Despite posting robust quarterly earnings, Adobe’s stock continues to face turbulence. A newly filed lawsuit is now targeting the core of the company’s artificial intelligence strategy, which was previously considered legally sound, creating uncertainty among investors. As analysts adjust their ratings, a critical question emerges: to what extent does this legal action threaten the software giant’s image as a “clean” AI alternative?
Financial Strength Meets Strategic Aggression
From a purely operational standpoint, Adobe remains on solid ground. For the fourth quarter of fiscal 2025, revenue climbed 10% to $6.19 billion. The company’s non-GAAP earnings per share of $5.50 surpassed market expectations.
The management team is pursuing an aggressive path of expansion and monetization to maintain competitive momentum:
* Strategic Alliance: A partnership with Runway, effective December 18, aims to integrate generative video models into Adobe’s suite of creative tools.
* Revenue Push: The free promotional phase for unlimited generation credits on Firefly Pro concludes today, December 22. This move signals a shift toward stricter commercialization of the company’s AI capabilities.
Adobe’s shares, down nearly 30% year-to-date, trade well below their previous highs. For fiscal 2026, management has provided a revenue outlook of up to $26.10 billion. Achieving these targets is likely to depend heavily on Adobe’s ability to swiftly and credibly address growing doubts surrounding the legality of its AI training data.
Should investors sell immediately? Or is it worth buying Adobe?
The Core of the Allegation: Questioning “Firefly”
The current unease stems from a class-action lawsuit filed on December 17, 2025. Author Elizabeth Lyon alleges that Adobe utilized the “Books3” dataset—which contains thousands of pirated literary works—to train its “SlimLM” artificial intelligence.
This accusation carries significant weight. Adobe has aggressively marketed its AI tools, especially Firefly, as a copyright-safe alternative to offerings from competitors like OpenAI. If the claims are substantiated, proving that training data from the “SlimPajama” dataset infringes on intellectual property rights, it would severely undermine Adobe’s unique selling proposition in the enterprise market. This would expose the company to the same regulatory risks currently faced by other AI developers.
Analyst Sentiment Shifts Rapidly
Market experts are clearly reflecting this newfound uncertainty in their assessments. Sentiment shifted markedly within a matter of days: while Wall Street Zen upgraded the stock to “Buy” on December 6, it was subsequently downgraded to “Hold” by December 14. Analysis firm KeyBanc also recently lowered its rating to “Underweight.”
This volatility in analyst opinion is seen as an indicator of the current difficulty in balancing Adobe’s AI potential against its escalating legal liabilities. Despite the company’s operational strength, a cautious short-term outlook now prevails.
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