Adobe’s $25 Billion Buyback and a New AI Assistant Can’t Shake the Bears

Adobe's stock slides 27% YTD even as it launches Firefly AI, closes Semrush acquisition, and posts record $6.4B revenue. Oversold conditions and insider moves add to the disconnect.

The software giant is firing on all cylinders—closing a major acquisition, launching a generative AI assistant, and authorizing a massive share repurchase—yet its stock continues to slide. Adobe’s shares have shed roughly 27% since the start of the year, trading near €207.80, a level that sits more than 23% below the 200-day moving average. The disconnect between operational momentum and market sentiment has rarely been starker.

A New AI Co-Pilot for Creatives

Adobe this week released the Firefly AI Assistant as a public beta, positioning it as the central nervous system of the Creative Cloud ecosystem. Users type simple text commands, and the assistant orchestrates tasks across Photoshop, Premiere Pro, and Lightroom without manual switching. A single prompt can turn a product photo into a full social media campaign. The company describes this as a shift toward “Agentic AI”—the human supplies the idea, the machine handles the execution.

The move is a direct response to a growing threat. Low-cost, AI-native rivals like Canva are chipping away at Adobe’s subscription model, and investors worry that generative AI could commoditize creative software. To fortify its position, Adobe has forged alliances with OpenAI and Anthropic, aiming to bridge the gap between general-purpose AI tools and specialized marketing workflows.

Semrush Deal Closes as AI Search Surges

On Tuesday, Adobe completed its acquisition of Semrush, a digital visibility platform with over 28 million users. The rationale is rooted in a seismic shift in how consumers find products: AI-driven traffic to US retailers surged 269% in March alone, as shoppers increasingly turn to voice models and AI assistants. Semrush’s data will be woven into Adobe’s platforms, giving businesses tools to manage their brand presence inside large language models.

Separately, Adobe announced a partnership with Alluvium targeting the healthcare sector, aiming to improve capacity management and patient communication. The company is also integrating Anthropic’s Claude AI model into Creative Cloud, enabling voice control over more than 50 creative tools.

Record Revenue, but the Chart Tells a Different Story

The financials remain robust. Adobe posted record quarterly revenue of $6.4 billion, with earnings per share of $6.06. Recurring revenue from new AI offerings tripled year-over-year. For the current fiscal year, management targets adjusted earnings of roughly $23.40 per share.

Yet the stock trades near €206, almost 24% below its 200-day average. A low relative strength index suggests the shares are deeply oversold. The fear is that generative AI will disrupt Adobe’s legacy software business faster than new products can offset the damage.

Insider Moves and a Buyback Backstop

Institutional positioning has been mixed. During the final quarter of last year, Mitsubishi UFJ Trust cut its Adobe stake by 27%, while Arrowstreet significantly increased its holdings. The board has authorized a multi-billion-dollar share buyback program running through April 2030, signaling confidence that the selloff is overdone.

Adding to the uncertainty, long-time CEO Shantanu Narayen has announced his retirement, effective once a successor is found. The leadership transition comes at a time when the stock is historically cheap, and the pressure is on to convert the Firefly AI Assistant into paying enterprise customers quickly.

Analyst Consensus: Buy, With a Wide Range

Despite the bearish price action, a majority of analysts surveyed still recommend buying the stock. The average price target stands at roughly $328, though the range extends as low as $220. The bull case rests on the idea that Adobe’s entrenched ecosystem and aggressive AI integration will eventually win over skeptics. The bear case argues that the competitive threat from cheaper alternatives is real and growing.

For now, Adobe is betting big on its own technology, its own balance sheet, and its own ability to navigate a market that has yet to be convinced.