Wall Street gives up on Adobe as it becomes poster child of AI distruption fears

Wall Street’s lost faith in Adobe. Analysts are more worried about the creative software maker than they’ve been in over a decade as concerns pile up about whether it can keep up in the AI era.

Oppenheimer cut its rating on Adobe stock to perform Tuesday. It’s just the newest downgrade in a string of them. Analysts are worried the company’s going to struggle against competitors like OpenAI that let users make images and videos just by typing what they want.

All these downgrades have pushed Adobe’s consensus rating down to 3.91 out of 5. That’s the lowest it’s been since 2013. The number comes from looking at how many analysts say buy, hold or sell.

Brian Schwartz at Oppenheimer listed several problems he thinks will hurt the stock this year. There’s a rough business environment as companies shift to AI technology, and that’s going to mean weak revenue growth that keeps getting slower. Schwartz also mentioned bumpy product rollouts, doubts about how strong Adobe’s competitive spot really is, investors not being that interested in software stocks right now, and profit margins that are expected to shrink compared to last year.

Stock performance lags far behind tech sector

Shares fell 2.6% Tuesday. The stock’s down 6.4% so far this year through Monday. That comes after drops of more than 20% in both 2024 and 2025. Adobe’s lost more than 45% of its value since the end of 2023.

Compare that to how other tech stocks have done. A fund that tracks software companies is up nearly 30% in that same time. Companies seen as AI winners like Microsoft, Oracle and Palantir Technologies have done well. The Nasdaq 100 Index has jumped more than 50%, thanks mostly to the Magnificent Seven.

Software-as-a-service companies have been getting hammered. Investors think services from AI-focused startups are going to steal customers and hurt growth.

Oppenheimer wasn’t the only firm to downgrade Adobe in January. BMO Capital Markets dropped it to market perform last week. The firm said competitive pressures in the creative market are getting worse and it doesn’t see any good news coming. Jefferies downgraded it to hold before that, pointing out that any revenue bump from AI hasn’t shown up yet. Growth has actually been slowing since fiscal 2023, including in the company’s early projections for fiscal 2026.

Goldman Sachs analyst Gabriela Borges started covering Adobe with a sell rating January 11. The firm used to rate it a buy. Borges wrote that Adobe’s handled tech changes well before, but AI is different. It’s making design tools available to everyone, which means fewer people need Adobe’s professional-level software.

Valuation concerns take backseat to competition worries

BMO cut its price target too, from $400 down to $375. The firm said Adobe’s valuation isn’t really the problem. The bigger issue is the competitive pressure building in creative software. BMO said Adobe now ranks dead last in its coverage group. It likes rivals Salesforce and HubSpot better.

Survey data backs up these worries. BMO found that more than 50% of students use Canva instead of Adobe now. Nearly half of freelancers rely on Canva versus about 10% who only use Adobe. Over half of users said they work with both tools. BMO thinks that’s bad news given how dominant Adobe used to be.

Canva’s expected to go public sometime in 2026 or 2027. That’ll probably make things even tougher for Adobe. Shares dropped roughly 20% over the past year, doing worse than the software sector overall.

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