Adobe Still Has $24.5 Billion Left for Buybacks. That's About a Quarter of the Company.

Shares of Adobe (NASDAQ:ADBE) have had a tough 2026. The stock ended last year at about $350 and trades near $240 as I write, down about 31%.

The software company has kept buying its own shares on the way down. In April, its board approved a new $25 billion stock buyback authorization, meant partly to "reduce share count over time." It runs through April 30, 2030.

And as Adobe's fiscal third quarter of 2026 ended Aug. 28, $24.55 billion of it was still unused.

Compared with Adobe's market value, the amount is large. With about 389.2 million shares outstanding in mid-September, Adobe is worth about $93 billion at today's stock price. The remaining authorization could buy back about 26% of it -- about 102 million shares.

Sure, an authorization isn't a promise. Adobe has around three and a half years to use it, and nothing forces the company to spend it all. But I think the company's pace this year shows it plans to put plenty of it to work.

Image source: Getty Images.

A steady, cash-funded pace

In the fiscal year's first three quarters, Adobe's buybacks averaged around $2.3 billion a quarter. That came to $6.82 billion, for 26.1 million shares, all bought on the open market.

And as the stock dropped, the same money bought more shares. The 9.5 million shares Adobe repurchased in fiscal Q3 cost an average of around $235 each, versus about $261 over all three quarters.

Notably, the company paid for it with cash from its operations. Adobe generated $7.65 billion of cash from operations during the same stretch, up around 11% year over year, and buybacks used close to 90% of it. Its balance sheet had $5.64 billion of cash and short-term investments at quarter-end, versus around $6.4 billion of debt.

This pace leaves room to spare. Spreading the unspent $24.55 billion evenly through April 2030 comes out to around $7 billion a year, about what Adobe spent in just those three quarters. If the company keeps buying at its recent rate instead, it could use up the authorization sometime in 2029.

Buybacks are doing about half the work

Adobe's diluted share count (the number used to calculate earnings per share) was around 395 million in the fiscal third quarter. That compares to 402 million in the fiscal second quarter and 424 million in the year-ago quarter.

Management's fourth-quarter targets assume around 389 million. In other words, the count's dropping about 2% a quarter, and steadily.

Not every repurchased share sticks, though. Shares outstanding dropped by around 22 million in the nine months, fewer than the 26.1 million Adobe bought, because employee stock awards added some back.

Showing what the shrinking count means for shareholders, Adobe's non-GAAP (adjusted) net income rose around 8% year over year in fiscal Q3 to $2.42 billion. Adjusted earnings per share climbed 15% to $6.13.

On a GAAP basis, net income grew just 3%, but earnings per share climbed 11% to $4.62. In short, fewer shares drove about half of the quarter's adjusted per-share growth.

If Adobe spent all $24.55 billion at roughly $240 a share and its earnings stayed flat, retiring about 26% of its shares would raise earnings per share by over a third.

That won't happen all at once, and the price Adobe pays will move. A lower stock price would stretch the cash further, and a higher one would shrink it.

Is the buyback a reason to buy?

At roughly $240, Adobe shares cost about 13 times earnings. Using the midpoint of management's fiscal 2026 target for adjusted earnings per share ($24.45 to $24.50), the price is about 10 times adjusted earnings. When shares reached their 52-week high of $363.70, that same target worked out to almost 15 times adjusted earnings.

I'd say buying back stock at about 10 times adjusted earnings is one of the better uses of Adobe's cash right now.

True, a buyback can't fix slowing growth. Adobe's total annualized recurring revenue (ARR), its gauge of the subscription business on a yearly basis, rose 11.2% year over year in fiscal Q3, and management's full-year target is 10.2%. And the market's discount probably reflects worries that artificial intelligence tools might hurt Adobe's pricing power. But as long as the subscription business keeps growing, a falling share count should help earnings per share outpace the business itself.

All in all, I think the buyback makes a cheap stock more interesting. Adobe stock looks worth considering at this price, but I'd want the subscription business to keep growing at roughly its current pace.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe. The Motley Fool recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.