History Says Adobe Stock Comes Back From Deep Drops. It's Now 64% Below Its 2021 Record.

Adobe (NASDAQ:ADBE) stock hit its closing record of $688.37 on Nov. 19, 2021. Almost five years later, shares of the creative software company trade around $248 as I write this -- about 64% off that high. And at their June 25 closing low of $193.41, they were down about 72%, the stock's deepest drop since the dot-com crash.

Deep drops are nothing new to Adobe, though. Using daily closing prices since 1990 (adjusted for stock splits, with dividends left out), the stock had fallen at least 30% from a record close eight times before this slide. It then set a new record after every one.

But I don't think that history settles much, because the two slumps this one most resembles started with a problem today's Adobe doesn't have.

Image source: Getty Images.

The slow comebacks took around six years

Six of the eight drops came in the 1990s, and they were deep, running from about 31% to 66%. But they were also mostly short.

Five of the six went from one record close to the next in around 18 months or less. The longest, which bottomed in August 1998, took about 3.4 years.

The two drops after that were another story. After peaking on Nov. 6, 2000, Adobe stock lost around 80% by August 2002, and it didn't close at a new record until Nov. 16, 2006.

The next slump, from an Oct. 24, 2007, peak, cut the stock around 67% by March 2009. Its next record was on July 12, 2013, about 5.7 years after the 2007 high.

Both times, the climb from the bottom back to the old high took over four years by itself. Today's slump is almost five years old, and as of this writing, the stock would have to gain around 177% to get back to its record.

In 2002 and 2009, the business shrank first

In the first of those long slumps, Adobe's revenue shrank two straight years, from fiscal 2000's $1.27 billion to $1.16 billion by fiscal 2002. Net income fell around a third over the same stretch.

Then sales turned. Revenue climbed 11% in fiscal 2003 and accelerated to 29% growth in fiscal 2004, so investors who hung on could see the rebound in the numbers.

The 2008-2009 recession cut deeper. Fiscal 2009 revenue slid 18%, to around $2.9 billion.

Interestingly, the stock's 2013 record was in a year when revenue fell 8%. Adobe had stopped new releases of its Creative Suite software, which customers bought outright, to focus on Creative Cloud subscriptions, which spread out revenue over time. Investors pushed the stock to a record before the new model's sales caught up.

Is this time different?

In one big way, it is: Adobe's business never shrank this time. Management expects fiscal 2026 revenue of around $26.6 billion, about 69% above the $15.8 billion it pulled in during fiscal 2021 -- the year the stock peaked.

Adobe's revenue climbed 13% year over year in its fiscal third quarter of 2026 (the period ending Aug. 28, 2026), hitting a quarterly record of $6.76 billion. Its non-GAAP (adjusted) earnings per share climbed even faster, up 15%.

The worry is what's next. Investors fear that artificial intelligence (AI) agents might take over tasks people now do with software like Adobe's, which bills subscribers per user, or seat.

If fewer people need a seat, Adobe's recurring revenue could shrink. That arguably makes this slump tougher to ride out than the past two. In 2002 and 2009, a sales recovery could show the hit was temporary. Now, Adobe needs to show that AI adds more to its business than it takes away.

It has a start. On its fiscal Q3 earnings call, Adobe said its AI-first annualized recurring revenue (ARR) passed $650 million, up more than 150% year over year. But it's still a small slice of its $27.5 billion in total ARR.

In the end, eight recoveries don't guarantee a ninth. And this one likely depends on investors seeing AI help Adobe more than it hurts.

But the business keeps growing, and the stock doesn't cost much for a company doing that. At around $248, shares trade at about 10 times the adjusted earnings per share management is targeting for fiscal 2026. For comparison, the S&P 500 sells at almost 19 times its expected earnings over the next 12 months.

I'd consider buying shares at today's price, but I'd be ready to hold them for years to come.

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.