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The artificial intelligence (AI) revolution has been a goldmine for many tech stocks, but Adobe (ADBE) hasn’t exactly ridden the same wave of investor excitement. Sure, the software powerhouse has rolled out some impressive AI-driven features over the recent years, like Firefly for creative design and AI enhancements across Photoshop and Illustrator.
In just six months alone, Adobe has unveiled 68 AI-driven solutions, with Images, Business, and Video accounting for roughly 57% of the releases. Still, Wall Street hasn’t been giving it much love. Fierce competition from both tech giants and fast-rising AI startups, along with the slow pace of monetization of the company’s AI solutions, has kept investors on the sidelines. That said, Adobe’s story is just getting interesting.
With the company’s third-quarter earnings just around the corner on Thursday, Sept. 11, the software giant could be at a turning point. Strong results might showcase real traction in its AI strategy and reignite investor enthusiasm, while any disappointment could reinforce lingering skepticism. Either way, this is shaping up to be a pivotal moment, which is precisely why it deserves a spot on investors’ watchlists.
About ADBE Stock
California-based software company Adobe is now busy doubling down on AI to write its next growth chapter. At the center of this push is Firefly, its generative AI platform that transforms simple prompts into striking content, all while prioritizing intellectual property protection. Seamlessly integrated into Creative Cloud, Firefly is making workflows smoother and attracting a fresh wave of creative users.
In June, Adobe made a bold move into mobile with the launch of its Firefly app for iOS and Android, putting Adobe’s AI innovation directly into the hands of millions of users. Currently valued at approximately $148 billion by market capitalization, ADBE has been advancing its AI ambitions at a rapid pace, but Wall Street hasn’t exactly rewarded the effort.
Over the past year, Adobe shares have bled 37.5%, lagging far behind the S&P 500 Index’s ($SPX) modest 18.7% gain. The downtrend has spilled into 2025, with the stock down roughly 20.2% year-to-date (YTD), while the broader index has climbed nearly 10.4%. As AI competition intensifies, investors are clearly holding back, waiting to see if Adobe’s strategy can start turning innovation into tangible returns.
Adobe’s stock may not be a bargain, but it has certainly come down sharply from its historical highs, now trading at 20.6 times forward earnings and 6.8 times sales. The pullback reflects caution around AI competition and execution risks. Still, it could also be a chance for a rebound if the company proves its AI investments can deliver real, lasting growth.
Adobe’s Q2 Earnings Highlights
The software giant reported its fiscal 2025 second-quarter earnings on June 12, surpassing Wall Street’s expectations on both revenue and profits. The company posted a record $5.9 billion in quarterly revenue, up 11% year-over-year (YoY), nudging past the $5.8 billion analysts had forecast.
The quarter also highlighted Adobe’s strong revenue visibility, with a robust backlog of around $19.7 billion in Remaining Performance Obligations (RPO), signaling steady demand ahead. Earnings were equally solid, with adjusted EPS of $5.06, up 13% from the prior year and above the $4.96 consensus. Adobe’s key business segments continued to show healthy momentum.
Digital Media revenue climbed 11% YoY to $4.4 billion, supported by steady demand for its creative and document solutions. Annualized recurring revenue (ARR) for this segment rose 12.1% to $18.1 billion. Meanwhile, Digital Experience revenue grew 10% from the year-ago quarter to $1.5 billion, with subscription revenue in the segment up 11% to $1.3 billion. Moreover, management’s tone also remains optimistic.
CEO Shantanu Narayen, for instance, emphasized that the company’s AI innovations are transforming industries and unlocking new levels of creativity for individuals and businesses alike. CFO Dan Durn echoed that view, noting that continued investment in AI is boosting performance and expanding Adobe’s reach across diverse customer segments.
Adobe has also raised its full-year outlook, now expecting fiscal 2025 revenue between $23.5 billion and $23.6 billion, with adjusted EPS of $20.50–$20.70. Looking ahead to the third quarter, which is set to be released after market hours on Thursday, Sept. 11, the company projects revenue to range between $5.875 billion and $5.925 billion, while adjusted EPS is forecasted to land between $5.15 and $5.20. Analysts tracking Adobe expect Q3 EPS to rise about 10.5% YoY.
What Do Analysts Think About ADBE Stock?
After the company released its Q2 earnings, ADBE shares fell nearly 5.3% on June 13. Despite reporting better-than-expected results and raising its full-year revenue outlook, partly aided by favorable currency movements, investors appeared cautious, with analysts pointing to the lack of a clear near-term growth catalyst as the primary reason behind investors' disappointment.
Evercore, which maintained its “Outperform” rating and $475 price target, described the quarter as offering no real fireworks for either bulls or bears, noting that Adobe will need to reshape its broader investment narrative to attract new interest. Meanwhile, Morgan Stanley also maintained its “Overweight” rating with a $510 price target, noting that while the results were largely in line, gains from AI adoption have yet to significantly impact overall performance.
As Adobe prepares to announce its Q3 earnings, Wall Street is maintaining a cautiously positive stance, with a consensus “Moderate Buy” rating overall, signaling measured optimism about the company’s near-term prospects. Of the 36 analysts offering recommendations, 23 advocate for a solid “Strong Buy,” two suggest a “Moderate Buy,” nine play it safe with “Hold,” and the remaining two analysts give a “Strong Sell” rating.
The average analyst price target of $484.38 indicates 36% upside potential from current levels, while the Street-high target of $605 suggests that ADBE stock can rally as much as 70%.
