Jefferies has issued a cautious outlook on Adobe (ADBE), citing macroeconomic headwinds and shifting enterprise spending patterns. The firm revised its sector-wide assessment, signaling reduced confidence in near-term software growth momentum.
- Adobe (ADBE) net revenue retention declined to 106% in Q3 FY2025
- Jefferies revised Adobe's FY2026 revenue growth forecast to 5.3% from 6.8%
- Operating margin projected to fall to 39.2% in FY2026
- Enterprise spending delays affecting software subscription renewals
- ADBE share price down 3.7% over five trading days post-outlook update
- Sector-wide growth expectations reduced across major software firms
Jefferies has maintained a cautious rating on Adobe Inc. (ADBE), reflecting broader concerns about the software sector's near-term trajectory. The firm's updated sector outlook highlights slowing growth in discretionary software spending, particularly in creative and productivity tools, where Adobe operates. Despite ADBE's strong recurring revenue base, Jefferies notes that customer retention and expansion rates have plateaued in the last fiscal quarter, with net revenue retention falling to 106%—a decline from 112% in the same period of the prior year. The firm's updated model forecasts Adobe's fiscal 2026 revenue to grow at 5.3%, down from a previous 6.8% estimate, primarily due to tighter IT budgets at large enterprises. Capital expenditure reductions across industries have led to deferred purchases of enterprise licenses and subscription renewals, especially in the Americas and Europe. Jefferies now expects Adobe's operating margin to compress to 39.2% in FY2026, compared to 41.1% in FY2025, due to higher cloud infrastructure and AI integration costs. Market impact is evident in ADBE's share performance, which has declined 3.7% in the past five trading sessions following the report. The cautious view affects investor sentiment across the software sector, with peers such as Microsoft (MSFT) and Salesforce (CRM) seeing modest downward revisions in projected growth rates. Institutional investors are adjusting allocation strategies, with some reducing exposure to high-growth software stocks in favor of more defensive tech segments.