BMO Capital Markets analyst Keith Bachman lowered Adobe’s rating from Outperform to Market Perform in early January 2026, citing heightened competitive dynamics and the likelihood that shares will trade within a narrow range for the next several quarters. Bachman pointed to recent quarterly results that, while in line with guidance, fell short of market expectations for growth acceleration. He also noted that near-term catalysts are limited, and that investors should temper return expectations until Adobe unveils its next wave of product innovations or secures meaningful enterprise deals.

Adobe’s market leadership in creative software is under pressure as challengers such as Figma leverage cloud-native architectures and embedded AI features to capture design teams. Regulatory blockers prevented Adobe’s 2022 acquisition of Figma, and since Figma’s July 2025 IPO the newcomer has rolled out rapid AI-powered prototyping and real-time collaboration tools. Moreover, a wave of generative AI startups focusing on prompt-to-asset capabilities has entered adjacent segments, forcing Adobe to accelerate its roadmap for AI-driven automation in Photoshop, Illustrator and its Experience Cloud suite.

Despite external headwinds, Adobe reported double-digit year-over-year revenue growth in its most recent quarter, driven by strength in its Digital Media segment and recurring subscription renewals. Commentary highlighted operating margins near historic highs, supported by scale efficiencies and disciplined cost management. Management reiterated its full-year revenue growth target in the mid-teens percentage range, and affirmed operating margin expansion of several hundred basis points, underscoring the company’s ability to grow profitably even as it invests in next-generation AI capabilities.

Adobe’s shares currently trade at approximately 19.8 times forward earnings and 5.8 times forward sales, levels not seen since the early 2010s. The company has deployed over $10 billion to repurchase stock over the past two years, reducing share count by about 5%, while also increasing its quarterly dividend. This combination of solid fundamentals, disciplined capital allocation and valuation below historical averages has prompted some analysts to label Adobe an “unloved compounder” with significant upside potential over a multi-year horizon.