BNP Paribas analysis software stock sell-off: Adobe(ADBE.US) needs to bridge the "free to paid" gap, Oracle(ORCL.US) equity financing unexpectedly calms market anxiety

Investment bank BNP Paribas in Paris comments on the recent sell-off of enterprise software stocks such as Oracle (ORCL.US) and Adobe (ADBE.US).

Adobe’s AI Functionality Takes a Long Time to Monetize

Regarding Adobe, analyst Stefan Swolinski recognizes that its stock is under pressure related to “AI disruptive concerns.” Adobe likely understands that it needs to stabilize first and then accelerate to ease these worries. However, Swolinski states that this may not happen quickly.

In a client report, Swolinski wrote, “Since new users can now start with free products (currently 70 million active users per month and growing rapidly), the time required to monetize customers may be longer than before.” He added, “Although Adobe remains confident in the value its products can provide (user and usage growth remain resilient—our expectation that net new annual recurring revenue will at least stay flat this year supports this), it may take time for this business model to re-accelerate growth. Additionally, positioning Adobe as a model aggregation platform for creators also requires time to develop.”

However, the company plans to hold the Adobe Summit in April. Swolinski pointed out that the messaging at that time might focus on “product data affected by AI” rather than “AI-first.” He explained that this year’s new AI-driven factors could include a shift to third-party model usage, higher resolution demands, and increased video consumption—these factors will, in turn, drive more credit utilization.

Oracle Eases Market Concerns Through Equity Issuance

For Oracle, the issue revolves around its balance sheet. The company recently announced a capital plan for 2026, including raising up to $50 billion through debt and equity financing.

Swolinski explained, “While we believe debt issuance is largely within market expectations, the equity issuance is somewhat surprising, as since the investor day last October, market focus has been on credit discussions.” He added, “We believe that the debt market pressures faced by software companies, including Oracle, likely led to this equity issuance. From the initial market reaction, we believe this financing arrangement has somewhat stabilized market sentiment.”

Swolinski also added that he does not expect vendor financing and that Oracle continues to state that its required financing will not exceed the $100 billion mentioned in the last earnings report.

“Overall, we believe Oracle remains confident in achieving its 2030 goals,” Swolinski further stated. “Data center construction and delivery are progressing as planned, and funds are in place. While the next few years may require winning more contracts and expanding order reserves to meet the 2030 revenue and profit targets, the ongoing AI arms race suggests that existing AI customers will generate more orders.”