Morgan Stanley downgrades Adobe, Salesforce over AI concerns

Wall Street analysts are turning increasingly bearish on major software companies, with a wave of downgrades hitting Adobe Inc. and Salesforce Inc. as concerns mount over the disruptive impact of artificial intelligence on the industry's traditional business models. The latest and most prominent move came from Morgan Stanley on Tuesday, July 21, 2026, which downgraded Adobe to underweight and cut its price target sharply, while also downgrading Salesforce to equalweight.

Adobe shares fell approximately 3.7% on Tuesday, extending a year-to-date decline of more than 35%. Salesforce shares slid 1.6%, bringing its 2026 losses to around 36%. The broader software sector also declined, with the iShares Expanded Tech-Software Sector ETF falling 1% on the day and down 13% for the year.

Morgan Stanley's downgrade of Adobe cited significant execution risks stemming from multiple simultaneous transitions. Analyst Adam Wood pointed to the company's move toward a freemium model, increased reinvestment in AI, and ongoing leadership changes. Shantanu Narayen is stepping down as CEO, and Steve Day has taken over as interim finance chief following Dan Durn's departure in June. Wood argued these...