Investing.com — BMO lowered its price target on Adobe (NASDAQ:) after the software giant posted a slew of disappointing quarterly results, as well as a weaker-than-expected 2025 outlook.
BMO cut Adobe’s TP from $600 to $570, while maintaining its Outperform rating on the stock.
The brokerage noted that Adobe’s annual recurring revenue (ARR) — a key metric for software-as-a-service companies — exceeded expectations in the November quarter by a smaller margin than earlier this year.
BMO also said ARR growth for Adobe’s Creative Cloud was lackluster at 2%, also missing estimates for 5% growth in the November quarter.
Most egregious was Adobe’s 2025 revenue forecast of $23.30 to $23.55 billion. The forecast missed Street estimates of $23.78 billion, indicating that recent moves by Adobe to incorporate artificial intelligence into its offerings took longer than expected to generate returns.
Still, BMO found resilience in Adobe’s Document Cloud business, with much of the ARR increase driven by the unit. But the broker also said that the trend, while encouraging for Document Cloud, was disappointing for investors as they preferred a more balanced upside.
BMO said it maintains Adobe at Outperform based entirely on its valuation. The stock tumbled nearly 10% in aftermarket trading and is down about 5% so far in 2024.
Adobe has ramped up its investments in AI amid increased competition from smaller players such as Stability AI and Midjourney, whose image-generating software is expected to erode Adobe’s market share.
But the company is still struggling to monetize its AI features, with revenue not increasing substantially despite the introduction of Adobe’s own image and video generation features.
