Wall Street Divided on Adobe’s AI Ambitions Despite Record Performance

Adobe's latest financial disclosures for fiscal 2025 showcased record-breaking results, yet the investment community's response has been notably mixed. The core debate among market strategists centers on whether the software giant can successfully convert its substantial investments in artificial intelligence into durable revenue streams.

The company closed its fourth quarter with performance metrics exceeding Wall Street's projections. Adjusted earnings per share came in at $5.50, surpassing the consensus estimate of $5.40. Quarterly revenue reached $6.19 billion, also beating analyst forecasts of $6.11 billion.

For the full fiscal year 2025, Adobe posted record revenue of $23.77 billion, marking an 11% increase from the prior year. Operating cash flow for the period was a robust $10.03 billion.

Looking ahead, management provided guidance for fiscal 2026, anticipating revenue in the range of $25.90 to $26.10 billion. Adjusted earnings per share are projected to land between $23.30 and $23.50.

Analyst Price Target Reductions Signal Underlying Concerns

A striking trend emerged following the earnings release: even analysts maintaining positive ratings opted to lower their price targets for Adobe shares. This occurred despite an upgrade from Wall Street Zen to a "Buy" rating on December 22.

Should investors sell immediately? Or is it worth buying Adobe?

Morgan Stanley adjusted its target down to $425 from $450, while Wolfe Research reduced its target to $440 from $450. BMO Capital Markets made a more modest cut, moving from $405 to $400. In a more decisive move, KeyBanc downgraded the stock to "Underweight," assigning a $310 price target. The prevalent apprehension is that Adobe must demonstrate its new AI features are not just being adopted by users, but are actively generating incremental revenue. The current analyst consensus sits at "Hold," with an average price target of $417.93.

Strategic Moves and Legal Headwinds

On the business development front, Adobe announced a multi-year strategic partnership with Runway. The collaboration aims to integrate generative video technology into Adobe's Firefly platform. Furthermore, the integration of Photoshop Express and Acrobat into OpenAI's ChatGPT expands the accessibility of Adobe's tools.

However, the company faces a new legal challenge. A class-action lawsuit filed on December 17, 2025, alleges that Adobe used authors' copyrighted works without permission to train its AI models. This case adds to a growing number of similar legal actions confronting technology firms in the generative AI sector.

Near-Term Outlook and Key Dates

For the first quarter of fiscal 2026, Adobe expects revenue of $6.25 to $6.30 billion and adjusted EPS of $5.85 to $5.90. The company is scheduled to report its next quarterly results on March 12, 2026. In the interim, the stock's trajectory is likely to be influenced by new product announcements, key metrics related to AI adoption, and developments in the ongoing class-action litigation.