Adobe Analysts Turn Most Bearish Since 2013 as AI Threat Looms

Adobe Inc. has come under increasing pressure from Wall Street analysts, who have downgraded the stock to its most bearish level in more than a decade. Recent moves from firms like Oppenheimer, BMO, and Jefferies reflect growing concerns about Adobe's ability to navigate the AI-driven transformation of the creative software market. The latest downgrade from Oppenheimer cut the stock to a 'perform' rating, citing a challenging operating environment and uninspiring top-line growth.

Analysts have pointed to intensifying competition from AI startups and new entrants that offer generative AI tools for image and video creation. These platforms, which allow users to generate content using simple prompts, are drawing attention away from Adobe's Creative Cloud suite and altering the dynamics of the creative software market.

The downgrades have pushed the consensus rating for Adobe to 3.91 out of 5, a level not seen since 2013. Analysts like Gabriela Borges of Goldman Sachs have warned that AI is 'democratizing design,' which could limit Adobe's growth in its core creative professionals market. The firm has also reduced its price target, reflecting the growing skepticism about Adobe's ability to maintain its market leadership amid rapid technological changes.

Why the Move Happened

Adobe's challenges stem from the broader disruption caused by AI in the creative software industry. Analysts like Brian Schwartz of Oppenheimer highlight a 'multi-year secular headwind' from AI tools that are reshaping user expectations and reducing the need for high-end software in certain segments.

The firm's product execution has also come under scrutiny. Reports mention inconsistent performance across product cycles and a lack of clear monetization from Adobe's AI enhancements. While Adobe has integrated AI into its Creative Cloud suite, the financial impact of these features has yet to materialize in a way that impresses investors.

BMO Capital Markets further emphasized the growing competitive pressures in the creative software space, noting that Adobe lacks near-term catalysts to drive growth. The downgrade to 'Market Perform' underscores concerns that alternative design platforms are gaining traction, especially among students and small businesses.

How Markets Responded

Adobe's shares have been under pressure for months, dropping nearly 45% since the end of 2023. The stock has underperformed compared to the broader software sector, which has risen by nearly 30%, and the Nasdaq 100, which has gained more than 50% over the same period.

The recent downgrades exacerbated the sell-off. On Tuesday, shares fell as much as 2.6%, reflecting investor unease over Adobe's growth trajectory. The stock is down more than 6.4% this year through Monday, compounding losses from 2024 and 2025.

Investors are now looking to Adobe's March earnings report for signs of improvement in user adoption, pricing power, and monetization of AI features. Analysts will also watch the firm's ability to retain high-end customers while competing with emerging AI platforms.

What Analysts Are Watching

Analysts remain divided on Adobe's long-term prospects. While some see the firm as a leader in professional-grade creative software, others warn that its market share could erode as AI tools become more sophisticated and accessible.

Goldman Sachs analyst Gabriela Borges noted that Adobe has historically managed technology transitions well but warned that AI is fundamentally different. The analyst believes the firm's core user base is at risk as AI tools offer simpler, more accessible alternatives for everyday design needs.

Morgan Stanley and UBS have maintained more bullish outlooks, with UBS setting a price target of $487 per share. However, these positive views are tempered by the broader sentiment that Adobe must adapt its business model to stay relevant in an AI-driven world.

Investors are also paying close attention to Adobe's strategic partnerships, such as its recent collaboration with Runway to enhance Firefly video tools. These moves are seen as critical to the firm's ability to differentiate itself and retain high-value customers in a rapidly evolving market.