Market Minute: Adobe (ADBE) Woes Ahead of Earnings Emblematic of AI Disruption
Adobe (ADBE) was one of the hardest-hit software stocks during the recent sector-wide decline as AI removes major barriers in digital creative work facilitated by its software.
Shares have plunged almost -44% during the past year and about -66.5% since the all-time high of 699.54 in November 2021. The maker of the iconic creative software suite including Photoshop, Illustrator, Premiere Pro, and Acrobat will report earnings in tomorrow’s postmarket, which could give a deeper look into the unusually severe challenges facing Adobe from the rapid rise of artificial intelligence.
The most obvious risk that AI poses for Adobe is that it removes major barriers traditionally found in digital creative work. Now, generative AI tools such as ChatGPT, Canva, or Figma allow users to create content almost immediately.
Despite the competitive pressures and recent slide in the stock, the company beat earnings estimates last quarter. Adobe is seeing momentum in its AI portfolio, including Firefly, Acrobat AI Assistant, and GenStudio, across both consumer and enterprise users. AI-driven annual recurring revenue (ARR) more than tripled year over year in fiscal Q1 2026, with generative credit usage rising over 45% sequentially. That strength is expected to carry into the upcoming quarter, as broader AI adoption continues to drive monetization and adoption.
Adobe also faces a leadership shakeup. Longtime CEO Shantanu Narayen is departing after 18 years at the helm in a move that may be causing anxiety among traders. In addition, Adobe has faced customer pushback against the “software as a subscription” model, which Adobe pioneered. Also, a controversial Terms of Service update prompted questions on how the company would use client work to train AI models.
Adobe Key Points
- Earnings: Analysts are looking for earnings-per-share to come in at $5.83 against last year’s figure of $5.06 (+15.22%), while revenue expectations are $6.46B vs. $5.87 year-over-year (+9.94%). Software subscriptions accounted for about 96% of Adobe’s annual revenue during fiscal 2025 with one-time product fees and other services representing the remaining revenue, so making subscriptions the main area for investors to watch.
- Analysts: Analysts were mixed on Adobe this week, with price target cuts coming from Stifel ($350 from $400, buy rating) and TD Cowen ($285 from $310, hold rating). However, Citigroup raised its target to $264 from $253 while maintaining its neutral rating. RBC Capital reiterated its outperform rating and $350 price target.
- Technicals: Adobe recently bounced off its 52-week lows, forming an upward channel beginning near 224 on Apr. 10. Shares climbed enough to fill the gap formed during the last earnings event in mid-March near 269, but price quickly wilted and retreated to a supportive area near 238 that marked a second smaller gap and a previous low from late May. Price now sits below most major moving averages, while the Relative Strength Index (RSI) made a bearish crossover. It is not uncommon for momentum to wane heading into earnings, but this is nonetheless more of a bearish development The yearly Volume Profile study also shows significant trading activity near these lows, ranging from about 240 to 260 with the Point of Control (heaviest trading area) coming in around 246. This type of situation typically would be viewed as a notable area of potential support, so price closing below this level yesterday is again not what the bulls would want to see. The weekly Jun. 12 options expiration shows a potential expected move of +/-21.9 (9.4%), which gives a range beyond the 52-week lows near 211 on the downside. Meanwhile, the Jul. 17 expiration comes in at +/-35.0 (15%), which suggests markets do not expect upside progress beyond the earnings gap around 268 from last quarter.
Economic data (ET)
- 7:00AM: MBA Mortgage Applications
- 8:30AM: Consumer Price Index (CPI)
Earnings
- Premarket: Chewy (CHWY)
- Postmarket: Oracle (ORCL), Stitch Fix (SFIX)
- Premarket Thursday: RH (RH), Lennar (LEN)
- Postmarket Thursday: Adobe (ADBE)
