Kodak of AI? Wall Street has written off Adobe stock as 'AI loser'

Adobe (ADOBE) can’t catch a break. The stock has cratered 18% year-to-date, down 35% over the past 12 months and now trading nearly 50% below its pandemic peak.

The slide comes despite record results and a raised outlook for fiscal 2025.

In Q2, Adobe posted record revenue of $5.87 billion, up 11% year-over-year, alongside $2.19 billion in operating cash flow and strong profitability.

The company bumped full-year guidance to $23.5–$23.6 billion in revenue and GAAP earnings of $16.30–$16.50 per share.

But strong financials haven’t stopped Wall Street from souring on the stock. Analysts at Redburn-Atlantic recently downgraded Adobe, slashing their price target by 33% to $280.

Even at its current price, they see the stock as overvalued.

The bearish call centers on competition from AI-native challengers like Midjourney, Sora, Veo, and Imagen, as well as a reinvigorated Canva, which now offers a free AI image generator powered by OpenAI and Google Cloud AI.

At least five other firms have lowered their price targets following Q2 earnings.

AI skepticism piles up

Investors and analysts remain unconvinced that Adobe can hold its ground in the generative AI era.

“Somehow Adobe has been snagged as an AI loser,” D.A. Davidson’s Gil Luria told Bloomberg. “We think that’s a misunderstanding of the technology.”

The perception issue is fueled by mixed reviews of Adobe’s own generative AI suite, particularly Firefly, which has been criticized for low-quality outputs and inconsistent results.

As InvestorsObserver reported, the rapid rise of AI has turned holding legacy companies like Adobe into a significant opportunity cost, given the abundance of faster-growing players in the market.

CFRA Research believes Adobe faces “a longer time horizon to achieve AI monetization,” while RBC analysts have warned it could take even longer for the company to address investor concerns and compete effectively with next-gen platforms.

Despite the skepticism, Adobe CEO Shantanu Narayen remains defiant.

“We continue to invest in AI innovation across our customer groups to enhance value realization and expand the universe of customers we serve,” he said on the company’s latest call.

With pressure mounting from nimble AI upstarts and Wall Street slashing price targets, Adobe must prove it can transform itself into an AI-native company before the market writes it off entirely.