France and Pakistan relay, Bank of America sings empty Adobe (ADBE.US): The cloud giant is using native AI tools to “dismember” its entire moat

The Zhitong Finance App learned that after Bank of America Securities, BNP Paribas recently sounded a wake-up call for Adobe (ADBE.US), becoming the latest major Wall Street bank to question its growth prospects in the AI era. Analysts from France and Pakistan released a report after attending the Adobe London summit, pointing out that competition from hyperscale cloud vendors and AI upstarts is eroding Adobe's moat from every step of the process.

Heated competition: total erosion from “tools” to “processes”

BNP Paribas analyst Stefan Slowinski said in the latest investor report that the bank's team attended Adobe's summit conference in London last week, and the feedback received from partners during this period was not optimistic.

The bank observed that compared to the clash of small and medium-sized startups such as Canva and Figma (FIG.US), which the market had previously focused on, supergiants with computing power, data, and platform advantages are using AI native tools to directly cut into Adobe's core creation and marketing process, weakening the value of its professional software from the bottom up.

“Although Adobe is trying to use its influence in existing enterprise workflows to defend itself, we've noticed that some partners are seeing more and more customers turn to hyperscale cloud service provider tools, particularly Google (GOOGL.US) products, to complete everything from content creation (such as using Nano Banana and Veo), marketing material preparation, permission review to marketing campaign launch,” Slowinski wrote.

The report clearly states that while Adobe is still entrenched in some “end-to-end” enterprise customers using its products, “there is more competition at every level of the business process, which certainly increases the risk of losing or being replaced.” Competitors specifically mentioned by France and Pakistan include Loomi AI, an AI product owned by BloomReach.

Furthermore, the report also touched on a deeper risk — AI sovereignty. Slowinski points out that this is particularly evident in Europe.

The analyst said that this not only means that companies want to limit their reliance on large AI laboratories, but also that “companies are seeking to 'de-intermediate' US application companies through the use of open solution building tools and workflows, thereby reducing their dependence on the latter.” As an example, he said that Nvidia (NVDA.US)'s NemoClaw (solution for encapsulating enterprise-grade guardrails in OpenClaw) provides the possibility for this kind of autonomous control. Once enterprises adopt such open tools in large numbers, Adobe's position as a third-party application provider will be fundamentally impacted.

The cautious rhetoric issued by France and Pakistan this time coincided with Bank of America securities having just gone out of business in a high-profile manner.

Not long ago, Bank of America Securities resumed coverage of Adobe, directly gave it a “underperforming market” rating, and set a target price of only 190 US dollars. The bank's analysts pointed out that as generative AI lowers the threshold for content creation, low-cost and native AI alternatives are putting Adobe's growth prospects at greater risk. Adobe's own AI strategy is far more defensive than aggressive. Although AI can increase user participation, the pure AI business still contributes less than 2% of annual recurring revenue, and there is no sign of accelerated growth in the short term.

Bank of America predicts that Adobe's growth is unlikely to accelerate in the short term. The low-end and amateur user groups are being replaced by “good enough” AI output, and the shift to a freemium and pay-per-use model will bring profit risks. The 2027 growth rate is expected to drop from 10.5% to 8.8%.

The company is still making money, but valuations are pricing the future

There's no denying that Adobe's financial engine is still running. According to the data, the company's recurring revenue in the previous fiscal year increased 11% to 26 billion US dollars, free cash flow reached nearly 9.8 billion US dollars, the remaining performance obligations (that is, future revenue agreed in the contract) were 22 billion US dollars, and the profit margin remained at 41%.

However, as Bank of America pointed out in its report, Adobe's “valuation is very attractive, but there is currently no catalyst in sight”. Currently, the stock's price-earnings ratio is only 12.5 times. This seems to indicate that the market is using extremely pessimistic pricing to bet on the structural growth slowdown and monetization uncertainty faced by this creative software giant in the AI era.