Shares of Adobe (NASDAQ:ADBE) slipped slightly in U.S. premarket trading on Tuesday after analysts at Oppenheimer lowered their rating on the creative software group.
In a research note, Oppenheimer cut its recommendation on Adobe to “market perform” from “outperform,” arguing that while the stock presents “good medium-term opportunities” at what they see as a relatively “cheap” valuation, near-term conditions remain difficult.
The analysts cautioned that the outlook for application software in 2026 is “challenging.” They pointed out that the sector has underperformed both the S&P 500 and the tech-heavy Nasdaq indices for four consecutive years, with small- and mid-cap software companies suffering one of their weakest performance years in 2025.
Although a supportive macroeconomic backdrop and the prospect of increased merger and acquisition activity could attract interest, the analysts said software has lagged other IT segments when it comes to monetizing artificial intelligence.
“Themes that worked well in the past—AI, verticalization, and digital transformation—fell apart” last year, they wrote.
“[A]n AI bear narrative on the constraints to software supplier models during the AI technology transition is compelling investors to lose confidence in multi-year growth trajectories and lower software company multiples.”
For Adobe specifically, the analysts said expected acceleration in its digital media business from AI-driven initiatives did not materialize. Despite flagship products such as Premiere Pro and InDesign underpinning Adobe’s leadership in creative software, digital media growth slowed over the past year rather than strengthening.
Adobe has been increasingly embedding AI features across its product portfolio to defend its position against newer competitors such as Midjourney and OpenAI, which are more narrowly focused on AI technologies.
“[A] challenging operating environment during the AI technology transition leading to uninspiring and decelerating top-line growth, inconsistent execution with product cycles, durability concerns about the moat, lackluster investor interest for owning software names, and down year-on-year operating margin guidance in FY26 will likely weigh negatively on the sentiment for the company’s opportunities this year, and limit near-term upside for Adobe shares,” the Oppenheimer analysts said.
Adobe shares are down more than 6% over the past 12 months.