Adobe Inc. (NASDAQ:ADBE) shares are trading lower Monday after Wells Fargo downgraded the stock to Underweight from Overweight and cut its price target to $225, citing results from its latest survey of chief information officers on AI spending.
- Adobe shares are sliding. Why are ADBE shares down?
Wells Fargo Says Adobe Is Losing AI Budget Share and Faces a Steep Fourth-Quarter Ramp
According to Investing.com, analyst Michael Turrin told investors he "came away more cautious" on front office and creative software and gave four reasons for the downgrade. First, Adobe’s third-quarter results suggest cracks are starting to show, and a steep fourth-quarter ramp looks difficult, since it would require new annual recurring revenue to roughly double from the previous quarter. Second, he sees risk to Adobe’s preliminary fiscal 2027 guidance given the lack of a price increase and an ongoing management transition, with both the CEO and CFO changing.
Third, the CIO survey reportedly showed Adobe as a clear loser of budget share in the AI evaluation cycle. Fourth, competition in Adobe’s core creative business is intensifying.
Wells Fargo Now Models Negative New ARR Growth in Fiscal 2027
Wells Fargo now models negative growth in new annual recurring revenue in fiscal 2027 and total annual recurring revenue growth of about 7%, below the consensus of more than 8%. It also lowered its margin forecasts, citing a focus on adding users over near-term monetization
Adobe Shares Fall
ADBE Price Action: At the time of publication, Adobe shares are trading 4.16% lower at $232.19, according to data from Benzinga Pro.
Image via Shutterstock