Adobe stock (NASDAQ: ADBE) has beaten Wall Street expectations consistently, but investors seem unimpressed.
The Photoshop maker reports fiscal third-quarter results after the US market closes on Thursday, with analysts expecting revenue of about $6.69 billion and adjusted earnings of roughly $6.08 a share.
Yet, market data indicates that Adobe shares have fallen after 15 of the past 20 earnings reports.
The stock closed at $254.86 on Wednesday and is down about 27% this year.
Adobe keeps beating, but investors want a different beat
Adobe itself guided for third-quarter revenue of $6.67 billion to $6.72 billion and non-GAAP earnings of $6.05 to $6.10 a share.
Its recent record suggests clearing that bar may not be enough.
Adobe has beaten both revenue and earnings expectations in nine of the past 10 quarters, while shares have risen after only two of the past 12 reports.
“They don’t just need an earnings beat, they need to change the narrative,” Freedom Capital Markets strategist Jay Woods wrote in his weekly newsletter.
That narrative is still dominated by uncertainty over whether generative AI expands Adobe’s opportunity or weakens the economics of products such as Photoshop, Illustrator and Acrobat.
Investors therefore need more than evidence that the core franchise remains resilient.
They need management to show that AI can produce a higher growth trajectory, rather than merely defend Adobe’s installed base from newer tools.
AI revenue has tripled, but monetisation is the test
Adobe has already made progress on adoption, as AI-first annual recurring revenue exceeded $500 million at the end of the second quarter, more than tripling from a year earlier.
Total Adobe ARR reached $27.1 billion, while Firefly ARR approached $300 million after growing roughly 50% sequentially.
The company has continued adding AI capabilities across creative and productivity products, including Firefly, Premiere, After Effects and Acrobat.
But Wall Street is increasingly separating usage from monetisation.
Goldman Sachs software analyst Gabriela Borges told The Information that successful incumbents need to reduce technical debt, innovate and monetise their AI products.
“I think Adobe is a little bit still figuring out where they are in that process,” she said.
That is important because Adobe has deliberately expanded freemium access to attract more users, accepting some near-term pressure on ARR in exchange for a larger funnel.
ARR growth may decide whether the multiple changes
The clearest bridge between AI adoption and Adobe’s valuation is recurring-revenue growth.
Adobe currently expects total ending ARR to grow 10.2% in fiscal 2026. That is healthy at Adobe’s scale, but investors want signs that newer AI products can eventually push that rate higher.
RBC Capital analyst Matthew Swanson raised his Adobe target to $315 from $285 while keeping an Outperform rating.
He expects broadly in-line third-quarter results, but said “a path to ARR re-acceleration remains the key to company-specific multiple expansion.”
That distinction is crucial as Adobe does not necessarily need a spectacular quarter. It needs a credible case that AI can increase the pace of recurring-revenue growth enough to justify a richer valuation.
Leadership adds another layer. Anil Chakravarthy becomes chief executive on December 1, while Shantanu Narayen moves to executive chair, leaving the incoming CEO responsible for turning Adobe’s expanding AI portfolio into faster growth.
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