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Adobe stock rises despite Citi downgrade as growth concerns persist

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Adobe shares ADBE rose on Wednesday despite another downgrade from Wall Street, as investors weighed concerns about the software company’s growth outlook against expectations for its upcoming quarterly results.

The stock gained as much as 3.5% during mid-morning trading before trading 0.96% higher at $248.50.

The advance came after Citi Research analyst Tyler Radke cut his rating on Adobe to Sell from Hold and lowered his price target to $207 from $250.

The downgrade adds to a series of increasingly cautious assessments of Adobe, whose shares have faced pressure this year amid concerns that artificial intelligence tools could make some of its products less relevant.

Citi warns of weaker growth in fiscal 2027

Radke said Adobe faces downside risks to consensus growth estimates entering fiscal 2027, partly because of leadership changes and uncertainty surrounding its creative business strategy.

“Incoming CEO Anil Chakravarthy assumes the role amid key leadership vacancies, including CFO and the head of Digital Media,” Radke said in a Wednesday investor report.

The analyst expects Adobe to provide a weaker fiscal 2027 outlook when it reports its fourth-quarter fiscal 2026 results in early December.

He said a potential strategic reset could weigh on the shares in the near term but give the company an opportunity to rebuild its leadership team and refine its strategy.

Radke also highlighted Adobe’s increased focus on monthly active user growth, which he believes could put pressure on annual recurring revenue in fiscal 2027 and 2028.

The company has been prioritising user acquisition and directing new customers towards lower-average selling price offerings rather than relying on price increases, according to the analyst.

He expects the impact to be most pronounced in Adobe’s core Creative business, amid weaker small and medium-sized business demand and competition from web-based and AI-native tools.

Citi lowered its estimates for net new annual recurring revenue by $470 million for fiscal 2027 and $500 million for fiscal 2028.

The revised estimates stand at $1.5 billion and $1.45 billion, respectively.

Adobe faces a series of Wall Street downgrades

Citi’s move follows similar rating cuts from other major financial institutions in October.

HSBC downgraded Adobe to Hold from Buy and reduced its price target to $267 from $310.

The bank cited pressure on business growth and the possibility that some users could move away from Adobe’s creative software suite.

Wells Fargo also lowered its rating to Underweight from Overweight, an equivalent of Sell, while cutting its price target to $225 from $270.

Analysts led by Michael Turrin pointed to worsening organic growth and execution risks during a major management transition.

They also highlighted a shift away from pricing-led monetisation towards a freemium model, in which users receive basic features for free before potentially becoming paying subscribers.

The concerns reflect broader uncertainty about Adobe’s ability to maintain growth as AI-native competitors and alternative software tools challenge its established products.

Despite the downgrades, the average analyst rating on Adobe remains Hold, according to FactSet.

December earnings could provide the next direction

Investors will get another indication of Adobe’s growth trajectory when the company releases its fourth-quarter fiscal 2026 results on December 9, after the market closes.

Analysts expect adjusted earnings per share of $6.33 on revenue of $6.83 billion.

In the same quarter last year, Adobe reported adjusted earnings per share of $5.50 and revenue of $6.19 billion.

The upcoming report will also give investors an opportunity to assess management’s outlook for fiscal 2027, particularly as the company navigates leadership vacancies, changes to its Creative business strategy and competition from AI-powered tools.

Adobe shares had already declined 16% through Tuesday from their August 31 closing price of $292.79, adding context to Wednesday’s advance.

AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.

The post Adobe stock rises despite Citi downgrade as growth concerns persist appeared first on Invezz

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