Wells Fargo Cuts Adobe to Underweight, Favors Tyler

what happened

GuruFocus reports that Wells Fargo issued a rare two-step downgrade on Adobe, moving the stock from Overweight to Underweight. The bank cited weakening growth, mounting AI competition and execution concerns ahead of fiscal 2027. Adobe shares slipped about 2.6% in premarket dealings. Tyler Technologies moved in the opposite direction, gaining roughly 2.5% after its rating was raised from Equal-Weight to Overweight.

Analyst Michael Turrin reduced Adobe’s price objective to $225 from $270. He said the third-quarter report showed early signs of deterioration, while the fourth-quarter hurdle appears demanding: NNARR, or new net annual recurring revenue, would have to approximately double from the prior quarter to meet expectations. Turrin also flagged Adobe’s preliminary fiscal 2027 outlook, the lack of a price increase and continuing leadership changes affecting both the CEO and CFO positions.

A Wells Fargo CIO survey indicated that Adobe is losing part of enterprise software budgets as companies assess AI products. Competition in its core creative-software franchise is also becoming more intense at an unfavorable point in the cycle. Tyler received a substantially more positive assessment: Turrin lifted his target to $400 from $335, saying many 2025 booking pressures were temporary and that 2027 could bring a rebound. He described Tyler as comparatively protected from AI disruption and noted that its valuation is below historical norms and software-sector peers.

why it matters

Adobe investors will focus on NNARR momentum, the fiscal 2027 forecast, pricing decisions, client retention and proof that AI features can generate revenue. For Tyler, the main questions are whether bookings recover in 2027 and whether its government-focused software supports renewed earnings growth.

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