Adobe Stock (ADBE) Draws Near to Make-or-Break Support Level

As February rolls in, creative software giant Adobe (ADBE) saw its shares fall another 12% last month, bringing the stock’s total decline to roughly 33% over the past year. While very short-term price movements have been largely macro-driven, the market has yet to see anything over the past several quarters that convincingly addresses concerns around moat erosion in Adobe’s core business, particularly in the face of growing competition from AI-native creative tools.

That backdrop has arguably contributed to a slowdown in what used to be consistent double-digit growth in subscription revenues. To be clear, Adobe remains far from a business in decline. It is a business in slowdown—two very different things.

Still, I believe a psychological bottom may yet need to be tested before any meaningful inflection in the bearish trend can take hold. Until the next—or next few—earnings reports provide evidence that the narrative is beginning to shift, a cautious stance appears prudent. For now, maintaining a neutral view on Adobe seems to be the most reasonable course of action.

Fresh ADBE Stock Selloff

Every attempt at a bounce in Adobe’s shares seems to run out of steam. At the time of writing, it feels like nothing will stop the stock from revisiting its five-year lows from late September 2022, when it briefly traded around a measly ~$275 per share. Back then, Adobe had suffered a roughly 60% drawdown from its all-time high in November 2021. Today, the stock has not yet matched its largest historical drawdown, but the decline from the February 2024 peak has already reached ~53%.

By drawing parallels between what happened then and what is happening now, we can arrive at similar conclusions—albeit driven by very different narratives.

In 2022, the macro backdrop crushed duration and amplified execution risk. Interest rates were rising in the post-COVID environment, the U.S. dollar was strong, and valuation compression swept across high-quality software names. On top of that, the attempted $20 billion acquisition of Figma (FIG) became a major catalyst for a loss of confidence in capital allocation, further punishing Adobe’s shares.

In 2026, however, interest rates remain an important backdrop, but the market’s focus around Adobe has shifted toward a different question: what remains defensible when creative workflows become AI-native?

This shift shows up clearly in recent downgrades and in the growing rhetoric that “AI is eating software.” In that sense, it is fair to say that in 2022 the market attacked Adobe’s multiple, while in 2026 it is attacking the moat. The outcome on the stock chart looks strikingly similar—but the underlying “why” is arguably more dangerous this time, because it goes straight to the core of the product itself.

The Market is Rewriting Adobe’s Growth Story

The stock market moves on expectations—plain and simple. In that context, it is extremely rare to see a company’s stock in the middle of a turnaround when expectations are being revised downward, even if only modestly. In Adobe’s case, the indicator that best captures this expectations problem is total Annual Recurring Revenue (ARR).

As I mentioned in a previous piece, ARR is a forward-looking metric that effectively shows where the company’s growth is headed. And what it shows today is a slowdown—not a decline. Adobe’s total ARR grew 12.3% year-over-year in Q1, 11.8% in Q2, 11.7% in Q3, and 11.5% in Q4. After issuing FY 2026 guidance of 10.2% growth in Q4, the implication is clear: this deceleration is likely to persist for at least the next four quarters.

Double-digit growth still doesn’t sound that bad. After all, it is obviously far from an outright decline. But the market is already looking beyond that. Consensus revenue growth for FY 2026 and FY 2027 now sits at 9.5% year-over-year and 9%, respectively. That would mark the first time in decades that Adobe fails to deliver double-digit top-line growth. In context, that is not a trivial shift.

And because markets react to expectations, those expectations must ultimately be reflected in valuation multiples. Typically, companies that grow at double-digit rates are classified as growth stocks—and growth stocks tend to trade at a premium.

Based on Adobe’s prolonged selloff, the market does not appear to be saying that Adobe is a bad business. Rather, it is signaling that Adobe may no longer be viewed as a structural growth story, but as a mature, high-quality software company. That regime change alone is enough to justify lower multiples—even if the underlying numbers still look solid today.

How Far the Re-Rating Has Gone

I believe the key question in Adobe’s thesis today is whether the stock’s multiple has already incorporated the expectations of a mature, high-quality software company with only moderate growth. In my view, at roughly 14x earnings and about 12.5x forward earnings, much of that risk already appears to be priced in.

When those multiples are viewed alongside expected EPS growth over the next three to five years, Adobe trades at a PEG ratio of around 1, which arguably suggests investors are paying a multiple proportional to growth, neither a clear premium nor a meaningful discount.

That said, even small signals in Fiscal Q1—results Adobe is expected to report in March—could trigger a short-term bullish reaction and re-rate the stock to a different level, or at least help stop the bleeding.

Still, despite being structurally bullish on Adobe as a steady cash-flow compounder and a leading creative software platform, I would prefer to wait a bit longer before trying to catch the falling knife. Ideally, I would look for either a retest of the psychological bottom set in September 2022 or a scenario in which the PEG ratio falls materially below 1.

Is ADBE Stock a Buy, Sell, or Hold?

The consensus around Adobe is neither pessimistic nor outright bullish. While some analysts downgraded the stock and others trimmed their price targets in January, overall sentiment remains relatively balanced. Of the 26 analyst ratings issued over the past three months, 16 are Buys, nine are Holds, and only one is a Sell. The average price target stands at $445.76, implying ~50% upside over the next 12 months.

See more ADBE analyst ratings

A Case for Patience With Adobe

As much as Adobe’s business continues to impress me—its market leadership, integrated creative ecosystem, recurring revenue model, stable and highly robust margins, and strong cash generation that supports aggressive buybacks—the stock still carries a clear overhang tied to short- and long-term expectations. That overhang has translated into a downward re-rating of multiples, and it appears that this process may not be fully complete.

Until there are signs, even small ones, that Adobe’s ARR is holding up better than the market expects—or until the stock trades below its 2022 lows, reaching a level where valuation becomes so compelling that even mediocre growth can be overlooked—I believe trying to play the hero and buy ADBE at current “cheap-looking” multiples may be premature. As a result, I am taking a more cautious approach ahead of Q1 earnings and maintaining a Hold rating on Adobe shares.