Bank of America Says AI Will Drag Down Adobe Stock

Spending on tools that help companies talk to customers is jumping fast, and that matters for any business selling digital experience software. Recent research shows the AI market for sales and marketing is expected to grow from $58.00 billion 2025 to about $240.59 billion by 2030, which works out to a strong 32.9% annual growth rate.

That kind of expansion should, on paper, be good news for platforms that power content creation and customer interactions. Yet Adobe (ADBE) is finding itself in a very different spotlight.

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The stock is trading near multi‑year lows around $200 and is one of the big underperformers in the S&P 500 Index ($SPX) so far in 2026. That weak performance now comes with a fresh blow, as Bank of America has cut its rating on Adobe to "Underperform" and says new AI tools are starting to hurt its growth outlook instead of helping it.

So what does that really mean for ADBE's prospects from here, and is the market overreacting or simply catching up to reality?

Adobe develops Creative Cloud and Document Cloud software that people and businesses use to design, edit, and manage digital content, and the company is headquartered in San Jose, California, at the heart of the U.S. tech industry.

ADBE is down 36.9% year to date and 42.2% over the past 52 weeks.

The company's market cap is $88.06 billion, and the shares trade at 9.70 times trailing price-to-earnings and 9.07 times forward price-to-earnings versus sector medians of 26.17 times and 24.77 times, showing a clear valuation discount.

Their quarter ending May 26 delivered earnings per share (EPS) of $4.58 versus a $4.74 estimate, a 3.38% negative surprise. The second‑quarter FY2026 update on June 13 reported record revenue of $6.62 billion, up 13% year-over-year (YOY), or 11% in constant currency.

It also showed GAAP diluted EPS of $4.25 and non‑GAAP EPS of $5.96, with GAAP including a $0.17 per‑share non‑cash goodwill impairment tied to the Publishing and Advertising unit. ADBE exited the quarter with $27.10 billion in total annualized recurring revenue, including about $480 million from Semrush.

The company posted GAAP operating income of $2.24 billion and non‑GAAP operating income of $2.95 billion, along with GAAP net income of $1.71 billion and non‑GAAP net income of $2.40 billion. This period also saw $2.17 billion in cash from operations, operating cash flow of $5.123 billion, up 73.19% YOY, and net cash flow of -$512 million with a -156.83% change, reflecting heavy capital deployment and roughly 8.5 million shares repurchased.

Adobe is pushing deeper into AI in a very practical way. The company recently agreed to buy Topaz Labs, a firm known for image and video enhancement tools, with the deal announced in late June 2026. This acquisition brings in products like Astra, which helps upscale video, and Wonder, which focuses on cleaning up and retouching images.

It also adds Neurostream technology that can cut memory needs for large video models by up to 95% and make more processing happen directly on devices. These tools are expected to plug straight into Firefly and key Creative Cloud apps such as Photoshop, Lightroom, Premiere Pro, and Illustrator, boosting Adobe's ability to sharpen, denoise, upscale, stabilize, and repair content without forcing users to leave its ecosystem.

The company is backing this up with new partnerships aimed at big creative and enterprise teams. Fresh deals with Accenture (ACN), Omnicom (OMC), WPP plc (WPP), Microsoft (MSFT), and Anthropic are meant to bake Firefly and related tools into marketing and tech stacks so creative and data teams can use software agents to plan, create, and fine‑tune campaigns at scale.

On the product front, Adobe has started rolling out a broad expansion of its Creative Agent across Firefly and Creative Cloud apps, adding more in‑app help and automation inside flagship tools like Photoshop and Premiere. The aim is to turn AI from a handful of separate buttons into something that is present throughout the workflow, from the first idea to the final export.