Adobe stock down 18% YTD before Q1 earnings: can AI spark rebound?

Adobe heads into its first-quarter earnings report later on Thursday with its stock down roughly 18% so far this year.

Amid booming valuations in the AI space, Adobe's stock below average performance has made the upcoming earnings a test of investor confidence.

The company is scheduled to release results after the Wall Street closing bell, followed by an investor call from 2 PM to 3 PM Pacific time.

Adobe stock: What investors are expecting?

The consensus estimates for the first quarter are about $6.28 billion in revenue and earnings of roughly $5.87 to $5.88 a share.

If Adobe achieves or beats these estimates, it would mark another quarter of growth from the $5.71 billion in revenue and $5.08 in adjusted earnings per share Adobe posted a year earlier.

The setup matters because Adobe is not reporting into a normal software backdrop, as investors are still debating whether generative AI will deepen the company’s moat or chip away at the pricing power of products such as Photoshop, Illustrator, and Premiere.

That tension helps explain why the stock has weakened even as Adobe’s broader 2026 outlook came in above Wall Street estimates.

Adobe said at the time that it expected fiscal 2026 revenue of $25.9 billion to $26.1 billion and adjusted earnings per share of $23.30 to $23.50.

But the numbers failed to impress the investors, who are questioning whether that growth is strong enough to justify its AI strategy.

Apart from the headline figures, the investors will be very much intrested in the detailed numbers as they expect subscription-led revenue to stay resilient.

The Digital Media revenue is projected at about $4.65 billion and Digital Experience at roughly $1.54 billion, figures that should show whether demand in Adobe’s core businesses remains steady.

Why AI is the swing factor

Adobe has spent the past year pushing Firefly more deeply into Creative Cloud and positioning generative AI as an add-on that can lift customer retention.

The company has also pointed to products such as Acrobat, Express, and Firefly as drivers of subscriptions and upgrades.

Recent partnerships, including one with Runway on AI video workflows, underscore how aggressively it is trying to stay central to professional creative work.

But analysts are still not sure about how Adobe can turn that product activity into a cleaner stock narrative.

RBC Capital has kept an Outperform rating and a $430 target, saying recurring revenue trends and profitability will be key.

TD Cowen cut its target to $325 and said channel checks before the quarter were mixed.

Piper Sandler has been even more blunt, warning that Adobe sits in software categories that are among the least insulated from AI disruption.

This is why the AI story becomes very crucial in the latest earnings report.

The Adobe Q1 earnings report will be judged less on whether Adobe beats consensus by a few cents and more on whether management can show AI is becoming a measurable revenue engine.