

In other words: Adobe felt like the licensing model was hindering them from pushing updates out as frequently as they would like. If a new feature had been finalized a couple of weeks after a new version had been released, they would simply have to sit on it until the rest of the new version was ready. With the introduction of subscriptions, they could instead roll out small fixes and patches as they saw fit.

Another massive issue that Adobe faced before the switch was pirated copies of their software. This is something that the company has been battling with for a long time and piracy was a persistent issue since many users relied on cracked versions of Adobe products rather than paying steep licensing fees.

Now, instead of paying a massive upfront licensing cost and choosing to go down the perilous road of illegally cracked software, a user could pay a much more reasonable sum to gain access legally.

From a user perspective, the shift to a subscription model made Adobe’s software more financially accessible, at least in the short term. Previously, purchasing Adobe Creative Suite could cost thousands of dollars, which made it a significant investment, particularly for small businesses, freelancers, and hobbyists. Under the subscription model, users could access Adobe’s entire suite for a monthly fee, making access to industry-standard tools much more accessible without a massive upfront cost.

However, some users were far from happy with this change, with one of the most common concerns being the long-term cost. While the upfront cost of Creative Suite was high, once a user purchased a license, they could use it indefinitely.

In contrast, the subscription model meant that users had to pay continuously to retain access. Over time, this could result in significantly higher expenditures, especially for individuals and small businesses that did not need every update and small tweak and were happy to use the same version of the software for years and years.

But when you take a look at the financials and the performance of the stock following the switch, it becomes abundantly clear that Adobe made the right decision.

While part of the change was motivated by improving the user experience. In the end, it primarily boiled down to the financial benefits that it provided Adobe with.

First and foremost: the subscription model provided Adobe with recurring monthly or annual payments, creating a more stable and predictable revenue stream compared to the volatility of one-time perpetual license sales. This in turn allowed Adobe to reduce its reliance on new version releases for revenue spikes and made for more predictable long-term financial planning.

But the impact wasn't instantaneous. As you can see below, Adobe experienced a sharp downturn in its earnings before settling into the new realities of its business model:

The impact of the switch from perpetual licenses to a subscription model visualized.

The impact of the switch from perpetual licenses to a subscription model visualized.

Adobe's EBIT fell from $1.2 billion in 2012 to just $0.4 billion by 2014, a sharp decline that might have seemed alarming at the time. However, the company had made a strategic shift, one that would ultimately prove to be the right move. By 2016, Adobe had not only recovered but had surpassed the benchmark from 2012. Over the following years, its earnings continued to climb steadily and by 2024, Adobe's EBIT had reached approximately $7.5 billion.

As you can see, subscriptions are not the only business segment that generates revenue for the company, even if it is the overwhelming majority. So, with that being said: let’s get into the nitty gritty of Adobe's business today.

Today, Adobe offers around 100 different products and for obvious reasons, we're not going to list all of them here. But in order to get a better insight into how Adobe of today is structured offerings, we’ll go over their different software packages and expand on how the company actually makes money.

Adobe’s Digital Media segment focuses on tools for creative professionals and hobbyists, enabling them to design, edit, and produce digital content. Key products include the Creative Cloud, the Document Cloud with Adobe Acrobat and PDF tools, and Firefly with generative AI tools integrated into Creative Cloud.

This segment provides solutions for businesses to manage and optimize customer experiences across digital channels. Core offerings include Adobe Experience Cloud with a comprehensive platform for marketing, analytics, and commerce, featuring tools like Experience Manager (for content and asset management), Real-Time CDP (for customer data unification), and Journey Optimizer (for personalized customer journeys). The segment also includes AI platforms for performance marketing and various AI agents.

Adobe's products for Publishing and Advertising have taken a backseat in later years, especially when compared to the early days of the company. Adobe's solutions for this segment today focus on content creation, distribution, and monetization.

Key components include: Adobe Advertising: a platform for ad campaigns, Creative Management which provides tools for testing and iterating ad creatives, and Content Supply Chain which streamlines content production workflows.

In total, the company generated a record $21.5 billion in revenue in 2024, representing 11% YoY growth. Of that roughly $22 billion, Digital Media accounted for 74%, Digital Experience for 25%, with Publishing and Advertising only contributing around 1% of total revenue.

Adobe’s subscriptions are, unsurprisingly, its largest revenue driver by far, accounting for 95% of total revenue in 2024. As we've already addressed, customers pay monthly or annual fees for continuous access to software, updates, and cloud storage.

The remaining 5% is split between the one-time licenses that are still offered and professional services. The licenses are only offered for a niche set of products and are more often than not tied to a single device. The services segment consists of revenue generated from professional services, training, and support offered to customers.

When breaking down the revenue generated by subscriptions in the largest of the three product categories (Digital Media), the numbers speak for themselves: creative tools are Adobe’s bread and butter, even if the document segment is far from negligible. The Creative Cloud accounts for 80% of revenue in Digital Media, while 20% stems from the Document Cloud.

One thing that is also worth being aware of in the grander scheme of things is the fact that Adobe no longer reports actual subscriber numbers. The company stopped doing so in 2016, citing the introduction of various pricing tiers and subscription models that made the raw subscriber count less meaningful as a metric for business health.

Instead, Adobe focuses on Annual Recurring Revenue (ARR) and other financial metrics to provide insights into its subscription-based business performance.

On a short sidenote: Adobe is not alone in this. Netflix has announced that it will stop reporting subscriber numbers, citing similar reasons as Adobe. Many other SaaS companies, such as Snowflake, Okta, and Zoom, have moved away from reporting granular metrics like customer counts or billings in favor of more strategic financial indicators.

While tools such as Photoshop, Premier Pro, and InDesign are extremely powerful and have become industry standards for a reason they also, like anyone who's ever tried starting out with one of these programs from scratch will tell you, have an incredibly steep learning curve. As more and more of the media, or to use the modern word for it, the content we consume has become shorter and easier to distribute.

This in turn has meant that the tools that creators use have changed. Today, a project with the highest standards, such as the editors of a Hollywood production or a professional photographer still needs the absolute best and most powerful tools they can find - and as we've already been over, the software available in the creative cloud are the standard tools of the trade.

However, for someone putting together a TikTok of their visit to the park, or for a creator producing a shorter YouTube video, using Premier Pro is like using an F1 car to do your weekly shopping. Sure, the F1 car is infinitely more powerful than a regular SUV – but the latter is much better equipped for the task.

This is where Adobe Express comes into the picture. It is a cloud-based design, intended to make content creation accessible to users who may not have experience with professional design tools. It is aimed primarily at individuals, small businesses, educators, and social media content creators who need to produce high-quality graphics, videos, and marketing materials without the complexity of traditional design programs.

Through Adobe Express, users can generate thumbnails, and simpler graphics, edit videos, record voiceovers, and much more. While it might not be an appealing offer for the professionals, it's not built for them. Express sits perfectly nestled into a creative niche that has seen rapid growth in demand over the last years, and is positioned to be a key product for Adobe going forward.

But the introduction and success of Express also shines a light on one important aspect of Adobe’s business: it's still capable of identifying when there’s a demand and a need for a new creative software solution, they're still willing to innovate to make it happen.

As we're about to get into, there are very few products out there that can actually compete with Adobe's products. The reasons for this are multifaceted and complex, but as for every rule, there's an exception. In this case, that exception is called Figma.

Figma is a web-based design platform founded in 2012 in Australia and was built specifically for UI and UX development. The platform quickly gained traction for its web-based, collaborative approach to design, allowing multiple users to work simultaneously on projects without the need for software installations.

While Adobe had its own web-based design tool, Adobe XD, it never gained the same level of traction as Figma. In a rare turn of events, it seemed like Adobe had been beaten at their own game: for all intents and purposes, Figma was a far superior product to XD.

In September 2022, Adobe announced plans to acquire Figma for approximately $20 billion in a cash and stock deal, a move that would have brought together the biggest name in creative software with one of the fastest-growing platforms for collaborative design. Adobe saw Figma as a strategic addition that could enhance its presence in web-based and collaborative design.

For Adobe, the acquisition was about more than just eliminating a competitor – it was a response to the increasing shift toward seamless, cloud-based, and collaborative design. Add the fact that Figma was a far superior product to XD, and you have a very clear-cut reason for why Adobe was so keen on going through with the acquisition.

However, the deal quickly attracted scrutiny from regulators in both the United States and abroad. Competition authorities in the European Union and the United Kingdom raised concerns that Adobe's acquisition of Figma would significantly reduce competition in the design software market.

The worry was that absorbing Figma into Adobe's portfolio would eliminate one of the few significant challenges to Adobe's long-standing dominance, limiting options for users, and reducing the incentives for both companies to innovate.

In the UK, the Competition and Markets Authority (CMA) launched an in-depth investigation, arguing that the deal could result in higher prices and fewer choices for users. The European Commission similarly signaled concerns, stating that the merger could give Adobe excessive control over the design software space, effectively creating a monopoly.

As regulatory hurdles mounted, it became increasingly clear that the deal would not proceed as planned. By December 2023, Adobe and Figma mutually agreed to terminate the merger agreement, citing the regulatory challenges as insurmountable.

When reading through the merger termination announcements, it is abundantly clear that management at both Adobe and Figma was bitterly disappointed with the regulator's decision to stop the deal in its tracks. But the Figma didn't walk away empty-handed. As per the pre-merger agreement, they received a $1 billion “breakup” fee.

But what about Adobe XD? While Adobe has a stellar track record of products that have withstood the test of time and become the obvious choice for professionals in a myriad of different fields, you're not going to hit a home run every time you step up to the plate. Adobe XD saw fewer and fewer updates in the months following the termination of the merger, as the plan all along had been for Figma to more or less replace the software outright.

Sometimes you simply have to cut your losses and move on, and that is exactly what Adobe did. In January 2024, the company announced they were not going to invest further into Adobe XD.

One of the most impressive things about the entire (and very aptly named) Creative Cloud is just how versatile it is. If you take a moment and think about the last time you saw a movie, an album cover, or even just a billboard on your way home from work, chances are very, very high that it passed through at least one of the software available in the Creative Cloud.

This leads us to one of the competitive advantages that's less tangible and doesn’t show up on income statements: the software included in the Creative Cloud is the industry standard, and has been for a long time. Depending on how dramatic you want to be in regards to your wording, it wouldn't be completely ludicrous to describe Adobe's market position as a near-monopoly.

Part of this has to do with the people who use Adobe’s products every day as part of their jobs. For a professional photographer who's been using Lightroom (Adobe's photo organizing and processing software) for the entirety of their career, or for the freelance designer whose ability to do their work depends on their skills in Photoshop, the idea of changing to a different software is inherently a very risky one.

Why take a chance on something new when Adobe’s product has been the tool you’ve utilized to help build your career?

But Adobe is also working proactively to make sure that the next generation of creative professionals gets accustomed to their products and starts building their skills in tandem with their proficiency in programs like PhotoShop or Substance 3D (a 3D modeling software).

Most of Adobe’s software is offered for free to both teachers and students in higher education, meaning that its products are often used as part of education. While this is obviously highly beneficial to the students, who are able to put proficiency in things like Photoshop on their resumes, it also means that they’re highly likely to convert into paying customers once they enter their professional careers.

But at the same time, it's important to reiterate something: Adobe has gotten to where it is today by producing the best creative software in the world, and yes, occasionally doing things that are unpopular with their userbase if it's what the company believes is best for long term success. All in all, Adobe products have become the industry standard for a reason.

But yes, there are competitors. However the serious ones are few and far between, and none has really tried to challenge. As we've already been over, Figma is the most obvious (and if we're taking it a step further, the most threatening) competitor to Adobe, with some other ones trying to capture what market share they can include names and software like Canva, Final Cut Pro, and Affinity Designer.

But none of these, not even Figma, is close to offering features and capabilities that are even close to as comprehensive as what Adobe offers through the Creative Cloud. At the time of writing, the price for a month's subscription is around 55, and that's before taking into account the discounts and promotions that are relatively common.

This is also where interoperability, which has been a focus for decades, also helps to build a competitive advantage. When you get access to over 20 different programs that all work together, for a predictable fee, that everyone at your workplace, your customers, and your competitors use, the choice becomes very straightforward.

Although Creative Cloud is the industry standard, and many professionals have built their careers using Adobe's tools, grievances against the company remain relatively widespread. These concerns aren't entirely unfounded.

Over the years, Adobe has frequently faced criticism for aggressive price hikes – some even call it “extortion.” More recently, the Federal Trade Commission (FTC) filed a lawsuit accusing Adobe of misleading consumers about its subscription cancellation process and imposing high cancellation fees. Given these issues, Adobe appears vulnerable to competition on paper. Yet, in reality, no challenger has managed to disrupt its dominance.

In the world of PDFs, the landscape is however a bit different. As we've already been over, PDF is now an international standard and is free of charge to use. Despite this, Acrobat and the associated tools for PDF editing and handling that Adobe offers have been the standard since the 90s and users are very accustomed to how they work, and once again - most people will tell you they’re the best ones available on the market.

So what does the future hold for Adobe? Like most other major software companies, the answer to that question is AI. Adobe has been steadily incorporating artificial intelligence into its software, with AI now being used in everything from its creative offerings to Acrobat. The company’s investment in AI is not new, but recent advancements in generative AI and automation have pushed it further into the spotlight.

One of the most visible aspects of Adobe's AI efforts is Firefly, a family of generative AI models designed to generate and modify visual content. Unlike other AI image generators that rely on internet-scraped data, Firefly was trained on Adobe's own stock images, public domain content, and other licensed material.

AI is also being used to streamline video editing in Premiere Pro and After Effects. Features like automatic scene detection, smart reframing for different aspect ratios, and AI-driven audio tools reduce the amount of manual labor required for tasks that used to take hours.

However, the AI that's been incorporated across the board is not there to do any of the heavy lifting creatively. Instead, it's meant to act as more of an assistant than anything else, helping to automate and streamline some of the more mundane tasks, helping users to spend their time and energy doing what they do best: being creative.

But artificial intelligence could also potentially turn out to be a double-edged sword for Adobe. With breakthroughs in AI happening almost every day, and with every model for videos, images, and other creative tasks, being more powerful than the next it might just be possible that Adobe's empire is challenged.

At the time of writing, that has not occurred, and time will tell what the future holds for both Adobe and those who rely on their products for their work.

What do the Creative Cloud, Adobe's stock returns, and everything else we've discussed in this article ultimately boil down to? A simple fact: Adobe creates tools that empower professionals, hobbyists, and everyone in between to pursue their passions – and to handle everyday tasks like paying taxes or sending legal documents to a landlord. And it excels at it.

Though Adobe isn’t perfect, and several of their users will happily tell you so, one fact remains indisputable: their software is, more often than not, the superior alternative to everything else out there. While there have been attempts, and it's said that no king rules forever, some 40 years after the company was founded in a Palo Alto garage, it's very difficult to see who could ever challenge Adobe. More than likely, it will continue to define how we use creative software for decades to come.