Adobe’s Strategic Maneuver: A Partnership and a Lawsuit Shape Its AI Future

Adobe finds itself navigating a complex landscape of opportunity and risk. The creative software giant's recent strategic move to bolster its video AI capabilities coincides with a legal challenge that threatens a core pillar of its marketing message. Adobe's stock closed Friday's session nearly flat at $355.86, yet beneath the surface, the battle for dominance in next-generation creative tools is intensifying.

Even as Adobe announced a major new partnership, a separate development cast a shadow. A class action lawsuit filed by author Elizabeth Lyon in the U.S. District Court for the Northern District of California alleges the company trained its SlimLM AI model using the "SlimPajama" dataset. This dataset is said to contain thousands of copyrighted books from the controversial "Books3" collection.

This legal action directly challenges Adobe's central promise of offering "commercially safe" AI, a claim based on using only licensed data for training. While the suit targets SlimLM—a model designed for document tasks—and not the flagship Firefly image generator, it risks undermining confidence in the company's overall AI integrity. For enterprise clients who choose Adobe specifically for its legal safeguards, a confirmed breach of this promise could lead to a significant erosion of trust.

Countering Competition Through Collaboration

In a clear bid to fortify its position, Adobe revealed a multi-year partnership with Runway, a leader in generative video AI, on December 19. The collaboration will see Runway's advanced Gen-4.5 models integrated directly into Adobe's Firefly platform and Creative Cloud applications like Premiere Pro. Access for Firefly Pro users began a day earlier, on December 18.

Market experts view the timing as strategic. The emergence of competitive tools like OpenAI's Sora poses a substantial threat to Adobe's ecosystem. By opting for partnership over purely internal development, Adobe acknowledges the rapid pace of external innovation. The objective is clear: retain high-end video professionals within the Creative Cloud suite before they migrate to competing standalone products.

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

Divergent Analyst Views Amid Record Results

Analyst sentiment on Adobe's path forward remains divided. Citi expressed optimism on Friday, raising its price target to $387 while maintaining a Neutral rating. This outlook is supported by Adobe's recently reported Q4 results for fiscal 2025, which set new records. The company posted revenue of $6.19 billion, a 10% year-over-year increase, and an adjusted earnings per share of $5.50.

However, the view is not unanimous. KeyBanc downgraded the stock to Underweight on December 15, assigning a $310 price target. The firm cited the persistent competitive threat from AI—precisely the concern Adobe's Runway deal aims to address. Trading around $356, Adobe's shares remain well below their 52-week high of $465.70.

A Pivotal Period for Execution

The coming weeks will be critical for Adobe's narrative. Two key questions will dominate: What will be the user adoption rate for the newly integrated Runway models? And how will the company formally respond to the pending lawsuit?

Adobe's revenue guidance for fiscal 2026 stands between $25.9 billion and $26.1 billion. Whether the equity can advance toward the $387 analyst target or beyond hinges on Adobe's ability to demonstrate that its AI integration strategy does more than just retain its existing customer base. It must actively drive new subscription growth, proving its ecosystem is indispensable in the generative AI era.