Bank of America downgrades Adobe, saying AI tools could weigh on growth

Adobe’s stock took another hit after Bank of America downgraded the company to “Underperform,” according to a market report published July 9. The report framed the decision around concerns that Adobe’s expanding artificial-intelligence capabilities may not be translating into stronger growth in the near term, even as customers begin adopting new AI-enabled workflows.

In the downgrade note referenced by the report, Bank of America also suggested the market is not yet rewarding the company’s AI push. The report said the stock is already trading near multi-year lows, making the call a challenge to investors who have been looking for AI-driven acceleration in Adobe’s results.

Adobe is best known for creative software used by designers, marketers, and media organizations, with offerings that include tools for editing images and video as well as document and digital-experience products. In that context, AI features typically aim to shorten production time, improve creative output quality, and make it easier for non-specialists to perform tasks that previously required more manual work.

The market report did not provide detailed, quarter-specific figures or model assumptions tied to the downgrade. It instead characterized AI as a factor that could “drag down” Adobe’s stock, emphasizing that the competitive and customer-adoption dynamics around new AI tooling may be evolving more slowly than some investors expect.

For Adobe, the central strategic question is whether new AI features will increase demand and retention enough to offset any transitional friction. Examples of transitional effects could include customers evaluating capabilities before upgrading plans, pricing pressure if AI-enabled substitutes proliferate, or costs associated with expanding AI infrastructure. The report did not specify which of these channels Bank of America believes is most material.

Beyond the analyst call, the decision underscores a broader tension in enterprise and creative software markets: AI can be both a product differentiator and a source of uncertainty. Early in an AI product cycle, investors often want proof that adoption is measurable in subscription growth, usage trends, and renewals. When that evidence is not yet clear, valuation sentiment can deteriorate even if the product roadmap looks promising.

A key caveat is that the available reporting did not include the full downgrade rationale or any disclosed targets, probability weights, or sensitivity analysis. It also did not quote management commentary, new customer data, or specific AI product releases that would directly support the claim about growth being weighed down.

Investors are likely to watch for the next set of Adobe disclosures that can connect AI features to commercial outcomes, such as commentary on customer adoption, engagement or usage metrics for AI tools, and updates on subscription momentum. If Adobe can demonstrate that AI-driven workflows are translating into net-new revenue or improved retention, it may blunt the impact of the downgrade. If not, the market may continue to treat the AI transition as a headwind until results catch up.