Wells Fargo cuts Adobe to Underweight, target to $225

Wells Fargo analyst Michael Turrin cut Adobe Inc. to Underweight from Overweight and set a new $225 target on Monday, Oct. 12, Benzinga reported in an article citing Investing.com.

Adobe shares fell 4.16% to $232.19 at the time of Benzinga’s publication, leaving the stock 3.1% above Wells Fargo’s new target, according to Atlas360 calculations.

The downgrade puts pressure on one of the largest software names tied to creative work, where investors are weighing whether artificial intelligence will expand Adobe’s market or redirect spending to rivals. Turrin cited Wells Fargo’s latest survey of chief information officers on AI outlays, according to Benzinga.

Turrin told investors he "came away more cautious" on front-office and creative software, Benzinga reported. The article said he listed four reasons for the rating change: weaker signs in Adobe’s third-quarter results, risk around preliminary fiscal 2027 guidance, survey findings on AI budget allocation and rising competition in Adobe’s main creative business.

One concern was the scale of Adobe’s fourth-quarter subscription push. Benzinga reported that Turrin said the company would need new annual recurring revenue, a software metric for contracted subscription revenue, to roughly double from the prior quarter.

Wells Fargo also reduced its fiscal 2027 assumptions. The bank now models negative growth in new annual recurring revenue and about 7% growth in total annual recurring revenue, below consensus expectations of more than 8%, according to Benzinga.

The article said Wells Fargo lowered its margin forecasts as well, citing Adobe’s emphasis on adding users rather than near-term monetization. Turrin also pointed to the absence of a price increase and a management transition involving both the chief executive officer and chief financial officer, Benzinga reported.

The survey finding matters because Adobe’s creative tools sit close to areas where generative AI products are being evaluated by corporate buyers. Benzinga said Wells Fargo’s CIO survey showed Adobe losing share of AI-related budgets during that evaluation cycle.

Competition was another part of the bank’s call. Benzinga reported that Turrin saw intensifying pressure in Adobe’s core creative business, though the article did not name specific rivals or quantify the change in competitive conditions.

The evidence remains limited by what was disclosed in the article. Benzinga did not provide the survey sample size, methodology or a response from Adobe, and it did not include a dated company catalyst for the next update.

Source: news article, Benzinga, Oct. 12