Adobe (ADBE) Price Target Cut as TD Cowen Flags Slowing Spend and Weak AI Credit Demand
1 min read
The story
TD Cowen trimmed its Adobe price target, citing two specific concerns: decelerating enterprise spend across the software stack and disappointing uptake of Adobe's AI credit consumption model — the mechanism through which ADBE expected to monetize Firefly and generative AI features. Adobe reported $23.8B in revenue for FY2025, up 10.5% YoY, with robust gross margins of 89.3%, but net margins of 30% and diluted EPS of $16.70 suggest the Street's premium multiple is priced for reacceleration, not deceleration.
The core tension is whether Adobe's AI credit system is a timing issue (enterprise adoption lag) or a structural miss on the monetization model itself. The next earnings print is the clearest catalyst — watch for management commentary on AI ARR contribution and any revision to credit attach rates. Until then, any multiple compression on slowing AI revenue signals could weigh on a stock that trades at a significant premium to legacy software peers.
The case — both sides
Adobe's 89.3% gross margin and 10.5% YoY revenue growth demonstrate durable pricing power, and any reacceleration in AI credit attach rates — which management has framed as early-stage — could rapidly justify current premium multiples.
TD Cowen's specific flag on weak AI credit demand suggests the consumption-based AI monetization model is not gaining traction at the pace baked into consensus estimates, threatening the reacceleration narrative that underpins ADBE's premium multiple.
The house read
Leans bearADBE faces the question of whether slowing AI credit demand is a temporary adoption lag or a signal that its generative AI monetization model is structurally weaker than priced in.
Wrong ifA strong next earnings print showing material AI credit ARR growth or a positive pre-announcement would rapidly close the price-target gap and squeeze any short position.
Published read · research, not advice