At a Glance

Adobe reports fiscal Q3 earnings on September 10, with Wall Street expecting adjusted EPS of $6.08 and revenue of $6.67 billion to $6.72 billion.

Only 1 of the 9 most recent analyst calls is a Buy; 6 are Holds and 2 are Sells, with a consensus average price target of $262.71.

ADBE dropped 6.73% on Friday to close at $266.51, and is down roughly 24% year-to-date.

AI monetization is the key focus: AI-first ARR topped $500 million last quarter, but Adobe warned the freemium push would weigh on near-term growth.

A CEO transition is adding uncertainty, with Anil Chakravarthy set to take over on December 1 as Shantanu Narayen moves to executive chair.

Adobe heads into its September 10 earnings report with its stock already under pressure. ADBE closed at $266.51 on Friday, down 6.73% on the day and about 24% year-to-date.

Wall Street is expecting adjusted EPS of $6.08 for fiscal Q3, up from $5.31 a year ago. Adobe's own revenue guidance sits at $6.67 billion to $6.72 billion, with adjusted EPS of $6.05 to $6.10.

The mood among analysts is cautious. Of the nine most recent calls tracked by TipRanks, only one is a Buy. Six analysts have a Hold, and two have a Sell. The average price target sits at $262.71 — a slight downside from where the stock currently trades. That setup signals Wall Street is not expecting a quick turnaround.

The AI Monetization Question

Last quarter, Adobe posted eye-catching AI numbers. AI-first ARR more than tripled year-over-year to above $500 million. Firefly ARR grew roughly 50% from the prior quarter and was close to $300 million. Creative freemium monthly active users jumped from around 50 million to 90 million year-over-year.

But user growth does not automatically translate into revenue growth.

Adobe said it would focus on pulling in more free users, even if that slows near-term ARR growth. The company also delayed planned Creative Cloud pricing changes to give the freemium strategy more room to develop.

Management warned that the approach would lower second-half ARR expectations and could push growth into Q4. That puts extra pressure on what Adobe says about the second half during this earnings call.

The key question is whether Adobe is beginning to convert its large free user base into paying customers at a rate that changes the revenue trajectory. It is a question that extends beyond Adobe: generative AI tools for image, video, and design have proliferated across the software industry, and established creative-software vendors are under pressure to show that AI features drive subscription revenue rather than simply defend existing market share.

Leadership Shift Adds Uncertainty

Adobe also has a CEO transition underway. Anil Chakravarthy will take over as CEO on December 1. He currently leads the Customer Experience Orchestration business and has been involved in several AI products. He joined Adobe through its 2018 acquisition of Marketo, where he was CEO.

Longtime CEO Shantanu Narayen moves to executive chair. Narayen has led Adobe since 2007, a tenure that spanned the company's pivot from boxed software to the Creative Cloud subscription model. The timing of the announcement, just ahead of earnings, caught some investors off guard.

CFO Daniel Durn is also departing. Two major leadership changes at the same time is something investors tend to scrutinize closely.

Analyst Targets

RBC Capital's Matthew Swanson holds the lone Buy among recent calls, with a price target of $315. Citi's Tyler Radke has a Hold with a target of $301. Barclays' Saket Kalia is also at Hold with a $295 target.

On the bearish side, Morgan Stanley's Adam Wood has a Sell and a $240 target. Bank of America's Tal Liani rates ADBE a Sell with a $220 price target.

Amundi increased its Adobe position by 11% in Q2, bringing its stake to 5.24 million shares worth around $1.07 billion. Institutional investors overall own 81.79% of the stock.

Adobe's full-year guidance calls for FY26 revenue of $20.5 billion to $20.6 billion and adjusted EPS of $24.35 to $24.45.

The post Is Adobe (ADBE) Stock a Buy Before Earnings Thursday appeared first on CoinCentral.