This article first appeared on GuruFocus.
Adobe (NASDAQ:ADBE) and Oracle (NYSE:ORCL) report earnings on the same day, September 10, but Bank of America sees the two AI software giants moving in opposite directions.
Analyst Tal Liani maintained a Buy rating and $240 target on Oracle, implying 51% upside, while rating Adobe Sell with a $220 target, implying 17% downside. The contrast reflects one question: Which company is converting AI demand into meaningful financial growth?
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Wall Street expects Adobe's fiscal third-quarter earnings to reach $6.08 per share, up from $5.31, as revenue increases 11.7% to $6.69 billion. Those numbers are respectable, but BofA doubts AI is changing Adobe's growth trajectory.
Creative freemium monthly users reached 90 million, rising 70%, while AI-first annual recurring revenue exceeded $500 million, more than tripling. However, AI-first ARR remains below 2% of total ARR.
That gap explains why Liani calls Adobe's strategy largely defensive. AI tools may improve retention and engagement without generating substantial new revenue. BofA expects 11% ARR growth, or 9% excluding Semrush, while higher AI usage costs pressure margins.
Oracle's setup is more aggressive. Wall Street projects earnings of $1.74 per share, up 18.4%, and revenue of $19.13 billion, rising 28.1%. BofA expects infrastructure-as-a-service revenue to jump 116% as roughly one gigawatt of data-center capacity comes online.
Oracle also carries a $638 billion backlog. Yet that opportunity is expensive: BofA forecasts $21 billion in quarterly capital spending and $92.5 billion for the fiscal year. Oracle must prove cloud growth can outrun the resulting cash-flow strain.
Broader analyst sentiment supports the split. Adobe carries a Hold consensus with 1.43% downside, while Oracle has a Strong Buy consensus with 60.4% upside.
For investors, Adobe must show AI adoption accelerating monetization, while Oracle must demonstrate capital efficiency. BofA's preference is clear, but each company faces a different earnings test for shareholders on September 10.