Phillip Securities cuts Adobe to Neutral, citing slower growth as AI momentum meets tempering expectations

Adobe shares slid in response to a Wall Street note that trimmed expectations for the company’s near-term trajectory. On June 29, Phillip Securities downgraded Adobe Inc. from Buy to Neutral, according to a report carried by Yahoo Finance, and cut its price target to $203 from $385.

The analyst’s view, as summarized in the market coverage, points to a tension between Adobe’s status in “legacy” software-as-a-service and the pace of growth that investors want to see in the AI era. The note argues that the business still appears resilient because its software is described as mission-critical and reliable for customers, but growth momentum has slowed.

While acknowledging that Adobe has moved ahead with AI initiatives, the analyst said the company’s growth has continued to decelerate. The framing suggests that AI has not yet translated into an acceleration strong enough to offset the broader slowdown seen in parts of the software market.

Recent reported results cited in the coverage show why investors are watching closely for an inflection. Adobe reported 13% revenue growth in its second quarter of fiscal 2026, with revenue of $6.62 billion compared with $5.87 billion in the prior-year quarter.

Profitability also remained solid in that period. The company reported GAAP net income of $1.71 billion and non-GAAP net income of $2.40 billion, according to the same account.

Separately, the market coverage also highlighted Adobe’s recent move to expand its AI capabilities through an acquisition. Earlier this month, Adobe entered into a definitive agreement to acquire Topaz Labs, an AI company specializing in video and image enhancement models, with the aim of widening the company’s model offerings in products that include Adobe Firefly, Firefly Services, and Creative Cloud applications.

Adobe said the Topaz Labs addition would expand video and image enhancement capabilities across different workflows. For investors, that matters because it speaks to how Adobe plans to use AI to deepen engagement with its creative and content tools, which are core to its recurring revenue model.

Still, the downgrade indicates that investors may require more than incremental product progress. The market note did not spell out a specific timeline for a rebound in growth, and it did not provide additional forward-looking guidance details in the text available here.

As the next set of earnings approaches, the key question will be whether Adobe can demonstrate that AI-enabled features are translating into faster customer adoption, stronger usage, and improved growth rates. Given the sharp gap between the revised price target and the previous level cited in the coverage, investors will likely be looking for clearer evidence that growth can re-accelerate alongside profitability.