Adobe NASDAQ:ADBE rose 2.62% in premarket after HSBC upgraded the software maker to Buy from Hold and raised its price target to $308 from $282, saying investor concerns about generative AI disrupting Adobe's core business have become excessive. The bank pointed to Q2 revenue growth of 12.7% year-on-year and a 13.1% increase in remaining performance obligations as evidence that customers are adopting Adobe's AI-enabled tools rather than leaving its ecosystem.
HSBC lifted its fiscal 2026-2028 EPS estimates by roughly 3% to 8%, citing operating momentum, continued buybacks, and a more measured view of long-term AI competition. Adobe repurchased more than $2.2 billion of stock in the second quarter. The bank acknowledged non-GAAP operating margin is expected to ease to around 45% this year from 46.2% in fiscal 2025, but attributed the decline mainly to the Semrush (SEMR) acquisition and freemium investment rather than underlying business pressure.
Adobe trades at roughly 8.5 times projected 2026 non-GAAP earnings. HSBC said this discount to the broader software sector despite offering comparable earnings growth, won't hold.