Adobe heads into its September 10 earnings report with its stock already under pressure. ADBE closed at $266.51 on Friday, down 6.73% on the day and about 24% year-to-date.
Wall Street is expecting adjusted EPS of $6.08 for fiscal Q3, up from $5.31 a year ago. Revenue guidance from Adobe itself sits at $6.67 billion to $6.72 billion, with adjusted EPS of $6.05 to $6.10.
The mood among analysts is cautious. Of the nine most recent calls tracked by TipRanks, only one is a Buy. Six analysts have a Hold, and two have a Sell. The average price target sits at $262.71, which is actually a slight downside from where the stock trades now.
That kind of setup tells you something. Wall Street is not expecting a quick turnaround here.
Last quarter, Adobe posted some eye-catching AI numbers. AI-first ARR more than tripled year-over-year to above $500 million. Firefly ARR grew roughly 50% from the prior quarter and was close to $300 million. Creative freemium monthly active users jumped from around 50 million to 90 million year-over-year.
But growth in users does not automatically mean growth in revenue.
Adobe said it would focus on pulling in more free users, even if that slows near-term ARR growth. The company also delayed planned Creative Cloud pricing changes to give the freemium strategy more room to breathe.
Management warned that the approach would lower second-half ARR expectations and could push growth into Q4. That puts extra pressure on what Adobe says about the second half during this earnings call.
The key question is whether Adobe is starting to convert its large free user base into paying customers at a rate that changes the revenue trajectory.
Adobe also has a CEO transition underway. Anil Chakravarthy will take over as CEO on December 1. He currently leads the Customer Experience Orchestration business and has been involved in several AI products.
Longtime CEO Shantanu Narayen moves to executive chair. The timing of the announcement, just ahead of earnings, caught some investors off guard.
CFO Daniel Durn is also departing. Two major leadership changes at the same time is something investors tend to scrutinize closely.
RBC Capital’s Matthew Swanson is the lone Buy among recent calls, with a price target of $315. Citi’s Tyler Radke has a Hold with a target of $301. Barclays’ Saket Kalia is also at Hold with a $295 target.
On the bearish side, Morgan Stanley’s Adam Wood has a Sell and a $240 target. Bank of America’s Tal Liani rates ADBE a Sell with a $220 price target.
Amundi increased its Adobe position by 11% in Q2, bringing its stake to 5.24 million shares worth around $1.07 billion. Institutional investors overall own 81.79% of the stock.
Adobe’s full-year guidance calls for FY26 revenue of $20.5 billion to $20.6 billion and adjusted EPS of $24.35 to $24.45.
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