A succession of downgrades has pushed the proportion of analysts recommending Adobe shares to buy towards historic lows, reflecting doubts about the company’s ability to sustain growth, protect subscription revenues and defend its position against emerging AI-powered competitors.
Only 29% of analysts tracked by one market survey now recommend buying Adobe shares, compared with a majority in February. Separate market datasets show similarly cautious sentiment, although their ratings distributions differ because they cover different groups of analysts.
Wells Fargo analyst Michael Turrin downgraded Adobe from overweight to underweight on October 12, reducing his price target to $225 from $270. HSBC followed on October 13, cutting its recommendation from buy to hold and lowering its target to $267 from $310.
The downgrades have reinforced concerns that Adobe’s investment in artificial intelligence has yet to demonstrate sufficient commercial returns to offset competitive pressures and changes in customer purchasing behaviour.
Turrin identified slowing organic growth, weakening pricing power and execution risks associated with management changes as significant challenges. His assessment highlighted a sharp deterioration in net new annual recurring revenue during Adobe’s fiscal third quarter.
The company is also shifting towards a freemium strategy, offering more capabilities without upfront payment to attract users who might otherwise choose competing applications. Analysts question whether the approach can generate enough paying subscribers to compensate for lower immediate revenue.
Wells Fargo’s assessment followed a survey of 100 chief information officers examining corporate technology spending. Approximately 60% of respondents expected to redirect a small proportion of their information technology budgets towards artificial intelligence, potentially reducing expenditure on established software products.
Adobe faces competition from Canva, Figma and developers of generative AI applications capable of producing images, graphics, videos and marketing materials through natural-language instructions.
These tools threaten to reduce the time and specialist expertise required for creative production, raising questions about the premium prices traditionally commanded by professional design software.
The competitive challenge extends beyond individual applications. Businesses increasingly want integrated AI systems that automate content creation, editing and distribution, potentially changing how they purchase creative software licences.
Nevertheless, Adobe’s financial performance remains substantially stronger than the prevailing analyst sentiment might suggest.
The California-based company reported record fiscal third-quarter revenue of $6.76 billion in September, representing annual growth of 13%. Adjusted earnings reached $6.13 per share, exceeding market expectations.
Annualised recurring revenue stood at $27.50 billion at the end of the quarter, while operating cash flow reached $2.52 billion. Subscription revenue from creative and marketing professionals increased 13% to $4.65 billion.
Adobe also disclosed that annual recurring revenue from its AI-first offerings had grown more than 150% year on year, indicating increasing adoption of products designed around generative artificial intelligence.
The company said its creativity and productivity products had surpassed one billion monthly active users, providing a substantial existing customer base through which it could distribute new AI capabilities.
Shantanu Narayen, Adobe’s chairman and chief executive, described the quarterly performance as evidence of continuing demand for its products and expressed confidence in the company’s AI strategy.
Adobe has integrated its Firefly generative AI technology into creative workflows, enabling customers to generate and modify visual content while retaining access to established professional editing tools.
Management maintains that combining generative capabilities with existing applications offers advantages over standalone AI services, particularly for commercial customers requiring consistent workflows and content controls.
However, investors remain concerned about the pace at which AI adoption translates into additional revenue. Adobe’s fourth-quarter revenue guidance of $6.80 billion to $6.85 billion fell slightly below expectations at the midpoint.
Management uncertainty has compounded those concerns. Anil Chakravarthy is scheduled to succeed Narayen as chief executive on December 1, with Narayen becoming executive chairman.
The transition comes as Adobe adjusts its pricing structure, expands free access and increases investment in AI products, creating several simultaneous operational challenges.
Analyst opinion is not uniformly negative. Some investment firms continue to recommend purchasing Adobe shares, citing its profitability, established customer relationships and ability to incorporate AI across its software portfolio.
JPMorgan maintained an overweight recommendation in September, while Bernstein retained a positive rating, illustrating continuing disagreement over the company’s prospects.
Adobe’s September results also showed net income of $1.83 billion under generally accepted accounting principles, alongside operating income of $2.35 billion and approximately 9.5 million shares repurchased during the quarter.
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