Wells Fargo Downgrades Adobe to Underweight Over AI Budget Share Losses

Adobe Inc. (ADBE) shares traded lower following an analyst downgrade from Wells Fargo, which lowered its rating on the software company from Overweight to Underweight and slashed its price target to $225. The research note highlighted multiple headwinds facing the business, particularly evidence from a technology executive survey that the firm is losing corporate budget share during ongoing artificial intelligence evaluations.

Beyond market share pressures, the downgrade pointed to operational and financial risks across the company. Analysts noted that a steep fourth-quarter performance ramp appears challenging because it would require new annual recurring revenue to roughly double from the third quarter. Additionally, leadership transitions involving both the chief executive officer and chief financial officer, combined with a lack of price hikes, create uncertainty around fiscal 2027 projections. Wells Fargo now models negative growth in new annual recurring revenue for fiscal 2027 and total annual recurring revenue growth of about 7%, falling behind Wall Street consensus estimates of over 8%.

Investors will be watching how Adobe Inc. (ADBE) manages its strategy of prioritizing user acquisition over immediate monetization, which led analysts to cut profit margin expectations. Market participants will also monitor whether upcoming product initiatives can reverse AI market share losses in its core creative business amid intensifying competition.