Adobe and Apple are finding themselves on the wrong side of investor sentiment as the artificial intelligence boom redraws the technology landscape. Both companies remain profitable with formidable global brands, yet analysts increasingly question whether either can keep pace in a market that rewards visible, fast-moving AI strategies. A creative software giant under pressure Once the dominant force in creative software, Adobe is struggling to convince Wall Street that its tools remain indispensable when rivals can now generate images from simple text prompts. Ahead of its fiscal third-quarter results, due Thursday, analysts forecast revenue growth of just 9.3% and earnings per share up 7%. While respectable in absolute terms, full-year sales growth of around 10% would mark Adobe’s slowest pace in more than a decade. Forecasts suggest growth could continue to recede each year through 2028. The stock has lost more than 20% this year and is down by about half since the end of 2023, even as an exchange-traded fund tracking software stocks gained more than 40% over the same period. Valuations have compressed sharply, with shares trading at less than 16 times earnings, their lowest multiple in more than a decade. Brian Barbetta, co-leader of Wellington Management’s technology team, said that “AI image generation that replaces stock photography and image-editing software is the most obvious example of where we’re already seeing disruption.” He said, “AI companies are growing so quickly that it really seems like it is coming at the expense of legacy names.” Apple sentiment hits five-year low If Adobe is the poster child for disruption fears, Apple is gradually becoming a cautionary tale of what happens when innovation stagnates. The iPhone maker was hit with two downgrades on Thursday, pulling its recommendation consensus to 3.9 out of 5, the lowest since early 2020. Only 55% of analysts tracked by Bloomberg now rate Apple a “buy,” an unusually weak endorsement for a megacap stock. Shares are down 9% so far in 2025, compared with a 14% gain for the Nasdaq 100. Although it’s worth noting that despite the year’s outlook, Apple has rallied a 30% jump since its April low, which was a by-product of President Trump’s tariffs. Apple’s stock has had a rough 2025 despite a recent recovery. Source: Google Finance The latest blow followed this week’s product announcements, which were relatively lacklustre, with little in the way of transformative features, with one of the highlights being a thinner iPhone. Investment banker D.A. Davidson has reportedly cut the stock rating from buy to neutral. Analysts have cited the lack of significant AI innovation alongside persistent weakness in China. An analyst said that Apple has to redefine its current products or develop compelling ones, as they believe the giant’s growth will remain stunted if it continues to run business as usual. Searching for the next AI winners The caution around Adobe and Apple stands in stark contrast to companies more clearly associated with the AI boom. Companies such as Microsoft, Nvidia and, most recently, Oracle, with its ongoing record-breaking rally, have seen significant growth that’s related to their investments in AI. Some investors remain willing to back Adobe at current levels, drawing parallels with Snowflake’s recent market success, with Conrad van Tienhoven, portfolio manager at Riverpark Capital, reportedly saying, “Adobe continues to offer good growth, great margins, and now at a very cheap valuation. While there are concerns about its future, the market has already decided it is going to be a loser. That’s the opportunity. If Adobe gets AI right, at this valuation, it could be a huge success.” For Apple, the question is whether major improvements to its products and the premium integration of AI features into its hardware ecosystem can reignite growth. Get $50 free to trade crypto when you sign up to Bybit now
