Investing.com -- In a note on Monday, Wells Fargo downgraded Adobe to Underweight from Overweight and cut its price target to $225, citing results from its latest survey of chief information officers on AI spending.

Analyst Michael Turrin told investors that he “came away more cautious” on front office and creative software.

He gave four reasons for the downgrade. Third-quarter results suggest cracks are starting to show, and a steep fourth-quarter ramp looks difficult, requiring new annual recurring revenue to roughly double from the previous quarter.

He also sees risk to Adobe’s preliminary fiscal 2027 guidance given the lack of a price increase and an ongoing management transition, with both the CEO and CFO changing.

The CIO survey reportedly showed Adobe as a clear loser of budget share in the AI evaluation cycle, while competition in its core creative business intensifies.

Wells Fargo now models negative growth in new annual recurring revenue in fiscal 2027 and about 7% total growth in annual recurring revenue, below consensus of more than 8%. It also lowered margin forecasts, citing a focus on adding users over near-term monetization.

The firm upgraded Tyler Technologies to Overweight from Equal Weight, raising its target to $400. Turrin said the vertical software company screens as more resilient to AI disruption despite recent underperformance, with valuation well below historical norms.

Wells Fargo also raised targets on cybersecurity names Palo Alto Networks to $525 and CrowdStrike to $300, saying it has increased conviction in the sector as a 2027 budget beneficiary.

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