What Happened?
Shares of creative software giant Adobe (NASDAQ:ADBE) fell 5.4% in the afternoon session after Oppenheimer downgraded the stock, adding to a growing chorus of concerns that the rise of Artificial Intelligence could hurt the company's business.
Oppenheimer lowered its rating on the software giant to "market perform" from "outperform." This move followed a recent downgrade from Goldman Sachs, which moved the stock to a "Sell" rating from "Buy." Analysts expressed worries that generative AI was making high-end design tools too accessible, increasing competitive pressure from AI-focused firms like Canva, Figma, and OpenAI.
This skepticism marked the most pessimistic outlook from financial analysts for Adobe in over a decade. The concerns centered on the potential for slowing revenue growth and pressure on earnings, especially if Adobe needed to increase its own AI investments to compete.
The shares closed the day at $310.02, down 5.4% from previous close.
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What Is The Market Telling Us
Adobe’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 13.2% on the news that the company reported underwhelming fourth-quarter (fiscal Q1 2025) results, as remaining performance obligations (RPO - leading growth indicator) fell slightly short of analysts' estimates.
That, plus the fact that full-year (fiscal 2025) revenue and EPS guidance were just in line with estimates, signaled a lack of near-term momentum. Wall Street likes to see companies beat and raise, and this wasn't impressive. Adding to the weakness, growth trudged along in the quarter rather than accelerate. Overall, this quarter was mixed. The stock's reaction suggested markets were expecting more.
Adobe is down 6.7% since the beginning of the year, and at $310.83 per share, it is trading 33% below its 52-week high of $464.11 from February 2025. Investors who bought $1,000 worth of Adobe’s shares 5 years ago would now be looking at an investment worth $658.47.
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