Investment Rating - The report assigns a "Buy" rating to several companies including Microsoft, Alphabet, Salesforce, ServiceNow, HubSpot, Adobe, and Intuit, indicating a positive outlook on their potential to capture market share in the evolving software landscape driven by agentic AI capabilities [16][18][19]. Core Insights - The report emphasizes that the next phase of AI-driven productivity gains in enterprises will depend on the effectiveness of agents at the software application layer over the next three years, with current examples primarily being basic chatbots [1]. - The total addressable market (TAM) for software is projected to grow by at least 20% by 2030, particularly in customer service software, which is expected to expand by 20-45% compared to a scenario without AI integration [2]. - SaaS companies are well-positioned to capture a significant share of the new agent TAM, with estimates suggesting that agents will constitute over 60% of the total software TAM by 2030 [3]. Summary by Sections Agentic Architectures - The report defines agents as autonomous AI entities capable of performing tasks, making decisions, and adapting to changes in their environment [22]. - It highlights the importance of distinguishing between traditional chatbots and more advanced agents that exhibit agency and context awareness [22]. The Evolving Software TAM - The report discusses the potential for TAM expansion across various software segments, noting that sectors tied to revenue generation and innovation, such as sales and marketing, have higher expansion potential compared to those viewed as cost centers [2][70]. - It provides a detailed analysis of how agents can drive productivity and enhance the software TAM, particularly in customer service and security operations [70]. SaaS Incumbents vs. New Entrants - The competitive landscape is characterized by SaaS incumbents, AI natives, and platform/model vendors, with the report mapping their strengths and weaknesses against key ingredients for success in capturing the agentic profit pool [8][10]. - It notes that while SaaS companies are adapting to the new agentic landscape, they face risks from new competition based on AI-native tech stacks and pricing model compression [8]. Companies, Strategies, and Case Studies - The report identifies key companies to watch, including Microsoft, Alphabet, Salesforce, ServiceNow, HubSpot, Adobe, and Intuit, each with unique strategies to leverage agentic AI capabilities [16][18][19]. - It emphasizes the importance of innovation pace, domain experience, and value-oriented pricing as critical factors for success in the agentic AI market [8][10].

Group 1 - The article mentions that Anand Chokkavelu, CFA, Jose Najarro, and Travis Hoium have no positions in any of the stocks mentioned [1] - The Motley Fool has positions in and recommends Adobe, indicating a positive outlook on the company [1]

Core Insights - Adobe and Apple are integrating artificial intelligence (AI) into their core products, with Adobe focusing on creative tools and Apple enhancing its operating systems [2][3] - Global spending on AI technologies is projected to exceed $749 billion by 2028, with enterprises expected to contribute 67% of the $227 billion AI spending in 2025 [3] - Both companies face competition from Microsoft, Amazon, and Alphabet, with Adobe shares down 13.9% year-to-date and Apple shares down 21.8% [4] Adobe's Position - Adobe has expanded its AI offerings with products like Adobe GenStudio and Firefly Services, which facilitate collaboration on marketing campaigns [6] - The Firefly Video Model in Premiere Pro allows for instant generation and extension of video and audio clips, while the Firefly App is gaining traction for AI-powered content creation [7][11] - Adobe's Digital Media Annual Recurring Revenue (ARR) has increased by 12% year-over-year, reaching $18.09 billion [12] - The company is on track to exceed its $250 million ARR target from AI-first products by the end of fiscal 2025 [12] - Adobe's earnings estimates for fiscal 2025 have risen to $20.41 per share, indicating a 10.8% increase over the previous year [16] Apple's Position - Apple is seeing improved iPhone 16 sales in regions where Apple Intelligence features are available, with plans to expand language support for these features [13][14] - New features for Apple Intelligence include Live Translation and enhancements to visual intelligence, expected to be available this fall [14] - The consensus estimate for Apple's fiscal 2025 earnings has decreased to $7.11 per share, suggesting a 5.33% growth over fiscal 2024 [17] Valuation Comparison - Adobe is trading at a lower forward Price/Sales ratio of 6.62X compared to Apple's 7.04X, indicating a more favorable valuation for Adobe [18] - Both companies are considered overvalued, but Adobe's focus on monetization and partnerships with major firms is expected to drive growth [21] - Adobe's revenue guidance has been raised to between $23.5 billion and $23.6 billion, reflecting positive momentum [21] Investment Recommendation - Adobe is rated as a stronger buy with a Zacks Rank 2, while Apple holds a Zacks Rank 3, indicating a hold position [22]

Adobe Systems (ADBE) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). This rating change essentially reflects an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Individual investors ...

Industry Overview - The software industry is experiencing significant growth driven by digital transformation, cloud adoption, and the rise of SaaS models, which provide recurring revenue visibility and scalability for users [1][2] - The global software market is projected to grow at a CAGR of 11.3% from 2025 to 2030, reaching $1,397.31 billion [2] - The Zacks Computer Software industry ranks 30, placing it in the top 12% of over 245 Zacks industries, indicating bright near-term prospects [8][9] Key Trends - Increased spending on AI and cloud technologies is expected to enhance software tools for automation, personalization, and predictive analytics [4] - Cloud computing is becoming a dominant force, with businesses adopting hybrid and multi-cloud environments for flexibility and scalability [5] - The demand for cybersecurity software is rising due to the increasing need to secure cloud platforms amid growing cyber threats [6] Company Highlights Intuit (INTU) - Intuit's shift to a cloud-based subscription model is expected to generate stable revenues, with a focus on embedding AI across key products [19] - In Q3 fiscal 2025, Intuit reported revenues of $7.75 billion, a 15.1% year-over-year increase, with QuickBooks Online revenues up 21% [20] - The Zacks Consensus estimate for Intuit's fiscal 2025 earnings is $20.06 per share, indicating 18.4% year-over-year growth [21] Adobe (ADBE) - Adobe is leveraging generative AI across its portfolio, enhancing its digital marketing services and personalized experiences [25] - In the last reported quarter, Adobe's total revenues were $5.87 billion, an 11% year-over-year increase [26] - The Zacks Consensus estimate for Adobe's fiscal 2025 earnings is $20.60 per share, indicating 11.8% year-over-year growth [28] Pegasystems (PEGA) - Pegasystems is focusing on its GenAI Blueprint solution and Customer Decision Hub, which utilize AI for personalized customer interactions [30] - In Q1 2025, Pegasystems reported revenues of $475.6 million, a 44% year-over-year increase, exceeding the Zacks Consensus Estimate by 33.6% [31] - The Zacks Consensus estimate for Pegasystems' 2025 earnings is $3.61 per share, indicating 19.1% year-over-year growth [31]

Core Viewpoint - Adobe has launched a separate mobile app called Firefly, aimed at generating AI videos and images [1] Group 1 - The new app Firefly is designed specifically for mobile devices, enhancing accessibility for users [1] - This initiative reflects Adobe's commitment to integrating AI technology into its product offerings [1] - The launch of Firefly indicates a growing trend in the industry towards mobile-based AI solutions [1]

Core Insights - Adobe is enhancing its enterprise focus through the Digital Experience segment, integrating creativity, data, and AI for personalized engagement, positioning itself for long-term growth as enterprises invest in marketing automation [1][5] Digital Experience Segment - The Digital Experience segment saw a 10% year-over-year revenue increase to $1.46 billion in Q2 2025, surpassing the Zacks Consensus Estimate by 1.56% [5][10] - Subscription revenues within this segment rose 11% to $1.33 billion, driven by the adoption of GenStudio and Firefly Services, outperforming the Zacks Consensus Estimate by 0.74% [5][10] Product Innovations - Adobe's GenStudio and Firefly Services are central to its Customer Experience Orchestration (CXO) strategy, facilitating campaign planning, content creation, and large-scale asset generation [2][3] - Recent upgrades to the CXO platform include automated ad deployment across major platforms and enhancements in content generation capabilities [3][10] - The introduction of LLM Optimizer and Agent Orchestrator aims to improve asset discoverability and automate campaign execution through AI workflows [3] User Engagement - Monthly active users for Acrobat and Express exceeded 700 million, reflecting a 25% year-over-year increase, with a notable 11x growth in the adoption of Express features within Acrobat [4] Competitive Landscape - Adobe faces increasing competition from Salesforce and HubSpot, both enhancing their AI-driven marketing platforms [6][7] - Salesforce's Marketing Cloud and Data Cloud offer real-time personalization and campaign orchestration, making it a strong alternative to Adobe [6] - HubSpot is gaining popularity among small to medium businesses with its all-in-one CRM suite, integrating more AI capabilities [7] Stock Performance and Valuation - Adobe shares have declined 11.9% year-to-date, contrasting with a 1.2% return in the broader Zacks Computer & Technology sector and an 11.1% rise in the Zacks Computer - Software industry [8] - The stock is trading at a forward 12-month Price/Sales ratio of 6.79X, higher than the sector's 6.33X, indicating a premium valuation [11] Earnings Estimates - The Zacks Consensus Estimate for Q3 2025 earnings is $5.08 per share, reflecting a 9.25% year-over-year growth [13] - The fiscal 2025 earnings estimate stands at $20.36 per share, indicating a 10.53% growth over fiscal 2024 [13]

Core Insights - Adobe has launched a standalone Firefly mobile application for Android and iOS, aimed at expanding its user base through AI-driven image and video generation tools [1][2] - The application features five core functionalities: generative fill, generative expand, text-to-image, text-to-video, and image-to-video, with generated video content limited to five seconds [1] - Firefly's user interface simplifies operations, making AI creative tools more accessible, while maintaining a similar text creation model to competitors like OpenAI, Google, and Meta [1] Product Features - The generative fill tool can intelligently identify and remove distractions in photos or add virtual content based on user needs [1] - The generative expand feature uses AI algorithms to stretch images, helping creators quickly adapt to different social media aspect ratios [1] - Users can choose between Adobe's proprietary AI model or switch to OpenAI or Google's models for text-to-image, text-to-video, and image-to-video projects [1] Commercialization Strategy - The application adopts a "free download + points consumption" model, allowing non-subscribers to pay $4.99 per month for additional points and unlock premium features [2] - All content generated through Firefly can be synced to users' Creative Cloud accounts, enabling seamless cross-device editing [2] - The launch signifies Adobe's strategic deepening in the AI creative tools sector, balancing its technical advantages in professional software with exploration into the consumer market [2]

Core Viewpoint - Adobe reported solid quarterly results but experienced a stock sell-off, with the stock down over 10% year-to-date and stagnant over the past five years [1] AI Initiatives - Adobe identified artificial intelligence (AI) as a key driver for increased interest in creative storytelling, leveraging its generative AI platform Firefly to allow users to create content through natural language prompts [3] - Firefly differentiates itself with flexibility and IP protection, combining Adobe's AI models with third-party tools to ensure commercial users are protected from IP infringement [4] - The Firefly app contributed to a 30% sequential increase in first-time subscribers during the quarter, indicating strong growth potential [5] User Engagement and Revenue Growth - Monthly active users for Acrobat and Express grew over 25% year-over-year, reaching 700 million, with Express adoption within Acrobat increasing 11 times year-over-year [7] - Subscription revenue for the segment rose 15%, driven by strong demand from students, small and medium-sized businesses (SMBs), and large enterprises, with Express adding 8,000 new business customers in the quarter [8] Financial Performance - Adobe achieved record quarterly revenue of $5.87 billion, an 11% increase year-over-year, surpassing prior guidance [9] - Digital Media revenue rose 11% to $4.35 billion, with annualized recurring revenue (ARR) climbing 12% to $18.09 billion [10] - The Digital Experience segment saw a 10% revenue increase to $1.46 billion, with subscription revenue climbing 11% to $1.33 billion [11] Future Outlook - Adobe raised its full-year revenue outlook, forecasting between $23.3 billion to $23.55 billion for fiscal year 2025 [12] - For fiscal Q3, Adobe provided a revenue forecast of $5.875 billion to $5.925 billion [14] Valuation Perspective - The stock trades at a forward price-to-earnings (P/E) ratio of 17 times fiscal year 2026 estimates and a PEG ratio near 0.75, indicating it may be undervalued [16] - While Adobe is not expected to become a high-growth stock, its current valuation suggests potential for upward movement with minimal positive developments [17]

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on Adobe Systems (ADBE), and emphasizes the importance of using these recommendations in conjunction with other analytical tools for investment decisions [1][5]. Group 1: Brokerage Recommendations - Adobe has an average brokerage recommendation (ABR) of 1.74, indicating a consensus between Strong Buy and Buy, based on 34 brokerage firms [2]. - Out of the 34 recommendations, 21 are Strong Buy (61.8%) and 2 are Buy (5.9%) [2]. - Despite the positive ABR, the article cautions against making investment decisions solely based on this metric due to the limited success of brokerage recommendations in predicting stock price increases [5][10]. Group 2: Analyst Bias and Tools - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, often issuing five Strong Buy recommendations for every Strong Sell [6][10]. - This bias indicates a misalignment of interests between brokerage firms and retail investors, suggesting that brokerage recommendations may not provide reliable insights into future stock price movements [7][10]. - The Zacks Rank, a proprietary stock rating tool, is presented as a more reliable indicator of near-term price performance, based on earnings estimate revisions [8][11]. Group 3: Zacks Rank vs. ABR - The Zacks Rank and ABR are different measures; ABR is based solely on brokerage recommendations, while Zacks Rank utilizes earnings estimate revisions [9]. - The Zacks Rank is updated more frequently, reflecting timely changes in analysts' earnings estimates, which correlates strongly with near-term stock price movements [12]. - Adobe currently holds a Zacks Rank of 3 (Hold), with an unchanged consensus earnings estimate of $20.36 for the current year, indicating a cautious outlook for the stock [13][14].