Adobe's Market Position Tested by Rival Innovation and Sector Headwinds

Adobe faces analyst downgrades and competitive pressure as Figma's strong AI-driven forecast contrasts with a broader software sector sell-off.

Adobe finds itself navigating a complex landscape where broader market skepticism towards software stocks converges with a specific competitive challenge. The company's shares remain under pressure, not merely from general sector trends but significantly from the rising momentum of its rival, Figma. Recent developments have placed a sharp focus on Adobe's strategic readiness to defend its turf in the era of artificial intelligence.

Investor Sentiment Sours as Analysts Recalibrate

The investment community's view on Adobe has grown increasingly cautious. A series of analyst adjustments reflect this tempered outlook. In January, Goldman Sachs downgraded the stock to "Sell," assigning a price target of $290. HSBC reduced its target from $388 to $302, maintaining a "Hold" rating. Further revisions came in early February: Piper Sandler moved to a "Neutral" stance with a $330 target, while UBS confirmed its "Neutral" rating but lowered its objective to $340 from $375.

This analytical prudence is mirrored by a split among major investors. Coatue Management notably increased its stake in Adobe at the end of 2025, while Mubadala nearly halved its position during the same period. Such divergent moves underscore a market still grappling with how to value software firms in the context of AI's disruptive potential. The share price, closing at €219.40 on Friday, currently trades approximately 49% below its 52-week high.

Figma's Bold Forecasts Intensify Competitive Scrutiny

Direct pressure mounted this week with Figma's confident projections. The competing design platform forecasted 2026 revenue between $1.36 billion and $1.37 billion, a figure that, according to Reuters/LSEG data, substantially exceeded market expectations. Simultaneously, Figma announced a new monetization strategy for AI features: the introduction of "AI Credits" starting in March 2026.

This dual announcement from Figma targets the core of Adobe's user base—designers and creative teams who are increasingly integrating AI-assisted tools into their workflows. The market's reaction was immediate and contrasting; Figma's shares advanced strongly on the news, while Adobe's stock continued to face downward pressure.

Broader Software Sector Faces a Valuation Reckoning

Adobe's challenges are compounded by a sector-wide recalibration. Last week witnessed a sell-off across many software and service stocks. Underpinning this trend is a growing concern that generative AI could make certain tasks cheaper, potentially devaluing the specific functionalities for which companies have historically paid premium software licensing fees.

Institutional investors appear to be acting on this uncertainty. An analysis by TIKR indicates that their weighting in software stocks has been reduced to its lowest level since 2021. This creates a fragile environment where a single piece of negative news can trigger amplified selling pressure, as major market participants have already shown a preference to lighten exposure to the sector.

All eyes now turn to Adobe's upcoming quarterly results, scheduled for March 12. This report is poised to serve as a critical litmus test. It will reveal whether the company's AI strategy—centered on its Firefly suite and enterprise partnerships—can begin to restore investor confidence, or if the combined forces of Figma's ascent and the AI-driven transformation of the software market will continue to weigh on performance.