Adobe (NASDAQ:ADBE) said Thursday that long-serving chief executive Shantanu Narayen will step down after eighteen years in the role, adding that its board has begun the process of selecting a successor.
The announcement came alongside quarterly results that exceeded analyst expectations on both revenue and earnings, as well as guidance for the current quarter that largely came in ahead of forecasts.
Despite the strong financial update, ADBE shares fell more than 8% in premarket trading on Friday.
CEO departure after long tenure
Narayen has been with Adobe since 1998 and rose through several leadership roles before becoming chief executive in December 2007. One of his most significant strategic decisions was transitioning Adobe’s software portfolio to a cloud-based subscription model.
During his tenure, Adobe’s annual revenue expanded dramatically, climbing to $23.77 billion from $3.58 billion.
“Over the coming months, I will be working with Frank Calderoni, our lead Director, and the Board of Directors to identify my successor and to ensure a smooth transition. I will stay on as Chair of the Board to support the next CEO just as John and Chuck did when I took on this role,” Narayen told employees in an email.
Over the same period, Adobe’s share price increased to $269.78 from $42.14, although the company carried out a 2:1 stock split in May 2005.
“We grew from ~3K employees to >30K employees, delivered technology that touched billions of people as customers of our products or the digital experiences that our customers create, leading to our revenue growing from <$1B to >$25B,” Narayen said.
Quarterly results exceed expectations
Looking at the company’s financial performance, Adobe reported adjusted earnings of $6.06 per share on revenue of $6.40 billion for its fiscal first quarter of 2026. Analysts had expected earnings of $5.86 per share on revenue of $6.28 billion.
The San Jose, California-based company is widely known for software products such as Photoshop and Premiere Pro, and has also expanded its presence in artificial intelligence through Adobe Firefly, a suite of generative AI tools designed for images, video, audio and vector graphics.
Adobe reported annualized recurring revenue (ARR) of $26.06 billion at the end of the quarter, while remaining performance obligations stood at $22.22 billion. However, net new ARR of $400 million declined about 11% year-over-year, with management pointing to weakness in the traditional Stock business and the timing of monetization for its freemium offerings.
“The resignation of long-time CEO Shantanu Narayen stoked investor fears of further transitions ahead for Adobe. However, the leadership transition may be overshadowing signs of stabilization in the core business,” Morgan Stanley analyst Keith Weiss said in a note.
Outlook remains solid
For fiscal Q2, Adobe forecasts adjusted earnings of $5.80 to $5.85 per share on revenue between $6.43 billion and $6.48 billion. Analysts had been expecting earnings of $5.70 per share on revenue of $6.43 billion.
The results arrive at a time when investor sentiment around artificial intelligence has evolved. Market participants have shifted from the view that AI will benefit the entire sector to a more selective outlook where AI will create distinct winners and losers, particularly within established software-as-a-service businesses.
“While usage/user metrics in ADBE’s AI business continue to improve and confidence in 2H acceleration is high, we believe investors will have a somewhat harder time underwriting that confidence given incremental uncertainty,” Wolfe Research analysts commented.
“That said, with shares at 13x CY27 GAAP P/E, shares still appear too cheap for continued double-digit EPS growth over at least the next two years,” they added, reiterating an Outperform rating while lowering their price target to $320 from $375.