Adobe Downgraded to Sell Amid AI Competition and Figma IPO Threat

Melius Research downgraded Adobe Inc. (NASDAQ:ADBE) to Sell from Hold with a price target of $310, citing AI as a threat to SaaS companies and increased competition from Figma IPO. Despite this, Adobe exceeded Wall Street estimates in its fiscal second quarter of 2025 with $5.87 billion in revenue, a 10.62% YoY increase.

Title: Melius Research Downgrades Adobe Inc. (ADBE) to Sell Amid AI Threats and Figma IPO

Adobe Inc. (NASDAQ:ADBE), a leading global technology company, has seen its stock downgraded by Melius Research analyst Ben Reitzes from Hold to a Sell Rating with a price target of $310. The downgrade is attributed to concerns about the software-as-a-service (SaaS) sector's vulnerability to artificial intelligence (AI) and increased competition from the recent Figma IPO [1].

Despite the bearish sentiment, Adobe Inc. reported impressive financial results for its fiscal second quarter of 2025. The company posted $5.87 billion in revenue, a 10.62% year-over-year increase, and exceeded Wall Street estimates by $73.73 million [1]. The earnings per share (EPS) also surpassed expectations by $0.09, demonstrating strong financial performance.

Melius Research's downgrade highlights the analyst's belief that SaaS companies are facing early innings of multiple contractions due to AI, with infrastructure winners potentially benefiting more. The firm also noted increased competition from Figma, which went public on August 1, 2025, and saw its stock price triple on the first day, reaching a market cap of over $59 billion [2]. This significant valuation can be attributed to Figma's strong AI potential and widespread use by Fortune 500 companies.

Adobe's AI-driven initiatives, such as Firefly and Adobe Express, have shown promising growth. These tools are designed to enhance the creative process and integrate AI seamlessly into the company's offerings. The company's strategy of offering an AI-powered, comprehensive creative platform is aimed at addressing the needs of creative and marketing professionals.

However, Adobe faces stiff competition from established tech giants like Microsoft and Alphabet, as well as from DocuSign in the document services and e-signature domain. The company's AI business is relatively small compared to these competitors, and the challenging macroeconomic environment has also been a headwind for Adobe's prospects [2].

Adobe's stock has declined 25% year-to-date (YTD), underperforming the Zacks Computer and Technology sector and the Zacks Computer – Software industry. The company's shares are currently trading below the 50-day and 200-day moving averages, indicating a bearish trend [2].

Adobe Inc. has a Zacks Rank #2 (Buy) and a Growth Score of B, offering a strong investment opportunity despite the challenges. The company's focus on improving the monetization of its AI tools is a positive for investors, but the stretched valuation and stiff competition remain significant headwinds [2].

References:
[1] https://sg.finance.yahoo.com/news/melius-research-downgrades-adobe-adbe-031535591.html
[2] https://www.nasdaq.com/articles/adobe-drops-9-month-should-you-buy-dip-adbe-stock
[3] https://www.ainvest.com/news/adobe-rises-1-8-1-32-billion-top-500-volume-ai-driven-challenges-strategic-shifts-2508/
[4] https://www.ainvest.com/news/adobe-earnings-outlook-figma-ipo-ai-advancements-2508/