Adobe Shares Tumble as AI Payoff Looks Further Away

Adobe’s stock took a sharp hit on Friday, falling 7% in early trading, as investors grew uneasy over how long it might take for the company’s artificial intelligence investments to deliver meaningful returns. The selloff came despite Adobe raising its annual revenue forecast for 2025 — a clear sign that Wall Street is growing skeptical about the near-term payoff of AI integration, even for industry veterans.

According to Angelo Zino, senior equity analyst at CFRA Research, growing concerns over mounting competition and a longer-than-expected timeline for AI monetization have started weighing on Adobe’s stock performance. “We see increasing concerns surrounding competitive pressures and a longer time horizon to reach notable AI monetization,” Zino said in a note.

A Pioneer Under Pressure in the AI Era

San Jose-based Adobe has long been the go-to name for creative professionals, with flagship products like Photoshop, Premiere Pro, and Illustrator forming the core of its Creative Cloud suite. But in today’s AI-driven software race, brand legacy alone isn’t enough.

Earlier this year, Adobe announced it would incorporate generative AI models from OpenAI and Google into its own Firefly platform — a suite of tools designed to help users generate and edit images and videos via simple text prompts, without the legal gray areas typically associated with AI-generated content. The move was part of Adobe’s bid to defend its creative software dominance amid a flood of new GenAI-powered competitors.

However, analysts at RBC Capital Markets suggested that while management remains optimistic about AI-powered demand, it may take more time to fully demonstrate the value of these initiatives. “While guidance was raised and management remains positive around demand generation, it feels like it will take more time to prove out these initiatives and quiet concerns of competition around GenAI,” RBC’s analysts wrote.

Revenue Outlook Up, But Investors Remain Unmoved

Adobe now expects its full-year 2025 revenue to land between $23.50 billion and $23.60 billion, an increase from its previous projection of $23.30 billion to $23.55 billion. On the surface, it’s a positive signal of steady business momentum. But it wasn’t enough to reassure the market.

Following Adobe’s Q2 earnings results, at least five brokerages trimmed their price targets on the stock, reflecting ongoing apprehension about AI execution risks and intensifying market competition. Including Friday’s decline, Adobe shares have dropped around 13% so far this year.

Valuation Gap Highlights AI Premium Elsewhere

The market’s cooling enthusiasm for Adobe’s AI story is reflected in its current 12-month forward price-to-earnings (P/E) ratio, which stands at 18.88. That’s noticeably lower than rival Autodesk, whose forward P/E sits at 29.16 — a difference that underscores how investors are placing a higher premium on companies perceived to have more immediate or compelling AI opportunities.

Industry Context: A Race for AI Supremacy

Adobe’s situation mirrors a broader pattern playing out across the software industry. Many legacy firms are racing to incorporate generative AI into their platforms while fending off upstart challengers that are building AI-native tools from the ground up. The tension lies in balancing rapid innovation with product stability, legal safeguards, and clear monetization pathways — all while keeping investors satisfied.