Adobe’s ADBE shares have declined 10.4% in the past month, underperforming the Zacks Computer and Technology sector’s return of 1.3% and the Zacks Computer – Software industry’s appreciation of 0.1%. The underperformance reflects modest growth prospects due to stiff competition in the AI and generative AI space from the likes of Microsoft MSFT-backed OpenAI, Alphabet GOOGL, Salesforce CRM, Midjourney, Canva and others.
Adobe shares have underperformed Microsoft, Alphabet, and Salesforce in the past 30 days. While shares of Microsoft and Salesforce have returned 0.6% and 0.7%, respectively, Alphabet has declined 0.2%.
Image Source: Zacks Investment Research
Meanwhile, Adobe has a Value Score of C, which suggests a stretched valuation. In terms of Price/Book, Adobe is trading at 11.71X higher than the broader sector’s 11.28X, Microsoft’s 11.07X, Alphabet’s 8.38X and Salesforce’s 3.82X.
Image Source: Zacks Investment Research
Adobe shares are now trading below the 50-day and 200-day moving averages, indicating a bearish trend.
Image Source: Zacks Investment Research
So, what should investors do with Adobe shares right now? Let’s find out.
Adobe’s strategy of infusing AI into its portfolio is driving growth, as reflected by the third quarter of fiscal 2025 results. Adobe AI influenced annual recurring revenues (ARR), which surpassed $5 billion, and management expects it to continue to rise as a percentage of Adobe’s business. ARR from new AI-first products, including Firefly, Acrobat AI Assistant and GenStudio for performance marketing, hit Adobe’s end-of-year target of more than $250 million.
Adobe’s third-quarter fiscal 2025 Digital Media ARR increased 11.7% year over year at constant currency, driven by strong demand for AI-powered Creative Cloud Pro and Acrobat, as well as AI-first products, Firefly and Acrobat AI Assistant. The monthly active users of Acrobat and Express grew approximately 25% year over year within the Business Professionals and Consumers segment. Adobe has been successfully monetizing Acrobat offerings, including the AI assistant and the recently launched Acrobat Studio.
The Creative Professionals business benefited from increasing demand and usage of AI in Photoshop, Premiere Pro and Illustrator as part of the new Creative Cloud Pro offering. The addition of Firefly and third-party models in Creative Cloud Applications drove generative AI (Gen AI) usage sequentially. The Marketing professionals business benefited from the strong demand for Adobe Experience Platform (AEP) and native applications. ARR grew more than 40% year over year as enterprises focus on delivering personalization at scale for customer engagement.
Workfront, Frame, AEM Assets, Firefly Services and GenStudio for performance marketing products, which comprises the integrated GenStudio solution, now exceed $1 billion in ARR and are growing more than 25% year over year. One Adobe deal saw 60% year-over-year growth, reflecting an improving footprint among enterprises.
