Adobe’s Strong Q2 Performance and AI Prospects Amid Growth Deceleration

Kirk Materne, an analyst from Evercore ISI, maintained the Buy rating on Adobe (ADBE – Research Report). The associated price target was lowered to $475.00.

Kirk Materne’s rating is based on Adobe’s strong financial performance in the second fiscal quarter, where both revenue and earnings per share surpassed expectations. The company also modestly raised its total revenue guidance, reflecting its outperformance in the first half of the year and some favorable foreign exchange impacts. Despite these positive results, the anticipated growth rate for the second half of the year suggests some deceleration, which may not be enough to significantly attract new investors at this time.
However, Adobe’s management highlighted promising developments, such as the standalone AI annual recurring revenue being on track to exceed the fiscal year 2025 target. Additionally, there has been an acceleration in Creative Cloud subscription revenue and growth in the business professionals and consumers segment. While there are no major product catalysts expected soon, the downside risk appears limited, and the current valuation might be appealing if management can effectively reframe the investment narrative.

In another report released today, Morgan Stanley also maintained a Buy rating on the stock with a $510.00 price target.