Adobe dips despite ‘solid’ Q2 as investors seek more, say analysts

Shares of Adobe (NASDAQ:ADBE) fell about 4% premarket on Friday after the second quarter fiscal year 2025 results and outlook drew mixed reactions from investors and analysts.

SA Analyst

“Adobe’s Q1 results were strong, with core revenue lines accelerating slightly from Q1, and margins improving year-over-year. What management failed to do, however, is to alleviate concerns about the company’s AI positioning,” said Seeking Alpha analyst YR Research.

The analyst added that the main question of “whether AI is friend or foe for Adobe remains, and no update on AI ARR [Annualized Recurring Revenue], aside from saying it’s tracking ahead of their 2025 targets, didn’t help in that regard.”

Wall Street Analysts

Evercore kept its Outperform rating on the stock with a $475 price target.

“No real fireworks for bulls or bears this quarter. At these levels, we believe the downside is limited, but until there is a bigger effort on the part of management to reframe the investment narrative and make the case for why Adobe’s multiple can re-rate from here, we expect investors are likely to remain on the sidelines,” said analysts led by Kirk Materne.

The analysts noted that Adobe delivered “solid” fiscal second results as revenue and EPS both came in ahead of expectations and total revenue guidance was raised modestly (reflective of first-half outperformance and some modest benefit from foreign exchange, or FX).

However, the analysts noted that they expect the shares to remain range-bound as the total Digital Media Annualized Recurring Revenue, or DM ARR growth target of about 11% was reiterated and infers some deceleration in the second-half despite easier compares.

Materne and his team said they expect this outlook could prove conservative, but expect the guidance is unlikely to pull investors off the sidelines in the near-term given there are no material product catalysts on the horizon.

Morgan Stanley maintained its Overweight rating with a $510 price target on Adobe’s stock.

Analysts led by Keith Weiss said that the second quarter reflected an in-line print with minimal changes to the fiscal year guidance. While AI metrics appear to be improving, the key investor question remains that when or if AI innovation can move the needle.

The analysts noted that AI adoption shows positive inflection with Firefly and Acrobat AI subscriptions up notably, but limited impact to overall numbers remains a concern for investors.

Jefferies kept its Buy rating on Adobe with a $590 price target on the stock.

Analysts led by Brent Thill said the fiscal second was “solid” with a 1%/2% revenue/EPS beat and net new DM ARR in-line at $460M. Fiscal 2025 DM revenue guidance was raised $150M at mid-point, with nearly 1/3 from FX.

The analysts added that AI metrics show good progress, with AI generations +20% quarter-over-quarter to 24B and AI ARR on track to beat the $250M target. Thill and his team noted that while AI is not yet material, the business is trending positively and management remains confident in double-digit growth.

Update: The story was updated with comments from SA analyst YR Research.