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Should Slower AI Monetization and Rising Competition Require Action From Adobe (ADBE) Investors?

Simply Wall St · 4d ago
  • In recent weeks, Adobe has faced a series of analyst downgrades tied to concerns that its much‑touted generative AI tools, despite rising usage and AI‑influenced annual recurring revenue above US$8.00 billion, are not yet driving the kind of revenue acceleration some expected.
  • At the same time, worries about intensifying competition in creative and marketing software, alongside broader caution toward premium software names, have raised questions about how quickly Adobe can translate its AI leadership and acquisitions into meaningful, measurable growth.
  • We’ll now examine how these AI monetization concerns and competitive pressures may influence Adobe’s previously optimistic investment narrative built around innovation.

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Adobe Investment Narrative Recap

To own Adobe today, you need to believe its creative and marketing platforms can keep attracting and retaining users while generative AI becomes a meaningful, measurable revenue driver. The key short term catalyst is clearer AI monetization, especially around Firefly and AI influenced ARR, while the biggest risk is that rising competition and cautious sentiment toward premium software continue to weigh on growth expectations. Recent downgrades sharpen these concerns but do not fundamentally alter that core thesis.

Against that backdrop, Jefferies’ downgrade stands out. The firm highlighted that, despite strong AI adoption metrics, Adobe’s newer AI features are not yet translating into the revenue acceleration some had hoped for, and it pointed to intensifying competition from both big tech and design upstarts. That directly intersects with the current catalyst debate, because it questions how quickly Firefly, Semrush, and broader AI integrations can shift from product excitement to visible top line impact.

Yet behind Adobe’s AI traction, some analysts warn that rising AI costs and competitive pressure could quietly erode margins in ways shareholders should be aware of…

Read the full narrative on Adobe (it's free!)

Adobe's narrative projects $29.3 billion revenue and $8.7 billion earnings by 2028. This requires 9.0% yearly revenue growth and about a $1.8 billion earnings increase from $6.9 billion today.

Uncover how Adobe's forecasts yield a $447.56 fair value, a 33% upside to its current price.

Exploring Other Perspectives

ADBE 1-Year Stock Price Chart
ADBE 1-Year Stock Price Chart

Some of the lowest estimate analysts were already assuming only about 7 percent annual revenue growth to roughly US$27.0 billion and modest margin slippage, which is a much more cautious view than consensus. When you set that against fresh AI monetization worries and concerns about rising AI costs, it shows how far opinions can differ and why it is worth comparing several possible paths for Adobe’s story.

Explore 102 other fair value estimates on Adobe - why the stock might be worth 19% less than the current price!

Build Your Own Adobe Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

  • A great starting point for your Adobe research is our analysis highlighting 4 key rewards that could impact your investment decision.
  • Our free Adobe research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Adobe's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.