Software and solutions provider Adobe (ADBE) is under scrutiny amid a selloff in software stocks driven by fears over artificial intelligence (AI). Following the latest quarterly earnings, analysts at Citigroup maintained a “Neutral” rating but lowered the price target from $315 to $278, reflecting a change in market perspectives.
While Citi analyst Tyler Radke noted Adobe’s earnings beat, the slight slowdown in annualized recurring revenue (ARR) has raised concerns among analysts. Adding to the uncertainties is the company’s CEO, Shantanu Narayen, announcing his departure once a suitable replacement is found. Argus Research analyst Joseph Bonner downgraded Adobe from “Buy” to “Hold” after the news of the CEO transition.
Despite the selloff in its stock, Adobe continues to rapidly integrate generative AI innovations across its product portfolio. Aligning with this, the company announced a strategic partnership with NVIDIA Corporation (NVDA) to accelerate AI-driven creation, production, and personalization, including the rollout of advanced Adobe Firefly models and agentic workflows.
Given this backdrop, let's take a closer look at Adobe.
About Adobe Stock
Adobe develops creative software and digital experience solutions, including tools for document management, marketing automation, and analytics. Its products empower designers, marketers, and businesses to create, deliver, and optimize content across digital platforms. Headquartered in San Jose, California, Adobe drives innovation in cloud-based services that support global creative workflows. The company has a market capitalization of $104.35 billion.
Adobe’s stock has come under pressure amid investor concerns that generative AI tools from OpenAI, Midjourney, Canva, and Figma threaten the company’s dominance through Photoshop and Illustrator. The leadership transition has also created some uncertainty.
Over the past 52 weeks, Adobe’s stock has dropped 36.45%, while it is down 28.94% year-to-date (YTD). Over the past five days, it has declined 9.13%. The shares reached a 52-week low of $244.28 on Feb. 24, but are up 0.7% from that level.
On a forward-adjusted basis, Adobe’s price-to-earnings GAAP forward ratio of 13.27x is lower than the industry average of 29.60x.
Adobe Posts Strong Q1 Results: AI Growth Surges
On March 12, Adobe reported its first-quarter results for fiscal 2026 (quarter ended Feb. 27). Its total revenue increased 12% year-over-year (YOY) to a record $6.40 billion, beating the $6.28 billion that Wall Street analysts had expected. This was mainly driven by subscription revenues, which increased 13% annually to $6.20 billion. Total Adobe ARR exiting the quarter was $26.06 billion. Most importantly, the company also reported that its AI-first ARR more than tripled YOY.
Adobe’s non-GAAP operating income grew 11.8% from the prior-year period to $3.04 billion, while its non-GAAP EPS was $6.06 for the quarter, up 19.3% YOY and higher than the $5.88 that analysts had expected. Also, the company reported a record Q1 cash flow from operations of $2.96 billion. At quarter-end, remaining performance obligations (RPO) stood at $22.22 billion, with current remaining performance obligations (cRPO) comprising 67% of the total.
Wall Street analysts are optimistic about Adobe’s future earnings. They expect the company’s EPS to climb 11.95% YOY to $4.59 for the current quarter. For fiscal 2026, EPS is projected to surge 10.4% annually to $18.99, followed by a 13.85% growth to $21.62 in fiscal 2027.
What Do Analysts Think About Adobe’s Stock?
Apart from the Argus Research and Citi analyses, Wall Street analysts have recently offered differing opinions on Adobe’s stock. On the same day, Goldman Sachs analyst Gabriela Borges lowered Adobe’s price target from $290 to $220 while maintaining a bearish “Sell” rating, reflecting a cautious outlook for the company’s prospects.
After the first-quarter earnings, analysts at Mizuho lowered the firm’s price target from $340 to $315, but maintained a bullish “Outperform” rating. Mizuho analysts noted that the company is trying to monetize its generative AI tools, though market competition is tough, and macroeconomic uncertainty is significant.
On the same day, Wells Fargo analysts cut Adobe’s price target from $405 to $330, while maintaining an “Overweight” rating on the stock. Net new ARR came in below expectations, and a surprise CEO change has likely affected the stock, but the eyeballs remain on how AI consumption offsets headwinds.
Adobe is still favored on Wall Street, with analysts awarding it a consensus “Moderate Buy” rating overall. Of the 37 analysts rating the stock, 15 analysts have rated it a “Strong Buy,” two analysts suggest a “Moderate Buy,” while 16 analysts are playing it safe with a “Hold” rating, and four analysts rated it “Strong Sell.” The consensus price target of $339.32 represents 37.9% upside from current levels. Moreover, the Street-high price target of $510 indicates a 107.3% upside.
On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
More news from Barchart
- Dell Stock Soars 30% In a Month: Is More Upside Coming in 2026?
- Bank of America Still Loves Nvidia Stock After GTC 2026. Should You?
- The Highest-Rated Healthcare Stock to Buy Now to Hedge Against Oil Price Shocks
- SoFi Is Firing Back Against Short Sellers. Should You Buy the Comeback Rally in SOFI Stock Here?
