Key Moments
- Jefferies cut Adobe to Hold, citing slowing revenue trends and no clear AI-driven inflection through fiscal 2026 or its FY30 forecast.
- IBM was upgraded to Buy on expectations of renewed software growth in 2026, supported by Red Hat, acquisitions, and resilient mainframe demand.
- Jefferies urged investors to stay selective in software as growth slows versus semiconductors and AI monetization remains uneven.
Jefferies Revises Its 2026 Software Outlook
Investing.com — Jefferies updated its software sector outlook for 2026, adjusting ratings as artificial intelligence benefits take longer to materialize. As a result, the firm downgraded Adobe to Hold and upgraded IBM to Buy.
According to analysts, investors may need patience before AI delivers meaningful revenue acceleration. Consequently, Jefferies recommends a more selective approach to software exposure as growth lags other sectors, such as semiconductors.
Adobe Downgraded as AI Impact Remains Limited
Jefferies lowered Adobe to a Hold rating, pointing to slowing revenue momentum and limited evidence of AI-driven acceleration. The firm noted that Adobe’s topline growth has steadily eased since fiscal 2023.
Importantly, this deceleration continues through the company’s fiscal 2026 guidance. While Jefferies acknowledged progress since the launch of Firefly in early 2023, analysts said AI has not yet changed the broader growth profile.
The report stated that Jefferies does not expect total revenue acceleration through its forecast period ending in fiscal 2030. In addition, lingering concerns about long-term business model disruption reinforced the firm’s cautious stance.
| Company | New Jefferies Rating | Key Drivers |
|---|---|---|
| Adobe | Hold |
Slowing revenue growth since fiscal 2023; no visible AI-driven uplift through fiscal 2026 or FY30; ongoing concerns about long-term disruption |
| IBM | Buy |
Expected software growth rebound in 2026; Red Hat strength; acquisition synergies; durable mainframe demand; expanding AI monetization |
IBM Upgraded on Clearer Software Growth Path
In contrast, Jefferies adopted a more constructive view on IBM and raised the stock to Buy. Analyst Brent Thill said IBM is positioned to “reboot software growth” in 2026.
This outlook is supported by Red Hat’s performance and expected synergies from recent and pending acquisitions, including HCP and Confluent. Together, these deals strengthen IBM’s hybrid cloud and data capabilities.
Moreover, Jefferies highlighted the resilience of IBM’s mainframe business and the growing monetization potential of generative AI through watsonx. As a result, the firm expects operating leverage to improve margins and free cash flow into 2026.
Overall, Jefferies sees IBM as better positioned within a software sector that is still working through the timing and scale of AI-driven revenue gains.
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