The 2025 Q4 earnings season is almost over, with more than 96% of the S&P 500 companies having already reported their results. This has been another great cycle overall, with growth remaining strong while the beating percentage not far off historical levels.
Adobe ADBE 2026 helps kick off the Q1 cycle, although this period will pick up more pace with the release of results from the big banks, which are due in about a month. But how do expectations rise for a beaten software favorite?
Will AI Disrupt Adobe?
Adobe shares have seen negative sentiment in recent months, with fears of AI disruption being reflected in share performance. Although there are still no definite signs that the company is in imminent danger due to the AI craze, this argument is still valid. While most software stocks have faced sentiment pressure, Adobe is not alone in this regard.
EPS and sales revisions for the reported quarter have also been flat, with the current $5.88 Zacks Consensus EPS Estimate suggesting 15% year-over-year growth. Revenue revisions paint a similar picture, with the $6.3 billion Zacks Consensus EPS estimate suggesting a 10% year-over-year increase.
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While stability in estimates is a positive sign, Adobe ADBE is still vulnerable to a high level of disruption from AI-related technologies, making the overall outlook unclear at this point. It seems like a more risk-averse idea to wait until we hear from the company about its response to the scare, but it’s worth noting that it won’t explicitly state that it’s at risk. While guidance and revisions will be a key factor after the earnings report, the currently cloudy outlook is not that reassuring.
That being said, the valuation picture here still can’t be ignored, with the current 11.6X forward 12-month earnings being a fraction of the 32.1X five-year average, which also reflects a hefty 47% discount relative to the S&P 500. Most of the downside has already been priced in, but that doesn’t mean the stock has much upside given the ongoing disruption risks.
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Adobe Inc. (ADBE): Free Stock Analysis Report
This article originally appeared on Zacks Investment Research (zacks.com).
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