KeyBanc downgrades Adobe and ServiceNow on AI risks

Investing.com -- KeyBanc Capital Markets has downgraded both ServiceNow and Adobe to Underweight, arguing that risks around artificial intelligence, valuation and growth momentum are rising as the enterprise software sector heads into 2026.

In its Enterprise Software 2026 stock outlook, KeyBanc analyst Jackson Ader stated that the “biggest change and the stock for which we expect to receive the most pushback is our downgrade of ServiceNow to Underweight,” calling it “more than a narrative call.”

The firm set a $775 price target on ServiceNow and pointed to “worrying trends in IT back-office employment data” that it believes increase the risk the company becomes “at-risk-from-AI” in coming quarters.

KeyBanc acknowledged that ServiceNow’s AI products include “a hybrid monetization structure that should mitigate some of the headwinds that would come from seat-count pressure,” but said similar structures “have not kept other SaaS sub-sectors afloat when this narrative has come for them.”

The firm also warned that ServiceNow’s perceived position as an AI orchestration winner “may cede ground to Microsoft in 2026,” while government spending scrutiny and increased inorganic investment add to the uncertainty, according to KeyBanc.

Adobe was also downgraded from Overweight to Underweight, with KeyBanc establishing a $310 price target.

The firm said the valuation discount is justified by “decelerating revenues, limited margin upside and AI competitive threats.”

KeyBanc noted that Adobe trades at 17.3x CY27 GAAP P/E, compared with a peers’ median of 31.4x, adding that upside risks would require a clear reacceleration in growth.

You May Also Be Interested In