Oppenheimer is the latest financial firm to downgrade Adobe, rerating the creative software company to Perform from Outperform.
“We had previously been bullish on Adobe as we expected its AI business momentum to reinvigorate growth in its Digital Media business,” said Oppenheimer analysts, led by Brian Schwartz, in a detailed investor report on Tuesday. “But this did not play out as we expected, and is visible with Digital Media growth decelerating further in FY25.”
Adobe shares were down 2.6% during early market action on Tuesday.
“In our view, Adobe has good medium-term opportunities and is a cheap stock,” Schwartz said. “However, a challenging operating environment during the AI technology transition leading to uninspiring and decelerating top-line growth, inconsistent execution with product cycles, durability concerns about the moat, lackluster investor interest for owning software names, and down y/y operating margin guidance in FY26 will likely weigh negatively on the sentiment for the company’s opportunities this year, and limit near-term upside for ADBE shares.”
This is the latest downgrade to hit Adobe. Last week, BMO and Jefferies downgraded Adobe to Market Perform and Hold, respectively. This followed KeyBanc downgrading the stock to Underweight in mid-December.
It also reflects the broader trend of software names not experiencing the same boost as hardware names during the AI boom.
However, Oppenheimer has a few favorites when it comes to software, including Microsoft (MSFT), Salesforce (CRM), ServiceNow (NOW) and Agilysys (AGYS).
“We think MSFT’s Azure results may look better in the 2H:CY26 when new data centers scale,” Schwartz said. “NOW and CRM are a thematic play on the AI markets—companies needing to turn things around with investor sentiment (i.e., show-me stocks), and execute well on M&A. Lastly, AGYS should see reacceleration and material profit margin improvement in FY27 on the back of Marriott (MAR).”