Adobe (ADBE) Stock Forecast & Price Target

Adobe's financial performance demonstrates robust growth, with total revenue reaching $6.194 billion, marking an 11% year-over-year increase and exceeding market expectations. The company's digital media annual recurring revenue (ARR) also showcased strong growth, climbing 11.5% year-over-year to $19.2 billion, driven largely by subscription expansion and strategic upselling efforts. Furthermore, the total remaining performance obligation (RPO) surged to $25.2 billion, reflecting a 13% year-over-year increase, underscoring Adobe's solid demand and positive outlook across its digital media and experience segments.

Adobe's financial outlook presents concerns primarily due to a projected decline in Non-GAAP operating margins, expected to fall by one percentage point to 45% in FY26, alongside guidance indicating a modest year-over-year Annual Recurring Revenue (ARR) growth of over 10%. The company's valuation multiples reflect a significant discount compared to peers, trading at 14 times FY26 EPS against a median of 26 times for large-cap software competitors. Furthermore, challenges related to the integration of acquisitions and failure to adapt to technological advancements threaten Adobe's long-term growth potential and could adversely impact future revenue and operating performance.