Mar Vista U.S. Quality Strategy Sold Adobe (ADBE) as Its AI Investments’ Revenue Potential Remains Uncertain

Mar Vista Investment Partners, LLC, an investment management company, released its “Mar Vista U.S. Quality Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter was a standout period for US equities, led by optimism over the Federal Reserve’s dovish pivot and the ongoing boom in artificial intelligence (AI). The S&P 500® Index and the Nasdaq Composite surged, representing technology’s relentless momentum.  In the quarter, the strategy returned +3.29% net of fees, compared to +8.00% and +8.12% returns for the Russell 1000 Index and the S&P 500 Index, respectively. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Mar Vista U.S. Quality Strategy highlighted stocks such as Adobe Inc. (NASDAQ:ADBE). Adobe Inc. (NASDAQ:ADBE) is a technology company that operates through Digital Media, Digital Experience, and Publishing and Advertising. The one-month return of Adobe Inc. (NASDAQ:ADBE) was -0.40%, and its shares lost 29.41% of their value over the last 52 weeks. On October 8, 2025, Adobe Inc. (NASDAQ:ADBE) stock closed at $348.77 per share, with a market capitalization of $145.995 billion.

Mar Vista U.S. Quality Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its third quarter 2025 investor letter:

“We exited our long-standing position in Adobe Inc. (NASDAQ:ADBE) as we grew less confident that generative AI product extensions across its flagship Creative Cloud suite would meaningfully expand the company’s addressable market. Adobe faces heightened risks and a wider range of potential outcomes as large language models such as OpenAI’s and Alphabet’s Gemini become mainstream. Investors are questioning whether automation of lower-level creative tasks by these models could reduce the number of licensed seats, thereby expanding the uncertainty around Adobe’s future business performance.

Although Adobe has invested heavily to embed generative AI capabilities across its platform, the company’s ability to translate these innovations into meaningful incremental revenue remains uncertain. With both the timing and magnitude of new AI-driven revenue streams unclear, and competitive pressures increasing in Adobe’s core markets, we concluded that the risk-reward profile had deteriorated. Therefore, we chose to exit our position and reallocate capital to opportunities in the portfolio with clearer return potential.”

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Adobe Inc. (NASDAQ:ADBE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 104 hedge fund portfolios held Adobe Inc. (NASDAQ:ADBE) at the end of the second quarter, up from 111 in the previous quarter.  In the fiscal third quarter of 2025, Adobe Inc. (NASDAQ:ADBE) reported record revenue of $5.99 billion, representing 10% year-over-year growth. While we acknowledge the risk and potential of Adobe Inc. (NASDAQ:ADBE) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Adobe Inc. (NASDAQ:ADBE) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Adobe Inc. (NASDAQ:ADBE) and shared the list of safest stocks to invest in. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.