William Blair moved Adobe to a Market Perform rating on Thursday, citing what the firm calls "intense competition" across Adobe's flagship Creative Cloud franchise and growing uncertainty about the company’s long-term competitive position.
In the note, analyst Arjun Bhatia said he is assuming solo coverage of Adobe. Bhatia reiterated a valuation point from the firm - that the stock trades at about nine times free cash flow - but emphasized that the immediate concern is competitive intensity. "Our primary concern is around the intense competition Adobe faces," he wrote.
William Blair said the current competitive landscape creates "legitimate questions" regarding several strategic pillars: Adobe’s pricing power, its ability to maintain product differentiation, and its "right to win the AI opportunity." Bhatia added context on the firm’s stance: "To be clear, we are not calling Adobe an 'AI loser' ... but acknowledging that the unknown answers to these questions are likely to keep the stock at least range-bound."
The note highlights how developments in artificial intelligence have altered the market dynamic. William Blair said AI has "overnight, democratized the highly technical skills creative professionals had built," and that this shift has accelerated pressure that was already present from competitors such as Canva and Figma.
The firm cited specific scale and growth differentials among competitors. Canva has reached $4 billion in annual recurring revenue and is growing at more than 30 percent, while Figma is at a $1.2 billion run rate and expanding at 40 percent. Those rates were contrasted with Adobe’s much larger but slower-growing $19 billion Digital Media business.
William Blair also noted a cohort of fast-growing, AI-native entrants, naming Midjourney, Runway and StabilityAI, and further pointed to heightened interest from large platforms, including Google, OpenAI and Apple. The firm said it is too early to determine long-term winners in the evolving environment.
Finally, William Blair warned that Adobe’s "very healthy mid-40s operating margin profile" could itself attract additional competitive encroachment. The firm concluded that margin trends and Adobe’s ability to capture new AI-driven demand are key items that investors should monitor.
Bottom line: William Blair downgraded Adobe to Market Perform amid mounting competition across creative tools and uncertainty about how AI will reshape the company’s pricing, differentiation and growth prospects.