Adobe Shares Face Mounting Skepticism as Goldman Sachs Issues Sell Rating

Adobe US00724F1012

The investment landscape for Adobe has grown increasingly challenging. Early Monday, Goldman Sachs delivered the latest in a series of analyst downgrades, casting significant doubt on the software leader's strategy. The core issue for investors is whether the company can successfully convert its substantial AI investments into profit, or if more affordable competitors will erode its dominant market position.

Goldman Sachs analyst Gabriela Borges initiated coverage with a stark "Sell" recommendation. Her price target of $290 per share suggests a potential downside of approximately 14% from Friday's closing price. The bank's skepticism is particularly evident in its valuation assessment, assigning Adobe a multiple of just 15 times expected earnings—a discount of roughly 50% compared to similar software sector peers.

This cautious stance stems from a competitive analysis. While the broader industry is targeting double-digit growth in revenue and earnings per share, Goldman Sachs forecasts Adobe's growth in these areas to hover around only 10%. Concerns are mounting that rising expenditures on artificial intelligence could pressure profit margins, while the proliferation of new AI tools may simultaneously weaken Adobe's pricing power.

Goldman Sachs is not alone in its pessimistic outlook. This latest downgrade follows a cluster of rating reductions that hit Adobe in January:

• BMO Capital Markets downgraded the stock to "Market Perform." Its proprietary research indicated Adobe is losing ground in the entry-level segment to rivals like Canva, particularly among freelancers and students.
• Jefferies moved its rating to "Hold," citing the limited near-term revenue contribution expected from Adobe's new AI features.
• KeyBanc had already established one of the market's more bearish stances in December, issuing a price target of $310.

Market observers interpret this pattern as a signal that the software sector has entered a new phase of accountability. While hardware manufacturers reap clear benefits from the AI boom, software providers must now demonstrate that their AI features not only attract users but also drive measurable revenue growth.

Strong Fundamentals Confront a Cautious Forecast

On the surface, Adobe's recent financial results appear robust. The company closed its 2025 fiscal year with record operating cash flow exceeding $10 billion and an 11% increase in revenue. However, financial markets trade on future expectations, and it was Adobe's forward guidance that disappointed investors.

The market perceived the outlook for 2026 as conservative. The projected 10.2% growth in annual recurring revenue (ARR) points to a deceleration compared to the prior year's performance.

Despite the prevailing caution, some advocates remain. Analysts at Bernstein and Piper Sandler maintain optimistic price targets as high as $506. Their thesis rests on the belief that Adobe's Firefly AI platform and new enterprise solutions will ultimately deliver the anticipated revenue acceleration and enhance the value of its subscriptions over the long term.

The Path Forward

Definitive clarity likely awaits the next quarterly earnings report, scheduled for March 12, 2026. Following the substantial criticism in January, Adobe's management team faces heightened pressure. For a sustained recovery in the share price—which currently trades about 25% below its 52-week high—the company will need to present concrete data proving that its AI strategy is genuinely accelerating growth, rather than merely sustaining the status quo.