We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Adobe Falls 27% YTD, Trades at a Discount: What Should Investors Do?
Read MoreHide Full Article
Key Takeaways
ADBE is down 26.7% YTD and trades below its 52-week high, underperforming its industry.
ADBE trades at 10.08x earnings vs. the industry's 22.25 and carries a Value Score of B.
ADBE is embedding GenAI via Firefly, Acrobat AI Assistant and GenStudio, but sentiment stays muted.
Shares of Adobe Inc. (ADBE - Free Report) have lost 26.7% year to date, underperforming the industry, its sector, as well as the Zacks S&P 500 composite in the same time frame. ADBE shares are trading at a discount to their 52-week high.
Adobe is a leading technology company offering personalized digital experiences through the infusion of artificial intelligence (AI) in its solutions. It is poised to grow, banking on deepening GenAI focus, an innovative GenAI-powered portfolio, and a sustainable competitive moat.
ADBE vs Industry, Sector, S&P
Image Source: Zacks Investment Research
Shares of Alphabet (GOOGL - Free Report) , a player from the AI and generative AI space, have rallied 27% year to date, while those of Salesforce (CRM - Free Report) have lost 29.2% in the same time frame.
ADBE Shares Are Cheap
The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 10.08, lower than the industry average of 22.25 and the median of 29.36 over the past three years. It has a Value Score of B.
Image Source: Zacks Investment Research
ADBE is cheap compared to GOOGL and CRM.
The Case for ADBE Stock
Adobe remains one of the strongest franchises in enterprise software, supported by dominant market share, recurring revenue streams, high profit margins, and expanding exposure to artificial intelligence. Its flagship products, elevated switching costs and strong customer retention create a durable competitive advantage, giving the company significant pricing power while steadily growing subscription-based revenues.
Artificial intelligence is emerging as Adobe’s next major growth driver. The company is embedding generative AI capabilities across its ecosystem through AI-first products and add-on services such as Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing. Adobe’s Firefly generative AI platform is deeply integrated into Creative Cloud applications, enabling users to create images, edit videos, and automate repetitive design workflows. Unlike many standalone AI startups, Adobe benefits from an established distribution network of millions of paying users, positioning it to monetize AI innovations quickly while reinforcing its leadership in creative software.
Adobe also strengthened its presence in digital marketing through the acquisition of Omniture, entering a market that is benefiting from rising enterprise spending. Growth in cloud computing, social media, mobile adoption and big data analytics continues to drive demand for digital experience solutions. Through a series of acquisitions, Adobe has expanded its capabilities across analytics, experience management, audience targeting, social engagement, and marketing spend optimization.
The company’s transition from perpetual software licenses to a cloud-based subscription model has significantly enhanced the predictability and quality of earnings. Adobe now generates highly recurring revenues and strong free cash flow, supporting continued investment in innovation, strategic acquisitions, and shareholder returns through buybacks. Its balance sheet also remains solid relative to many large-cap technology peers.
Although Adobe faces intense competition from Microsoft, Alphabet, Salesforce, and AI-native players such as OpenAI, Midjourney and Canva, the company continues to strengthen its position among creative, marketing, and business professionals through ongoing AI-driven innovation.
ADBE’s Growth Prospects Solid
The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a 9.6% and 9.1% increase year over year, respectively.
The consensus estimate for fiscal 2026 and 2027 earnings implies a 12.3% and 12.9% year-over-year increase, respectively.
Image Source: Zacks Investment Research
The expected long-term earnings growth is pegged at 13.4%, better than the industry average of 11%. It has a Growth Score of B.
Adobe expects fiscal second-quarter total revenues between $6.43 billion and $6.48 billion and non-GAAP earnings between $5.85 and $5.90 per share.
For fiscal 2026, Adobe expects total revenues between $25.9 billion and $26.1 billion and non-GAAP earnings between $23.30 and $23.50 per share.
Muted Analyst Sentiment for ADBE
The consensus estimate for fiscal 2026 and 2027 earnings witnessed no movement in the last 30 days.
Parting Thoughts on ADBE Shares
A dominant brand, recurring revenues, high operating margins, strong cash generation, and multiple avenues for growth make Adobe an attractive long-term investment opportunity. Its solid growth prospects and its VGM Score of A instill confidence.
View the Zacks #1 Rank List
Image: Bigstock
Adobe Falls 27% YTD, Trades at a Discount: What Should Investors Do?
Key Takeaways
Shares of Adobe Inc. (ADBE - Free Report) have lost 26.7% year to date, underperforming the industry, its sector, as well as the Zacks S&P 500 composite in the same time frame. ADBE shares are trading at a discount to their 52-week high.
Adobe is a leading technology company offering personalized digital experiences through the infusion of artificial intelligence (AI) in its solutions. It is poised to grow, banking on deepening GenAI focus, an innovative GenAI-powered portfolio, and a sustainable competitive moat.
ADBE vs Industry, Sector, S&P
Image Source: Zacks Investment Research
Shares of Alphabet (GOOGL - Free Report) , a player from the AI and generative AI space, have rallied 27% year to date, while those of Salesforce (CRM - Free Report) have lost 29.2% in the same time frame.
ADBE Shares Are Cheap
The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 10.08, lower than the industry average of 22.25 and the median of 29.36 over the past three years. It has a Value Score of B.
Image Source: Zacks Investment Research
ADBE is cheap compared to GOOGL and CRM.
The Case for ADBE Stock
Adobe remains one of the strongest franchises in enterprise software, supported by dominant market share, recurring revenue streams, high profit margins, and expanding exposure to artificial intelligence. Its flagship products, elevated switching costs and strong customer retention create a durable competitive advantage, giving the company significant pricing power while steadily growing subscription-based revenues.
Artificial intelligence is emerging as Adobe’s next major growth driver. The company is embedding generative AI capabilities across its ecosystem through AI-first products and add-on services such as Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing. Adobe’s Firefly generative AI platform is deeply integrated into Creative Cloud applications, enabling users to create images, edit videos, and automate repetitive design workflows. Unlike many standalone AI startups, Adobe benefits from an established distribution network of millions of paying users, positioning it to monetize AI innovations quickly while reinforcing its leadership in creative software.
Adobe also strengthened its presence in digital marketing through the acquisition of Omniture, entering a market that is benefiting from rising enterprise spending. Growth in cloud computing, social media, mobile adoption and big data analytics continues to drive demand for digital experience solutions. Through a series of acquisitions, Adobe has expanded its capabilities across analytics, experience management, audience targeting, social engagement, and marketing spend optimization.
The company’s transition from perpetual software licenses to a cloud-based subscription model has significantly enhanced the predictability and quality of earnings. Adobe now generates highly recurring revenues and strong free cash flow, supporting continued investment in innovation, strategic acquisitions, and shareholder returns through buybacks. Its balance sheet also remains solid relative to many large-cap technology peers.
Although Adobe faces intense competition from Microsoft, Alphabet, Salesforce, and AI-native players such as OpenAI, Midjourney and Canva, the company continues to strengthen its position among creative, marketing, and business professionals through ongoing AI-driven innovation.
ADBE’s Growth Prospects Solid
The Zacks Consensus Estimate for fiscal 2026 and 2027 revenues indicates a 9.6% and 9.1% increase year over year, respectively.
The consensus estimate for fiscal 2026 and 2027 earnings implies a 12.3% and 12.9% year-over-year increase, respectively.
Image Source: Zacks Investment Research
The expected long-term earnings growth is pegged at 13.4%, better than the industry average of 11%. It has a Growth Score of B.
Adobe expects fiscal second-quarter total revenues between $6.43 billion and $6.48 billion and non-GAAP earnings between $5.85 and $5.90 per share.
For fiscal 2026, Adobe expects total revenues between $25.9 billion and $26.1 billion and non-GAAP earnings between $23.30 and $23.50 per share.
Muted Analyst Sentiment for ADBE
The consensus estimate for fiscal 2026 and 2027 earnings witnessed no movement in the last 30 days.
Parting Thoughts on ADBE Shares
A dominant brand, recurring revenues, high operating margins, strong cash generation, and multiple avenues for growth make Adobe an attractive long-term investment opportunity. Its solid growth prospects and its VGM Score of A instill confidence.
Despite its discounted valuation, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock now, given muted analyst sentiment and price erosion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.