Adobe’s AI Ambitions Face Investor Skepticism

Adobe's efforts to restore investor confidence are meeting significant headwinds. A disappointing financial outlook and emerging legal challenges are fueling a critical reassessment of the software giant's valuation, causing its shares to extend a downward trend. This skepticism persists despite the company announcing a strategically vital partnership in the competitive AI video generation space.

Two conflicting stories are currently shaping Adobe's narrative. On one hand, the firm is bolstering its strategic position through a multi-year collaboration with Runway. This partnership aims to integrate Runway's advanced Gen-4.5 video model into Adobe's ecosystem, a move designed to defend its dominance in professional video workflows against a new wave of AI competitors.

This forward momentum is being overshadowed by substantial legal risk. A proposed class-action lawsuit alleges the company trained its "SlimLM" AI models using datasets containing pirated books. Uncertainty surrounding these data sources and the potential for significant liability is weighing heavily on the sentiment of institutional investors.

Market Sentiment and Trading Activity

The prevailing negative mood was evident in yesterday's trading session. Notably, the share price decline occurred on relatively light volume, with the number of shares traded falling well below the daily average. Market observers often interpret this lack of liquidity on down days as a signal that aggressive buying interest is absent at current price levels. Such hesitation leaves the stock vulnerable to further drift, as selling pressure is not met with substantial demand.

Should investors sell immediately? Or is it worth buying Adobe?

Revised Analyst Targets Reflect New Realities

The financial community is adjusting its expectations to a harsher competitive landscape, a shift clear in recent analyst commentary reacting to Adobe's fiscal 2026 forecast, which disappointed the market.

• KeyBanc downgraded the stock to "Underweight" and cut its price target to $310, citing increased competitive pressures in creative software.
• BMO Capital and Morgan Stanley also reduced their price targets to $400 and $425, respectively, although they maintained their neutral-to-positive ratings for now.

Technical Picture Confirms Weakness

Chart analysis underscores the ongoing weak phase. The stock closed yesterday at €298.90 and has lost more than 30% since the start of the year. The gap to its 52-week high of €445.25 illustrates the scale of the correction. The share price has also fallen decisively below its 200-day moving average, a technical confirmation of the medium-term downtrend.

The key to a potential trend reversal will be how quickly Adobe can monetize its new Runway partnership. In the near term, however, investors are watching key technical support levels with apprehension. A breach of these levels could pave the way for a move toward the lower price targets set by the most skeptical analysts.