Adobe Inc. (NASDAQ:ADBE) is one of the 10 software stocks analysts are upgrading. On June 13, BofA analyst Brad Sills upped the company’s price objective to $475 from $424, while maintaining a “Buy” rating, as reported by The Fly. As per the firm, Adobe Inc. (NASDAQ:ADBE)’s Q2 2025 results and outlook exhibit strong execution amidst a sluggish software demand backdrop, while its AI optionality remains intact. The firm’s analyst hinted at a more resilient and diversified business, as well as healthy execution on growth initiatives.
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.
For FY 2025, the company targets total Adobe revenue of between $23.50 billion – $23.60 billion, and digital media segment revenue of between $17.45 billion – $17.50 billion. In Q2 2025, Adobe Inc. (NASDAQ:ADBE)’s digital media segment revenue came in at $4.35 billion, representing 11% YoY growth, or 12% in constant currency. Digital Media ARR, while exiting the quarter, came in at $18.09 billion, reflecting 12.1% growth YoY.
While Adobe Inc. (NASDAQ:ADBE)’s AI-influenced ARR continues to contribute, the company’s AI book of business from AI-first products like Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing has been tracking ahead of the $250 million ending ARR target by FY 2025 end.
Adobe Inc. (NASDAQ:ADBE) is engaged in developing and selling creative, document, design, and marketing software. Aristotle Capital Management, LLC, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Adobe Inc. (NASDAQ:ADBE), the leading provider of content creation and publishing software, was a notable detractor during the quarter. This came despite the company reporting record revenue of over $5.7 billion in the first quarter—a 10% year-over-year increase, with double-digit increases across both its Digital Media and Digital Experience segments. The disconnect between strong fundamentals and share price weakness reflects ongoing market concerns around intensifying competitive threats from generative AI and lower-cost design platforms. Market sentiment has remained cautious around the perceived disruption risk posed by new AI-driven entrants, including OpenAI’s Sora for video generation and platforms like Canva, which cater to the broader prosumer and small and medium-sized business segment. However, we continue to view these as largely non-overlapping with Adobe’s core base of creative professionals, enterprises and agencies—audiences that demand precision, control and integration within larger workflows. Canva, while expanding its feature set, remains limited in its enterprise readiness and depth. Sora, meanwhile, remains early-stage and experimental, with limited commercial application at this point. Crucially, Adobe is not standing still. The company is actively embedding generative AI across its ecosystem through Firefly, which is commercially safe (i.e., free of copyrighted sources to train its models) and integrated natively into Creative Cloud applications like Photoshop and Illustrator. Firefly has shown strong early traction, generating $125 million in annualized recurring revenue, with management expecting that figure to double by year end. While modest in size relative to Adobe’s total revenue, Firefly’s monetization strategy is still in its early innings, with further potential through upselling, usage-based pricing and expanded use cases. Beyond monetization, AI integration enhances Adobe’s long-term competitive moat through product functionality, stronger customer engagement and increased switching costs. Adobe’s unique access to proprietary data, content workflows and creative content allows it to fine-tune models that serve the high-end needs of professionals—capabilities that generic AI models lack. Strategic partnerships with Microsoft (e.g., Firefly in Microsoft 365 Copilot) and ongoing momentum in Adobe Express further extend its reach into new user segments. Ultimately, we believe Adobe has a durable competitive advantage, underpinned by a large installed base, subscription-led business model, strong brand equity and a long track record of innovation. While short-term concerns over AI disruption have weighed on the stock price, we believe Adobe is well-positioned to harness AI as a driver of value rather than being displaced by it.”
While we acknowledge the potential of ADBE to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than ADBE and that has 100x upside potential, check out our report about this cheapest AI stock.
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