Adobe Stock: Citi Lifts Target, Strong 2026 Guide, New AI Copyright Lawsuit

Adobe (ADBE) on Dec. 18, 2025: Earnings strength, AI distribution bets, and a fresh copyright lawsuit

Adobe stock hovered near $354 on Thursday, with trading largely contained in the mid-$350s. The story today sits at the intersection of three forces: solid subscription math, aggressive AI distribution moves, and rising legal risk tied to training data.

For legal and compliance teams, the new proposed class action around Adobe's SlimLM models is the headline that matters most. It adds direct exposure to the core question of this cycle: what's allowed in AI training-and at what cost if it's not?

What's moving ADBE right now

• Citi raises its target to $387, remains Neutral: Better confidence post-earnings, but not a full vote of confidence on execution and competition.
• New AI training lawsuit: Reuters reports author Elizabeth Lyon sued Adobe, alleging training on pirated books for SlimLM without permission-described as the first such case against Adobe, seeking monetary damages. Adobe did not immediately comment. Source
• Price action context: Shares gained ~2% on Dec. 17, continuing a post-earnings stabilization after months of concern about AI-native rivals and pricing pressure.

Earnings at a glance (Q4 and FY2025)

Adobe's Dec. 10 release delivered firm Q4 numbers and a record fiscal year-fueling the "durable ARR" case.

• Q4 FY2025: Revenue $6.19B (+10% y/y, as reported and cc), GAAP EPS $4.45, non-GAAP EPS $5.50, operating cash flow $3.16B, RPO $22.52B, ~7.2M shares repurchased.
• FY2025: Revenue $23.77B (+11% y/y), Total Adobe ARR $25.20B exiting FY2025 (+11.5% y/y), operating cash flow $10.03B, ~30.8M shares repurchased.

ARR focus: Management is steering investors toward double-digit ARR growth in FY2026. Adobe also revalued ending ARR at FY2025 close-largely FX-driven-lifting Total ARR by $460M to $25.66B entering FY2026.

FY2026 outlook

• Total revenue: $25.90B to $26.10B
• Business Professionals & Consumers subscription revenue: $7.35B to $7.40B
• Creative & Marketing Professionals subscription revenue: $17.75B to $17.90B
• Ending ARR growth: 10.2% y/y
• EPS: GAAP $17.90-$18.10; non-GAAP $23.30-$23.50

Note: These targets exclude any contribution from the planned Semrush acquisition until close.

Q1 FY2026 guidance

• Total revenue: $6.25B to $6.30B
• Business Professionals & Consumers subscription revenue: $1.74B to $1.76B
• Creative & Marketing Professionals subscription revenue: $4.30B to $4.33B
• EPS: GAAP $4.55-$4.60; non-GAAP $5.85-$5.90

Reuters noted the FY2026 revenue and profit outlook topped key LSEG expectations, supporting the "fundamentals are holding" view despite AI churn.

AI distribution and monetization: what's actually changing

Adobe reports rising AI use, with freemium monthly active users up 35% to 70M+, per CFO Dan Durn. The funnel is growing. The open question is conversion and pricing discipline.

Adobe is integrating Photoshop, Adobe Express, and Acrobat into ChatGPT, putting core workflows where users already spend time. Reuters said this could extend reach to ChatGPT's 800M+ weekly users, with Adobe registration still required.

Semrush acquisition

Adobe plans to acquire Semrush for $1.9B to deepen marketing and search intelligence as queries shift across web search and GenAI assistants. FY2026 targets exclude Semrush until close, so any impact is upside to guidance once approved and integrated.

Legal angle: the SlimLM class action and where risk concentrates

Reuters reports a proposed class action alleges Adobe trained SlimLM on pirated copies of copyrighted books without permission, seeking damages and flagged as the first AI-training copyright suit against Adobe. Adobe did not immediately comment. Source

Key questions counsel will weigh

• Training data provenance: What datasets were used, how were they obtained, and what documentation exists for licenses, terms, and usage rights?
• Theory of liability: Direct, contributory, or vicarious infringement; whether any copying was necessary and transformative under fair use; and the role of model weights versus source text.
• Class certification: Commonality and predominance across a class of copyright holders; individualized damages; and whether the alleged conduct supports a single class.
• Remedies and exposure: Potential statutory damages (if applicable), actual damages and profits, possible injunctive limits on training or distribution, and the downstream impact on product cadence.
• Discovery and preservation: Model training logs, data pipelines, vendor contracts, deduplication/filtering methods, and internal communications-high-stakes material that can influence both litigation and public perception.
• Compliance costs and timelines: If licensing or data filtering expands, what does that mean for margin, speed of model updates, and roadmap promises embedded in guidance?
• Contract risk: Review customer and partner indemnities, EULA language, acceptable-use terms, and representations about training data to assess cascading exposure.

Practical next moves for in-house teams

• Run a point-in-time audit of SlimLM training sources, licenses, filters, and opt-out handling; lock down a defensible chain of custody.
• Map potential claim types to dataset slices and model versions; prepare narrowly tailored discovery plans and protective orders.
• Stress-test fair-use positions with fact patterns (purpose, amount, market effect) and prepare contingency paths (licensing, filtering updates).
• Tighten documentation: model cards, data datasheets, third-party vendor attestations, and governance approvals.
• Align external messaging with legal posture to limit admissions risk; keep product teams informed on constraints early.

Analyst debate: split views, wide targets

• Citi: Target to $387, Neutral.
• KeyBanc: Downgrade to Underweight, $310 target (competition cited).
• BMO: Outperform, target trimmed to $400 from $405.
• Oppenheimer: Outperform, target to $430 from $460 (AI investment and margins in focus).
• Evercore ISI: Outperform, target to $425 from $450.
• UBS: Neutral, $375 target after in-line results.

MarketBeat shows an average 12-month target near $417.93 with a wide dispersion-translation: execution on AI monetization and net new ARR can swing sentiment fast. MarketBeat

What to watch next

• Q1 FY2026 earnings (Mar 12, 2026): Progress toward 10.2% ending ARR growth and the quality of net new ARR.
• AI monetization: Conversion from freemium use to paid tiers, pricing mix, and any signs of discounting pressure.
• Litigation cadence: Motion practice, class certification posture, discovery scope, and any settlement dialogue.
• Semrush close and integration: Timing, antitrust review (if any), and how capabilities feed into subscription growth.
• Commerce signals from Adobe Analytics: Seasonal reads that inform marketer budgets and downstream demand.

Bottom line

Adobe's guide is clear: FY2026 revenue of $25.90B-$26.10B, non-GAAP EPS of $23.30-$23.50, and 10.2% ending ARR growth. The business still leans on subscription durability while pushing AI deeper into everyday workflows.

The legal risk just rose with the SlimLM class action. For counsel and leadership, the next few quarters will come down to two things: prove conversion on AI usage without eroding pricing-and contain litigation exposure with disciplined governance, documentation, and a credible defense story.