"Prove Mode": three analysts downgraded Adobe stock after the report. What's Wrong.

Software developer Adobe's fiscal second-quarter results beat expectations and its full-year outlook was better than the consensus forecast. However, personnel reshuffles in management and three downgrades put pressure on the company's shares in trading on Friday, June 12, CNBC notes. At the intraday low on June 12, Adobe's securities were falling by 10%, but then slowed down a little - at the time of publication are losing about 7%.

Analysts, Barron's notes, question Adobe's change in strategy. The company is trying to dispel market fears about the impact of AI on its business by launching its own AI products. However, Adobe plans to attract new customers with the possibility to connect to them without the need for immediate payment - that is, the so-called Freemium (conditionally free) offer, the company's CEO Shantanu Narayen told The Wall Street Journal during a teleconference on the results of reporting.

- Adobe reported adjusted earnings in the second fiscal quarter of $5.96 per share on "record" revenue of $6.62 billion. These results beat analysts' forecasts, who expected earnings of $5.82 per share on revenue of $6.45 billion, notes Barron's. Adobe's quarterly revenue at the same time showed growth of 12.7% year-on-year.

- The company also raised its outlook for fiscal year 2026. Adobe now expects earnings in a range of $24.35 to $24.45 per share on revenue of $26.5 billion to $26.6 billion. Both ranges exceeded Wall Street estimates for fiscal 2026, which were $23.54 billion and $26.1 billion, respectively, Barron's reports.

- Monthly audiences for Acrobat (the company's software for editing, viewing and signing PDF documents) and Express (a web-based visual content creation application) have grown from 700 million a year ago to more than 850 million users in the second fiscal quarter of 2026, while the number of active monthly users of Adobe's creative products on Freemium has increased from 50 million to more than 90 million, Narayen said.

- Adobe's annual recurring revenue (ARR) - an indicator that shows the predictable revenue that the company expects to receive for the year from all active customers - reached $27.1 billion in the last reporting period (a year-on-year increase of 12.5%), and also exceeded analysts' forecasts, who expected to see it at $26.6 billion. At the same time, Adobe management admitted that the chosen Freemium strategy will put pressure on ARR in the second half of the year, reports The Wall Street Journal. Annual recurring revenue has become a key metric for investors seeking to understand whether the company's investments in artificial intelligence are paying off, the newspaper notes.

"The results reflect the strong demand for AI technology among our customer groups," Narayen said on the teleconference, emphasizing that he believes that attracting new customers through a simple connectivity process with no immediate payment required (Freemium) will be the best way to encourage the use of Adobe's AI-based products.

The day before, the company also announced the departure of CFO Dan Dern, who will take a similar position at AI chip developer Marvell Technology on June 15, Barron's recalls. This development follows Adobe's announcement three months ago that Shantanu Narayen would also step down as CEO of the company, a position he held for 18 years, once his successor is found.

Adobe shares have lost about 42% since the beginning of the year amid concerns that artificial intelligence could disrupt software developers' business models.

- Analysts of investment bank Stifel after the report lowered their recommendation on the company's securities from "buy" to "hold" and lowered the target price from $350 to $200. This target implies a 8.5% drop in quotes relative to Thursday's closing price. Despite strong quarterly results, Adobe shares are under pressure due to the deterioration of the company's ARR forecast, explained Stifel analyst Joe Parker Lane, writes CNBC.

"The decision to 'step on the gas' in user engagement by moving to a Freemium model seems logical given the proliferation of artificial intelligence in the creative sphere, but it comes at the expense of short-term ARR growth and [business] transparency," Barron's quoted Lane as saying.

He added that the departure of Chief Financial Officer Dan Dern, announced on Thursday, June 11, combined with the impending resignation of CEO Shantanu Narayen later this year, adds uncertainty to the company's future. "We are stepping aside as the company copes with the transition to a Freemium strategy and the change in CEO and CFO," wrote analyst Stifel.

- Wolfe Research after the release of the company's report downgraded its recommendation on the company's shares from "buy" (Outperform rating) to "hold" (Peer Perform) on Adobe shares. Analyst Alex Zukin called the quarterly report of the corporation "changing the theme": personnel reshuffles in the management of Adobe, combined with a slowdown in growth rates will limit the upside potential of quotations, Zukin believes.

- Investment firm Evercore also downgraded its recommendation on Adobe shares from "buy" to "hold." Its new target price of $225 implies an upside of just under 3% relative to Thursday's close. Analyst Kirk Matherne also called the company's outlook for annualized recurring revenue (ARR) disappointing. He said the combination of delayed monetization to drive higher user engagement in the short term and the ongoing search for a new CEO and CFO will likely force the stock into a "show me" mode.

Overall on Wall Street, 20 of the 38 analysts covering the company's stock recommend holding it. 15 advise buying Adobe securities, and three advise selling.

This article was AI-translated and verified by a human editor