Adobe (NASDAQ:ADBE) has a new Sell rating to deal with. On Nov. 4, Citigroup analyst Tyler Radke downgraded the creative software company to Sell from Neutral and cut his price target to $207 from $250. Citi sees downside risk to Wall Street’s growth estimates for Adobe going into fiscal 2027.
Shares didn’t drop on the news. Actually, Adobe stock gained about 1% that day.
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But the stock was already having a tough year. At roughly $242 as I write, it’s down about 31% in 2026.
I wrote about Adobe’s long history of steep drops under two weeks ago, and Citi’s Sell rating is the only new development since then. I don’t think the downgrade is wrong about the direction of Adobe’s growth. But I do think the stock price already bakes in something far worse than what Adobe’s own numbers show.
Image source: Getty Images.
Adobe’s growth is slowing
Citi points to industry data showing rising pressure on Adobe from artificial intelligence (AI) and among small businesses. It also thinks changes to the creative business under Anil Chakravarthy, who becomes Adobe’s CEO on Dec. 1, might hold back short-term growth.
Adobe’s own numbers already show some slowing. Heading into fiscal 2026, the company aimed for 10.2% growth in total annualized recurring revenue (ARR), a gauge of what its subscriptions pull in over a year. Later, Adobe closed its acquisition of the marketing software company Semrush, which added around $480 million in ARR. But the full-year ARR target didn’t move. Without the purchase, that target comes out to growth of only around 8%.
Profits are cooling, too. Adobe’s non-GAAP (adjusted) net income climbed around 8% year over year in the fiscal third quarter of 2026 (the period ended Aug. 28, 2026), down from about 11% in the fiscal second quarter and 12% in fiscal Q1. Revenue, of course, still rose 13% from a year earlier to a record $6.76 billion in fiscal Q3.
And if the slowdown in profit growth persists into fiscal 2027, Citi’s concern about next year’s estimates could prove right.
A higher earnings target
Earnings per share look stronger, mainly because Adobe continues to buy back its stock. Showing how much the buyback matters, the company’s diluted share count shrank around 7% year over year in fiscal Q3, to 395 million. So adjusted earnings per share climbed 15% that quarter, almost twice the growth in adjusted net income.
