Adobe Inc. (NASDAQ: ADBE) shares came under pressure on June 12 after several Wall Street firms downgraded the software company despite stronger-than-expected quarterly results and improved full-year guidance.
Shares of Adobe fell more than 6% after Wolfe Research downgraded the stock to “Peer Perform” from “Outperform,” while Stifel lowered its rating to “Hold” from “Buy” and set a $200 price target. Evercore ISI also downgraded Adobe to “In-Line” from “Outperform” with a $225 target price.
Jefferies and UBS separately reduced their price targets to $230 and $225, respectively, as analysts raised concerns about slowing annual recurring revenue (ARR) growth, Adobe’s evolving freemium strategy, and leadership uncertainty.
The analyst actions followed Adobe’s fiscal second-quarter earnings report, which exceeded Wall Street expectations. Revenue rose 13% year-over-year to $6.62 billion, while non-GAAP earnings per share increased 18% to $5.96, supported by continued strength in subscription revenue.
Adobe also raised its fiscal 2026 outlook, forecasting revenue of $26.5 billion to $26.6 billion and adjusted earnings of $24.35 to $24.45 per share, citing strong first-half performance and contributions from its Semrush acquisition.
Total annual recurring revenue reached $27.1 billion at the end of the quarter, representing growth of approximately 12.5% from a year earlier. The figure included roughly $480 million attributable to the Semrush acquisition.
The company highlighted strong momentum in its artificial intelligence initiatives. AI-focused ARR surpassed $500 million, more than tripling from the prior year, while Firefly ARR approached $300 million after growing roughly 50% quarter-over-quarter.
Adobe also reported continued strength in its enterprise business. Subscription revenue from Adobe Experience Platform and related native applications grew more than 30% year-over-year, while GenStudio ARR increased more than 25%.
Despite those gains, investors focused on management’s revised ARR growth outlook. Adobe now expects fiscal 2026 ARR growth of approximately 10.2%, reflecting weaker anticipated growth among individual subscribers during the second half of the year.
Analysts said Adobe’s strategy of directing more users toward free versions of Acrobat, Express, and Firefly may help expand its user base but could reduce near-term recurring revenue visibility. The company has also delayed planned Creative Cloud pricing and packaging adjustments that had been expected later this year.
Several analysts additionally pointed to increasing competition from AI-powered creative platforms and potential pricing pressure as risks to sustaining long-term organic ARR growth.
Adding to investor concerns, Adobe disclosed that Chief Financial Officer Dan Durn will depart the company. Steve Day, currently Senior Vice President of Corporate Finance, will serve as interim CFO beginning June 15.
The CFO transition comes as Adobe continues its search for a new chief executive officer following the previously announced leadership transition involving longtime CEO Shantanu Narayen, who is expected to become chairman.
While Adobe’s latest results demonstrated continued revenue growth, margin expansion, and accelerating AI adoption, analysts remain cautious about the company’s ability to balance its freemium strategy with sustainable recurring revenue growth amid ongoing leadership changes and intensifying competition in the AI software market.
