Background: Adobe was founded in 1982 and helped create the PDF format we still use today. It also powers creative staples lie Photoshop and Illustrator - though it's now facing rising competition from tools like Canva and even newer AI-driven platforms like Claude Design.

What happened: Despite generating over $10.3 billion in free cash flow last year, Adobe's share price has dropped more than 30% over the past six months. The culprit isn't performance... It's fear. Investors are worried that AI tools could start eating into Adobe's core market.    

What else: In response, Adobe has approved a massive $25 billion share buyback program running through 2030. Adobe has the cash…and still has the belief in their long-term value so they’re deciding to use that cash to buy back their shares. And they can use this buyback as a way to offset their employee stock compensations

What's the key learning

💡 A share buyback is when a company buys back its own shares from the market. This reduces the number of shares in circulation - meaning each remaining share represents a larger slice of the company (like cutting a pizza into fewer pieces).  

💡 Buybacks can offset dilution from employee stock compensation. Adobe issues around $1.5 billion to $2 billion in stock to employees each year, which can dilute existing shareholders by 1-2% annually. So buybacks help offset that, so investors don't lose ownership value over time.  

💡 Adobe will buy the $25 billion USD of stock back at opportunistic times over the next 5 years during price dips (like now) will help Adobe maximise value while still continuing to reward employees...and without hurting shareholders.