Adobe reported better-than-expected fiscal first-quarter earnings on Thursday night. The news was eclipsed by the resignation of the company’s long-time CEO Shantanu Narayen.
Narayen, who was CEO of Adobe for 18 years, will remain in his role until a successor is chosen, the company said on Thursday. He will also stay on as chair of the board to help support a new chief executive.
Shares dropped 9% in premarket trading on Friday following the news.
Adobe stock has fallen 23% this year and is down 60% from its all-time closing high of $688.37 on Nov. 19, 2021.
Adobe has found itself at the center of the conversation regarding artificial intelligence’s impact on software companies. The concern is that AI capabilities can replace what software does. Some investors worry that Adobe is particularly susceptible to these disruptions as other companies launch creative software tools powered by AI.
Adobe has been trying to boost investor sentiment by proving they are making money off of customer’s adopting their AI tools. The company said on Thursday that first-quarter AI-first annual recurring revenue more than tripled year-over-year.
“Our mission, Empower Everyone to Create, represents an even larger opportunity in the AI era. By delivering an innovative roadmap aligned to our audience strategy, we are positioning Adobe to lead this next chapter,” Narayen said in a letter announcing his departure to employees on Thursday.
Investors don’t seem convinced yet. New leadership will have the responsibility of trying to change the narrative.
It wasn’t all bad news on Thursday, though. Adobe posted adjusted first-quarter earnings of $6.06 a share on revenue of $6.4 billion. That’s better than analysts’ consensus estimate for earnings of $5.87 a share on revenue of $6.28 billion, according to FactSet.
The creative software maker also said it expects second-quarter earnings to be between $5.80 to $5.85 a share on revenue of $6.43 billion to $6.48 billion. That’s compared to Wall Street’s earnings estimate of $5.68 a share on revenue of $6.43 billion.