AI Efforts & Rich Partner Base: Adobe Stock Set for Recovery?

Adobe’s ADBE expanding partner base and AI-related initiatives are expected to help the stock navigate a tricky business environment in which conventional SaaS software stocks have suffered from ongoing AI disruption. An innovative AI-infused portfolio is expected to help ADBE steer off stiff competition from the likes of Microsoft MSFT and Alphabet GOOGL in the near term. Adobe shares have plunged 27.1% year to date.

Adobe boasts of a rich partner base that includes the likes of Amazon Web Services (AWS), Microsoft Azure and Copilot, Google Gemini, HUMAIN, OpenAI, among others. ADBE’s Firefly, Express and Creative Cloud applications currently integrate models from partners, including Google, OpenAI, Black Forest Labs, Luma, Runway, Topaz Labs and Eleven Labs. Adobe is now expanding its partnership with WPP under which integrated solutions will be delivered for global brands to optimise media. These solutions, powered by AI agents, will orchestrate the planning, creation, production and activation of creative and media assets at a much faster pace.

Adobe’s prospects are expected to benefit from continued adoption of its cloud-based platform, Acrobat and Express, supported by the integration of AI-powered capabilities such as Firefly and Acrobat AI Assistant. These tools are enabling faster content creation and document productivity, directly influencing subscription renewals and premium upgrades. Adobe is infusing AI innovations into Acrobat, including new AI chat experiences to PDFs with simple, natural-language prompts. The company is combining Acrobat and Express to transform productivity and creativity together, making it fast and easy to generate presentations and podcasts from documents in minutes with AI. The new features are available in Acrobat Studio, which includes advanced PDF tools, AI Assistant and PDF Spaces from Acrobat and Express Premium capabilities in one AI-powered home for productivity.

Acrobat users are increasingly relying on Acrobat AI Assistant to consume content at a faster rate and are using Express to create richer PDFs, customized presentations and animated designs. ADBE is seeing increasing adoption of Express capabilities within Acrobat, driven by growing demand for creative functionality. Adobe is gaining traction among individuals, small and medium businesses and enterprises, thanks to Acrobat AI Assistant, as well as Express premium plans. This is expected to drive top-line growth in fiscal 2026. The Zacks Consensus Estimate for revenues is currently pegged at $26.04 billion, suggesting 9.5% growth over fiscal 2025’s reported figure.

Adobe Faces Tough Competition in the AI Domain

ADBE’s AI business is minuscule compared with Microsoft and Alphabet. Microsoft’s Intelligent Cloud revenues are benefiting from growth in Azure AI services and a rise in the AI Copilot business. Microsoft monetizes AI through existing customer relationships, reducing customer acquisition costs while expanding revenue per user. Microsoft’s $625 billion remaining performance obligations and 15 million Microsoft 365 Copilot paid seats demonstrate robust enterprise demand and successful AI product adoption.

Alphabet’s focus on leveraging AI to drive growth is a key catalyst. AI is infused heavily across its offerings, including Search and Google Cloud. AI Overviews and AI Mode are driving overall queries and commercial queries, thereby driving monetization opportunities. The launch of personal intelligence in AI Mode in search and the Gemini app bodes well for Alphabet’s prospects.

ADBE’s Share Price Performance, Valuation & Estimates

Adobe shares have lost 42.5% in a year, underperforming the broader Zacks Computer and Technology sector’s return of 25.2%.

Adobe Stock Lags Sector in a Year

Image Source: Zacks Investment Research

ADBE stock is trading at a discount, as suggested by a Value Score of B.

In terms of forward 12-month price/sales, Adobe shares are trading at a lower multiple of 3.94 compared with the broader sector’s 6.38.

ADBE Stock is Cheap

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for fiscal 2026 earnings is currently pegged at $23.47 per share, unchanged over the past 30 days, suggesting 12.1% growth from the figure reported in fiscal 2025.

Adobe Inc. Price and Consensus

Adobe Inc. price-consensus-chart | Adobe Inc. Quote

Adobe currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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