WHEN IN DOUBT, ACQUIRE SOMETHING WITH ‘AI’ IN IT

(ADBE), (GOOGL)

In its latest attempt to prove it’s still got teeth in the AI era, Adobe (ADBE) just dropped $1.9 billion in cash on Semrush, a mid-tier SEO platform that, until recently, was bleeding low-end customers and nursing a PR narrative about “Generative Engine Optimization.” 

It sounds futuristic until you realize it’s just SEO trying to dress up for an AI party it wasn’t really invited to.

Let’s not kid ourselves. This isn’t some masterstroke of visionary strategy. It’s a case of an aging titan with too much cash and too few new ideas deciding to buy relevance in bulk. 

Adobe’s growth is slowing, Figma is eating its lunch in the design market, and Wall Street analysts are starting to use words like “mature” and “value play,” which in tech, is basically hospice care.

This is where Semrush comes in. A company with decent revenue, passable free cash flow, and a high churn problem so obvious the CEO practically posted a Craigslist ad asking enterprise clients to please call him back. 

They’ve been backing away from their small business user base because it turns out paying $500 a year for keyword analytics isn’t as compelling when ChatGPT can summarize your competitor’s entire strategy for free.

So why pay up for this thing? Because Adobe needed something – anything – with the letters “AI” attached to it. 

And Semrush, to its credit, figured out that slapping “AI Toolkit” onto its product catalog could goose ARR just enough to avoid becoming completely irrelevant. 

Its AI-related revenue doubled sequentially, which sounds impressive until you realize it was growing off a base of nearly nothing. A rounding error with a LinkedIn post.

But here’s the part where the deal possibly makes sense. Adobe doesn’t care about Semrush’s growth rate, or lack thereof. 

What it sees is a chance to plug Semrush’s backend into its Experience Cloud, sell some bundled nonsense to CMOs, and hope no one notices that its own AI roadmap still looks like it was drawn on a cocktail napkin.

The acquisition math isn’t insane. At 3.6x next year’s revenue and 30x free cash flow, it’s not cheap, but Adobe has more cash than it knows what to do with. 

With $2 billion in free cash flow per quarter, it could’ve made this acquisition without so much as a budget meeting. Buying Semrush won’t move the needle, but it will give Adobe’s earnings calls a new paragraph to read from while pretending it’s still innovating.

Meanwhile, Semrush gets a life raft. It had $275 million in cash, sure, but it also had a business model increasingly dependent on customers who’d rather use free tools, and a category being eroded by search platforms themselves. 

Google’s (GOOGL) SGE and AI summaries are doing to SEO what GPS did to paper maps: making the entire category look quaint.

As for Adobe, the best thing you can say is that this acquisition isn’t dangerous. It won’t wreck the balance sheet. It won’t tank margins. And it might – just might – provide a mild bump in ARR growth and some narrative cover for another few quarters. 

But let’s be clear: this is not a turnaround moment. It’s an expensive press release.

There’s a certain irony in watching Adobe, a company that once defined digital creation, now desperately trying to bolt on relevance by acquiring companies that weren’t exactly lighting the world on fire. This is what happens when you miss the platform shift and have to buy your way back in. 

If you squint, this might help Adobe look more competitive in enterprise martech. But if you look with both eyes, it’s clear Adobe is still trailing the AI-native generation.

Still, Adobe remains a buy. Why? Because it’s a money printer. 

Gross margins near 90%, fortress balance sheet, and trading at just 13x forward earnings if you back out the cash. The bar is so low, they could trip over it and still beat consensus. 

You don’t need to love the strategy. You just need to accept that inertia and a dominant install base are often more profitable than vision.

So yes, this deal is underwhelming. No, it doesn’t change Adobe’s trajectory. 

But in a market where AI plays are either wildly overpriced or outright vaporware, buying a discounted monopolist with a mediocre acquisition isn’t the worst thing you could do.

It just won’t get you excited. And that, frankly, might be the most bullish thing about it.