The promise of generative artificial intelligence has Adobe (ADBE) back to its market-beating ways, even if the stock has gotten off to a disappointing start in 2024.

After adding 77% in 2023, shares in the maker of application software for creative types are lagging the broader market through the first quarter of the new year. The company's May announcement that it was adding AI tools to Photoshop lit a second-half fire under Adobe stock.  But then a pullback of some kind following such a torrid run isn't unusual for any name. Besides, two steps forward and one step back is sort of par for the course for ADBE stock.

And make no mistake: jumping on the AI bandwagon was just what Adobe needed. For years, the company enjoyed a near monopoly in its niche. Its Creative Suite – which includes the likes of Photoshop, Premiere Pro for video editing and Dreamweaver for website design, among others – really had no peer. 

But times change. The emergence of Microsoft's (MSFT) Azure and other cloud-based competitors have taken a bite out of Creative Cloud. Adobe's suite of products still commands a market share of more than 60%, but there's no question the company – and its shareholders – have been feeling the heat.

Just look at how shares have slowed down over the past few years. 

Adobe stock has outperformed the S&P 500 by a wide margin over the course of its life as a publicly traded company, generating an all-time total return of almost 24%. By comparison, the broader market returned 10.4% over the same span. ADBE stock also beat the S&P 500, usually handily, over the past 20-, 15-, 10- and five-year periods.

The early 2020s have been a different story entirely. A terrible 2022 has ABDE stock actually lagging the S&P 500 over the past three years by almost three percentage points.Happily for shareholders, the AI feeding frenzy appears to have put shares back on track. "The recent selloff in ADBE shares looks overdone and the stock is a good place for investors to be involved in over the next fiscal 12 months given there are numerous growth drivers ... favorable generative AI positioning and valuation support," writes analyst Brian Schwartz, who has an Outperform (the equivalent of Buy) rating on ADBE. 

The bottom line on Adobe stock

(Image credit: Getty Images)

Adobe's hot 2023 run was a lot more like what longtime shareholders have come to expect from the stock. After all, anyone who plonked down just a thousand bucks into ADBE a couple of decades ago would have enjoyed truly outstanding returns. Have a look at the chart below and you'll see that a $1,000 investment in Adobe stock 20 years ago would today be worth about $30,300. The same money invested in the broader market would theoretically have grown to almost $6,600.

(Image credit: YCharts)

True, Adobe stock remains about 20% below its all-time closing high set back in November 2021, but analysts think it can reclaim those levels eventually. 

After all, Wall Street is pretty bullish on the name. Of the 31 analysts issuing opinions on Adobe stock surveyed by , 11 rate it at Strong Buy, 14 call it a Buy, 6 have it at Hold. That works out to a consensus recommendation of Buy, with high conviction.

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