Adobe Stock Down 23% This Year, Analyst Warns of Further Pressure

A top analyst at Melius Research has cut his rating on Adobe from Hold to Sell, citing the rise of artificial intelligence as a challenge for traditional software companies like Adobe. The analyst believes AI is disrupting the software market, causing valuations to shrink, and has lowered earnings estimates for Adobe for 2026 and 2027. The analyst's $310 price target indicates a potential downside of about 9% from current levels.

A top analyst at Melius Research has recently downgraded Adobe from a Hold rating to a Sell rating, citing the rise of artificial intelligence (AI) as a significant challenge for traditional software companies like Adobe. The analyst's concern is that AI is disrupting the software market, potentially causing valuations to shrink and lowering earnings estimates for Adobe in 2026 and 2027. The analyst has set a $310 price target, indicating a potential downside of about 9% from current levels.

Adobe, a multinational software company with a market value of over $140 billion, has been integrating AI into its solutions, such as Adobe Express and Firefly, to enhance user experience and drive growth. However, the analyst at Melius Research argues that the increasing competition from AI-driven startups and the volatility in the AI market are factors that could negatively impact Adobe's performance.

Despite the analyst's concerns, Adobe's strong financial performance and growth prospects continue to make it an attractive investment for many investors. The company reported 11% year-over-year revenue growth in Q2 2025, reaching $5.87 billion, and is expected to generate cash flow growth of 11.9% in 2025 [3]. Adobe's AI strategy, which includes features like automated tasks and the ability to translate designs into code, has been well-received in the market and has contributed to the company's growth.

However, the analyst's downgrade highlights the potential risks associated with AI integration and the increasing competition in the software market. Investors should closely monitor Adobe's earnings and growth prospects, as well as the company's AI strategy, to assess the potential impact of these challenges.

References:
[1] https://seekingalpha.com/article/4811995-why-i-fear-adobes-ai-risks-yet-see-large-upside
[2] https://www.ainvest.com/news/adobe-solid-fundamentals-based-buy-recommendation-2508/
[3] https://www.aol.com/finance/adobe-reports-ai-fueled-earnings-210840619.html