Q1 performance exceeds expectations but cannot hide AI anxiety: Adobe(ADBE.US) CEO resigns after 18 years at the helm, stock drops over 7% after hours

In the face of deep concerns about whether it can continue to lead in the age of artificial intelligence, Adobe Inc. (ADBE.US) Chief Executive Officer Shantanu Narayen will step down as head of the creative software giant. On the same day, the company released its first fiscal quarter report, with revenue and earnings both exceeding average market expectations.

In a statement released Thursday, Adobe said that after serving as CEO for 18 years, 62-year-old Narayen will retire, but will remain in place until a successor is confirmed, and will continue as chairman of the board.

Grace Harmon, an analyst at market research firm Emarketer, said in an email that the leadership change “raises questions about strategic continuity, capital allocation priorities, and the pace of innovation. Investors may closely watch whether the incoming leadership team can strike a balance between solid execution and aggressive AI investment, especially as competition in the creative and enterprise AI space grows increasingly fierce.”

The stock closed at $269.78 in New York on Thursday. As of the time of publication, it was down about 7.33% in after-hours trading. Since the start of 2026, Adobe’s share price has fallen by roughly 23%, nearing its three-year low.

As the developer of professional creative tools such as Photoshop, Adobe is seen as one of the application software companies like Salesforce and Atlassian that are facing challenges from AI newcomers in winning new customers. To protect its large market share, Adobe has been working to integrate AI tools into its creative and marketing software and has rolled out a series of AI models designed to generate images with no copyright risk.

Under Narayen’s leadership, the company experienced tremendous growth. Since taking office at the end of 2007, Adobe’s annual revenue has grown nearly sixfold to about $24 billion, and the number of employees has grown from about 7,000 to more than 30k. He is often regarded as one of the pioneers who successfully guided the software industry’s transition to a subscription model, under which customers pay recurring fees for a suite of products rather than buying individual applications once.

Microsoft CEO Satya Nadella wrote on the social platform X that Narayen’s tenure at Adobe was a “legendary journey.” The CEO of Figma, Dylan Field, which Adobe attempted to acquire in 2022, said Narayen was “thoughtful, kind, and steadfast in his pursuit of Adobe’s vision.”

However, in recent years, investor questions about Narayen’s direction as CEO have been mounting. Generative AI has made it possible to create visual media without relying on Adobe’s expensive products. Many popular new AI creative tools, such as Google’s Veo 3 AI model, are being built by competitors.

Frank Caldroni, the board’s chief independent director tasked with finding a successor, said: “We are focused on selecting the right leader for the company’s next exciting growth chapter, and we thank Shantanu for continuing to lead in the CEO role to ensure a smooth transition.”

In a call after the company released its earnings report, Narayen said that compared with the same period last year, annual recurring revenue for AI-priority products like Firefly in the first fiscal quarter grew by more than two times. In September last year, the company said sales of these products had already exceeded $250 million.

On the same day, Adobe forecast that revenue for the quarter ending in May would be between $6.43 billion and $6.48 billion, with analysts’ average estimate at $6.43 billion. Earnings per share excluding certain items were expected to be between $5.80 and $5.85, with an average estimate of $5.70.

In the first fiscal quarter ended February 27, sales rose 12% to $6.4 billion, exceeding analysts’ average estimate of $6.28 billion. Adjusted earnings per share were $6.06, versus an average estimate of $5.88.

Of that, subscription revenue from creative and marketing professionals contributed $4.39 billion, while business professionals and consumers contributed $1.78 billion.

Anurag Rana, an industry analyst, wrote that Narayen’s departure makes performance that was otherwise solid look dim. “Since early last year, Adobe’s financial metrics have changed little in any significant way, but the stock price has fallen by nearly 40%—which is very likely a key reason behind the planned CEO transition.”