Adobe Shares Hit by Sector-Wide Selloff Amid AI Disruption Fears

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A sharp downturn across the software sector on January 29, 2026, placed significant pressure on Adobe's stock, marking one of the industry's most challenging trading sessions in recent months. The selloff was fueled not by optimism surrounding artificial intelligence, but by mounting concerns that AI poses a fundamental threat to established business models. This sentiment dragged the S&P 500 Software and Services Index to its lowest point in nine months.

The sector's weakness originated from disappointing cloud revenue outlooks provided by industry players SAP and ServiceNow. These reports amplified a growing investor fear: that AI tools capable of generating application code and software at a fraction of the traditional cost could severely undermine the lucrative subscription models upon which many software firms are built.

Adobe's equity felt the brunt of this sentiment, plummeting to a new 52-week low of $284.60 during the session. It managed a partial recovery to close at $291.65. Cumulatively, the share price has declined more than 30% over the preceding twelve-month period.

This dynamic highlights a growing divergence in the technology landscape. While chipmakers and memory suppliers reap benefits from soaring demand for AI infrastructure, software companies are now grappling with serious questions about the long-term competitiveness and pricing power of their core platforms.

Financial Performance and Forward Targets

Despite the market turmoil, Adobe's underlying business recently demonstrated strength. In December 2025, the company announced record results for its fourth quarter and full fiscal year 2025. Annual revenue reached $23.77 billion, and operating cash flows surpassed the $10 billion mark for the first time.

Looking ahead, management has set ambitious targets for fiscal 2026. The company is projecting revenue in the range of $25.9 billion to $26.1 billion, which would represent approximately 9% year-over-year growth. It also aims to maintain an operating margin around 45%.

Key Financial Data:
* Fiscal 2025 Revenue: $23.77 billion
* Fiscal 2026 Revenue Target: $25.9 - $26.1 billion
* Projected Operating Margin: ~45%
* Current Market Capitalization: ~$120 billion

Pending Acquisition Faces Headwinds

Adding a layer of complexity to Adobe's narrative is its pending acquisition of Semrush Holdings, announced in November 2025 for roughly $1.9 billion. The strategic move is designed to bolster Adobe's AI-powered marketing suite by integrating Semrush's capabilities in search engine optimization and generative engine optimization.

The transaction is anticipated to close in the first half of 2026. However, its timeline faces potential delays following legal challenges. Shareholders of Semrush have filed lawsuits against the proposed merger, which could complicate the finalization process.

All eyes will now turn to Adobe's next quarterly earnings release, scheduled for March 11-12, 2026. This update will be a critical test for management's ability to convincingly articulate its dual-path AI strategy—leveraging both its organic Firefly platform and the planned Semrush integration—to a skeptical market.