The Disruption Trap: Why TCW's Exit from Adobe Marks a Turning Point for Growth Investing

Adobe's financial performance in 2025 was undeniably resilient. The company achieved 11% year-over-year revenue growth, driven by its AI-integrated tools like Firefly and Acrobat AI Assistant, which contributed over $5 billion in AI-influenced ARR by Q3 2025. Its strategic acquisitions, including Semrush for $1.9 billion, further expanded its digital marketing capabilities, positioning it as a leader in Generative Engine Optimization (GEO) according to market analysis. Additionally, Adobe's partnerships with OpenAI and Runway to integrate advanced AI models into Creative Cloud applications demonstrated a proactive approach to innovation as reported by Bloomberg.

However, these strengths are increasingly offset by structural challenges. According to a Bloomberg analysis, Adobe's stock price fell over 35% year-to-date in 2025, reflecting investor concerns about its ability to compete with AI-native platforms like Canva, Figma, and Oracle's AI infrastructure ecosystem. The latter, through its $300 billion partnership with OpenAI and its Zettascale10 supercomputer, is repositioning itself as the backbone of enterprise AI, a domain Adobe has yet to fully dominate according to Nasdaq analysis.

The AI Disruption Playbook: Adobe vs. Oracle

Adobe's AI strategy hinges on embedding generative AI into creative workflows while emphasizing "commercial safety" and content governance. Its Firefly AI model, trained on licensed content, aims to address copyright risks-a critical differentiator in the enterprise market according to research. However, Oracle's approach is more infrastructure-focused. By securing a five-year contract to host OpenAI's large language models in its data centers starting in 2027, Oracle is capturing a pivotal role in the AI supply chain as reported by Yahoo Finance. This contrast highlights a broader trend: while Adobe is optimizing for creative workflows, Oracle is building the foundational infrastructure for AI, a domain with higher margins and longer-term scalability.

The market's response has been telling. Oracle's stock outperformed Adobe's in 2025, with investors betting on its AI infrastructure play. Adobe's forward P/E ratio of 15–19x, compared to Oracle's 32.9x, suggests the market views Adobe as undervalued but also reflects skepticism about its ability to sustain growth in a rapidly evolving landscape according to LeverageShares analysis.

Investor Sentiment and the Shift in Growth Investing

TCW's exit from Adobe was emblematic of a broader rotation in growth investing. As noted by Reuters, capital is increasingly flowing into AI-native companies that prioritize AI-first product design over incremental improvements to legacy software. These firms, which include generative AI platforms and infrastructure providers, are outperforming traditional SaaS players by 68% in new-logo velocity, according to LinkedIn data according to Iconiq Capital.

Adobe's stock underperformance in 2025-despite strong earnings-reflects this shift. A valuation analysis by LeverageSharesUS suggests Adobe is undervalued by 31.8% based on a DCF model, yet its price-to-book ratio remains higher than peers, signaling lingering doubts about its AI monetization potential. Meanwhile, AI-native companies with scalable infrastructure models are commanding premium valuations, even as they navigate unproven business models.

The Disruption Trap: A New Paradigm for Growth Investing

TCW's decision to divest Adobe underscores a paradigm shift in growth investing. Investors are no longer content with incremental AI integration; they demand companies that are architected for AI from the ground up. Adobe's strengths-its enterprise customer base, brand equity, and creative software dominance-are formidable, but they are being challenged by AI-native competitors that prioritize agility and innovation.

For Adobe, the path forward lies in proving that its AI-driven tools can deliver sustainable growth without eroding its core Creative Cloud user base. The company's recent focus on "trusted generative AI systems" and partnerships with Runway and OpenAI is a step in the right direction as reported by Bloomberg. However, as Wedbush analysts note, Adobe now joins a list of "AI losers" if it fails to demonstrate that its AI initiatives can translate into meaningful revenue growth and market share retention according to Investor's Company analysis.

Conclusion

The TCW exit from Adobe is not merely a single fund's decision-it is a harbinger of a larger trend. Growth investors are recalibrating their portfolios to prioritize AI-native companies that are redefining industries rather than optimizing existing ones. While Adobe's fundamentals remain strong, its ability to navigate the disruption trap will depend on its capacity to innovate at the speed of AI and convince the market that its AI-driven future is as transformative as its past. For now, the stock's valuation discount suggests both opportunity and risk, a duality that defines the new era of growth investing.