Adobe: Cheap, but fundamentally challenged; Reinstating Underperform and $190 PO

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Adobe: Cheap, but fundamentally challenged; Reinstating Underperform and $190 PO

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Adobe

Cheap, but fundamentally challenged;

Reinstating Underperform and $190 PO

Reinstating Coverage: UNDERPERFORM | PO: 190.00 USD | Price: 218.07 USD

AI-driven disruption narrows Adobe’s competitive moat 07 July 2026

We are reinstating coverage of Adobe (ADBE) with an Underperform rating and a $190 Equity

PO, based on 7x CY27E EV/FCF. We flag rising risk to the growth profile as generative AI

(GenAI) lowers barriers to content creation and increases competition from lower-cost Tal Liani Research Analyst

and AI-native alternatives. We believe some professionals will remain focused on pixel BofAS

level control and continue to utilize Adobe’s tools, but AI will likely displace large parts of +1tal.liani@bofa.com646 855 5107

the core market over time, with likely pressure on pricing and seat expansion. We see Eden Vacnich

Adobe’s own AI strategy as largely defensive, supporting engagement and retention but Research Analyst

BofAS

limited on its ability to generate incremental high-quality ARR at scale. +1 646 855 1971

eden.vacnich@bofa.com

Growth reacceleration unlikely in the near term Kevin Niederpruem

Research Analyst

Our report is centered on a key question: can Adobe reaccelerate growth in the age of BofAS

AI? Adoption across AI products is notable, but we see limited evidence it translates into +1 646 855-1540

kevin.niederpruem@bofa.com

meaningful ARR uplift, with AI-first ARR still representing <2% of total ARR. Risk is

concentrated in lower-end and prosumer cohorts, where “good enough” AI output can

substitute for paid workflows, while professional and enterprise use cases remain more

resilient but not immune.