TLDR
- Citi raised its Adobe price target to $301 from $228, keeping a Neutral rating, citing higher software multiples
- Adobe is expected to beat Q3 estimates, with consensus EPS of $6.09 and revenue of $6.7B
- Citi sees Q3 as an achievable setup after Adobe cut ~$500M from its FY26 ARR guidance last quarter
- Firefly is getting more positive feedback, but Legacy Creative products are losing ground to rivals
- Risks grow into FY27 as Adobe leans more heavily on freemium-led growth strategies
Adobe reports its Q3 2026 earnings after the market close on September 10.
Citi analysts raised their price target on Adobe (ADBE) to $301 from $228 on Tuesday, while keeping a Neutral rating on the stock. The firm pointed to a broader rise in software multiples as the main reason for the bump.
The new target implies 10.4x FY28 estimated EV/FCF and 11.9x FY28 estimated GAAP P/E. Adobe currently trades at a P/E of 16.79.
Wall Street expects Adobe to report adjusted EPS of $6.09, GAAP EPS of $4.48, and revenue of $6.7B for Q3. In the same quarter last year, Adobe posted adjusted EPS of $5.31 on revenue of $5.99B.
Citi said it would not be surprised to see a beat and raise when results drop on September 10, pointing to the roughly $500 million cut to FY26 total ARR guidance from last quarter as the setup.
“We remain cautious on Adobe fundamentals but see the ~$500M organic cut to FY26 total ARR guide last Q yielding an achievable set-up in Q3,” Citi analysts wrote in a note to investors.
Despite the higher target, Citi kept its tone measured. The firm noted that checks with partners and at the Cannes event showed little change in enterprise buying behavior. Negativity around the Creative segment continues.
Legacy Creative products are feeling the pressure. Partners told Citi they are seeing consolidating seat demand and some displacement by rivals.
Firefly Gets a Warmer Reception
On the brighter side, feedback on Adobe’s Firefly product has improved. Citi noted slightly more positive reads, with partners citing better capabilities and governance features that are resonating with customers.
Enterprise tools like AEM and Journey Optimizer are still driving demand, though Citi noted conversations around CX Enterprise and Coworker remain early stage.
Citi raised its Q3 and Q4 estimates slightly ahead of guidance. But the firm pointed out this still reflects a 26% decline in second-half net new ARR.
FY27 Is the Bigger Question
Citi’s FY27 total ARR growth estimate sits below Street consensus. The firm sees increasing risk as Adobe’s growth becomes more reliant on freemium strategies heading into next year.
Not everyone shares Citi’s caution. HSBC upgraded Adobe to Buy from Hold, pointing to a 12.7% revenue increase in Q2 FY26 and full-year guidance of 11.8% revenue growth.
Morgan Stanley moved the other way, downgrading Adobe to Underweight from Equal Weight and cutting its target to $240, flagging AI substitution risks.
CLSA initiated coverage with an Outperform rating and a $300 price target.
Adobe also recently expanded a partnership with Saudi Arabia’s Ministry of Communications and Information Technology, giving over 27 million users free access to Adobe’s AI tools, valued at over $4 billion.
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