Adobe is about to deliver its fiscal first-quarter earnings after the bell today, and the setup is fascinating. The stock has been absolutely hammered — down 38% from its highs — as the market prices in what analysts are calling the “AI disruption trade.” The fear? That generative AI tools from competitors could eat into Adobe’s creative software monopoly.
But here’s the thing Wall Street keeps ignoring: Adobe has beaten both earnings and revenue estimates for 12 consecutive quarters. Twelve. That’s three full years of delivering better numbers than analysts expected, and the stock has still gotten crushed. If that doesn’t scream “narrative over fundamentals,” nothing does.
The consensus is looking for earnings per share of $5.46, up from $5.08 a year ago, on revenue of roughly $6.28 billion — a 10% jump year over year. Options markets are pricing in a 7.7% post-earnings move, which would translate to roughly a $25-$30 swing on the stock. That’s a big move, and it tells you traders are bracing for fireworks in either direction.
What makes this quarter particularly interesting is the AI narrative. Adobe’s Firefly generative AI tools have been integrated across its Creative Cloud suite, and management has been leaning hard into the “AI is additive, not destructive” argument. Bulls say Firefly is actually a moat — it’s trained on licensed content, which matters in a world where copyright lawsuits are flying. Bears say it doesn’t matter because free or cheap AI tools are proliferating faster than Adobe can monetize.
Mizuho’s Gregg Moskowitz just cut his price target to $340 from $390 while keeping an Outperform rating — basically saying “I still like the stock but the sentiment is terrible.” That’s a common analyst position right now: the fundamentals are fine, but nobody wants to own it until the AI fear cycle breaks.
For traders, the earnings report tonight is less about the actual numbers and more about guidance and AI commentary. If Adobe can show accelerating Firefly adoption and raise guidance, this could be the catalyst that finally breaks the stock out of its downtrend. If it’s another “good quarter, meh guidance” situation, the 38% decline might just be the warmup.
Either way, at roughly 20x forward earnings for a company growing revenue 10%+ with 35% operating margins, the valuation case is starting to look compelling. Sometimes the best opportunities show up when everyone’s busy worrying about the wrong thing.