Adobe Stock Drops 26% as Wall Street Questions Its Defense Against AI Competition

Core Viewpoint - Adobe's stock has dropped 26% in 2026 as Wall Street questions its ability to compete against generative AI, leading to a significant decline from its 52-week high by over 44% [1] Group 1: Stock Performance and Analyst Ratings - Adobe's P/E ratio has fallen to 16x, which is less than half of its historical range, despite maintaining profit margins above 36% [1] - Goldman Sachs issued a Sell rating with a price target of $290, while HSBC reduced its target from $388 to $302 [1] - Piper Sandler downgraded Adobe to Neutral with a price target of $330, reflecting uncertainty about its future [1] Group 2: Market Sentiment and Social Media Influence - Online discussions on Reddit shifted from bullish to bearish, with sentiment scores dropping from 85-88 in late January to 32-68 by mid-February [1] - Users on Reddit expressed concerns about Adobe's product quality and AI strategy, leading to a significant decline in social sentiment [1] Group 3: Competitive Landscape and Risks - Adobe faces existential risks from generative AI tools developed by competitors like OpenAI and Midjourney, which threaten its Creative Cloud dominance [1] - A class-action lawsuit alleges that Adobe used pirated books to train its AI models, adding legal and reputational risks [1] - The broader software sector is experiencing a selloff, with companies like Microsoft and Salesforce also facing steep declines due to AI disruption fears [1]