Shares of Adobe Inc. (NASDAQ: ADBE) are forming a flat base with a 13% correction beneath a September 8 high of $570.24. 

While many stocks have tumbled as AI optimism is taking a breather, Adobe has held up. The S&P 500 component is outperforming the S&P 500 by a wide margin on both a three-month and year-to-date basis.

Adobe stock is up 7.30% in the past three months and up 66.43% year-to-date.

Adobe has been emphasizing the applications of generative AI in its software for design, photography, video editing and other content. 

In the case of Adobe, it's easy to see how AI is being deployed in existing products. That plays a role in how investors are evaluating the company and its stock at this point. 

Adobe Stock Remains Actionable

If you take a glance at the Adobe chart, you'll see that the stock actually cleared that base but retreated. Shares closed at $557.87 on October 18, meaning the stock is in the buy range, as it's trading just 2.2% below that prior high. 

Adobe's revenue has grown at rates of 9% or 10% in each of the past four quarters. Earnings growth accelerated from 9% to 20% in the past four quarters.

Adobe repurchased approximately 2.1 million shares in the most recent quarter, adding to the stock's performance. 

Business unit highlights included: 

• Digital Media revenue was $3.59 billion, 11% year-over-year growth.
• Creative revenue grew to $2.91 billion, also representing 11% year-over-year growth.
• Document Cloud revenue was $685 million, an increase of 13%.
• Net new Digital Media annualized recurring revenue (ARR) was $464 million, ending the quarter with Digital Media ARR of $14.60 billion. 
• Creative annualized recurring revenue grew to $11.97 billion, and Document Cloud ARR grew to $2.63 billion. 
• Digital Experience segment revenue was $1.23 billion, 10% growth. 
• Digital Experience subscription revenue was $1.10 billion, an increase of 12%.  

Several factors are driving this across-the-board performance. First, as you can see by those increases in annual recurring revenue, the company is successfully moving its design software, such as Photoshop and Illustrator, to a subscription-based model.

Also facilitating that move is a transition from packaged software to cloud-based software. 

Rolled Out More Than 100 New AI Features

And don't overlook Adobe's focus on AI products. 

AI-based products include Sensei, a tool for creating marketing graphics and Firefly, to create images, text and color palettes. Firefly, which was released in September, comes with copyright protection to compensate artists whose work is used illegally in the software.

In October, at a conference, the company rolled out over 100 new updates and features using AI in its software products, including Firefly, Photoshop, Lightroom, Premiere Pro, Illustrator and others. 

Adobe's analyst ratings show a consensus view of "moderate buy" on the stock. The price target is $594.50, an upside of 6.57%. 

Adobe is tracked within the Technology Select Sector SPDR Fund (NYSEARCA: XLK). Adobe stock has outperformed tech stocks as a whole in the past three months, as well as year-to-date. 

Holding Up Better Than Other AI Stocks

The stock has not suffered the same fate as AI-related semiconductor stocks that got smacked due to more measured expectations about AI and heightened restrictions on chip exports to China. 

Within the S&P 500 tech sector, Adobe's year-to-date performance lags only Nvidia Corp. (NASDAQ: NVDA) and cybersecurity specialist Palo Alto Networks Inc. (NASDAQ: PANW). 

Adobe is the fifth most heavily weighted stock within the tech sector, behind Microsoft Corp. (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Broadcom Inc. (NASDAQ: AVGO) and Nvidia.  Adobe has a weighting of 3.12% within the sector, meaning that it's dwarfed by Microsoft and Apple and isn't likely to have much influence on performance all by itself. 

Given the solid 2023 price performance, it shouldn't come as a surprise that big investors are jumping on board. 

MarketBeat's Adobe institutional ownership data show 1,913 institutional buyers accounting for $260.90 billion in inflows in the past 12 months, versus 1,461 big sellers accounting for $14.51 billion in outflows. That's a sign that buyers are clearly in charge.