Key Takeaways

Adobe ( ADBE ) shares tumbled Thursday after the company’s outlook came in lower than expected , but analysts said they they're still bullish on the stock, pointing to its potential for AI-driven growth.

Jefferies analysts said they were surprised by the stock's sharp decline after the results, which they felt were "positive enough to offset the negatives," and added that "AI adoption is trending well," with Adobe poised for AI-driven revenue gains. The analysts maintained a “buy” rating and $650 price target for the stock, suggesting over 70% upside from Thursday's close.

Bank of America analysts trimmed their price target to $528 from $605, but kept a “buy” rating, saying they expect Adobe is “on a path” to better AI monetization. The analysts highlighted that monthly active users of Photoshop and Lightroom generative AI both increased in the period.

Adobe reported annualized recurring revenue from AI of $125 million at the end of the quarter, with CEO Shantanu Narayen saying he expects that to double by the end of fiscal 2025, according to a transcript of the company’s earnings call provided by AlphaSense.

More AI updates are expected at the company’s Adobe Summit event next week, which one analyst previously said could be more informative than the quarterly results.

Shares of Adobe dropped nearly 14% Thursday to close at $377.84. They've lost about a third of their value in the past 12 months.

UPDATE—March 13, 2025: This article has been updated since it was first published to reflect more recent share price values.

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