Adobe Stock Falls 8% on Freemium AI Strategy Despite Earnings Beat

Adobe beat expectations for its second-quarter earnings and raised its full-year outlook, but the stock still dropped. Shares fell 8% on Friday morning as analysts paid more attention to Adobe’s new freemium AI strategy and the exit of its chief financial officer than to the strong results. Here’s a look at Adobe’s numbers, why analysts are concerned about the strategy change, and what the executive departures might mean for the software industry.

Adobe posted adjusted earnings of $5.96 per share on $6.62 billion in revenue, topping analyst forecasts of $5.82 per share and $6.45 billion in revenue. The CEO called it a record quarter, pointing to strong demand for AI products among customers. Adobe also raised its 2026 outlook, now expecting earnings of $24.35 to $24.45 per share and revenue between $26.5 billion and $26.6 billion, both higher than Wall Street’s previous estimates of $23.54 and $26.1 billion.

Investors are worried about Adobe’s plan to offer its AI products for free to attract new users. Stifel downgraded the stock from Buy to Hold and lowered its price target to $200 from $350, saying the freemium approach makes sense as AI spreads in creative fields, but it could hurt short-term revenue growth and predictability. Mizuho kept a Neutral rating and cut its price target to $245 from $270, noting that a focus on free users could slow monetization in a tough market. The uncertainty grew when Adobe said its chief financial officer will leave on June 15 to become CFO at Marvell Technology, a chip and networking company. This follows news that the CEO will also step down after more than 18 years at Adobe. The move of a finance leader from software to hardware highlights a trend: hardware companies are gaining from strong AI demand, while software firms face questions about how AI might disrupt their main businesses. Marvell’s stock is up 230% this year, while Adobe’s has dropped 37%.

Adobe is trying to address concerns about AI disruption by launching new products, including an AI agent platform called CX Enterprise. This tool is meant to help businesses improve customer experience and automate time-consuming tasks. Dow Jones Market Data shows that Adobe’s stock has dropped after eight of its last ten earnings reports.