Goldman Sachs reiterates Adobe stock rating on AI growth potential

Goldman Sachs has maintained its Buy rating and $570 price target on Adobe (NASDAQ:ADBE) following the company’s fiscal second-quarter 2025 results. The stock fell approximately 2% in after-hours trading despite Adobe outperforming expectations and raising its fiscal year 2025 Digital Media revenue forecast by 1%. According to InvestingPro data, Adobe currently trades at a P/E ratio of 27.2x with a market capitalization of $176.3 billion, suggesting the stock may be undervalued based on InvestingPro’s Fair Value analysis.

The investment firm remains optimistic about Adobe’s growth trajectory, citing the company’s comprehensive content supply chain platform that has driven Adobe Experience Platform and Apps subscription revenue up 40% year-over-year. Goldman Sachs views this as evidence of Adobe’s expanding enterprise market share. This growth is supported by Adobe’s impressive 89.25% gross profit margin and 10.63% year-over-year revenue growth, as reported by InvestingPro.

Adobe’s Express platform has emerged as a reliable engine for user acquisition, adding more than 8,000 businesses, representing a sixfold increase year-over-year. This growth comes amid increasing demand for AI-enhanced content creation tools across various industries.

The company’s artificial intelligence adoption is accelerating, with Firefly App first-time subscribers increasing 30% quarter-over-quarter. Goldman Sachs believes this highlights monetization potential through higher-priced tiers and generative credit consumption models.

Adobe expects its AI-standalone products to surpass a $250 million run-rate by the fourth quarter of fiscal 2025, which Goldman Sachs suggests could provide additional revenue growth as consumption-based AI features scale, particularly in areas like AI-enabled video generation.

In other recent news, Adobe has reported strong financial performance for the second quarter of fiscal year 2025, surpassing analyst expectations. The company achieved non-GAAP earnings per share of $5.06, exceeding the consensus estimate of $4.96, and reported revenue of $5.87 billion, which was above the anticipated $5.79 billion. Adobe’s Digital Media segment maintained an 11% revenue growth rate, and the Digital Experience segment saw an improvement to 10% growth. Stifel maintained a Buy rating but lowered its price target on Adobe to $480, expressing concerns about the company’s outlook for Digital Media annual recurring revenue. Meanwhile, DA Davidson raised its price target to $500, citing increased pipeline visibility and confidence in the company’s full-year guidance. Evercore ISI reiterated its Outperform rating, noting that Adobe’s AI revenue targets are on track. These developments highlight Adobe’s continued success in integrating AI into its product offerings, contributing to its robust financial performance.

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