Adobe announced that its Chief Executive Officer, Shantanu Narayen, will step down from his role leading the creative software giant, amid deep market skepticism about the company's ability to maintain leadership in the artificial intelligence era. On the same day, the company reported fiscal first-quarter results, with both revenue and earnings surpassing average market expectations.

In a statement released on Thursday, Adobe said the 62-year-old Narayen will retire after serving as CEO for 18 years. He will remain in his position until a successor is named and will continue to serve as Chairman of the board. An analyst from market research firm Emarketer, Grace Harmon, stated via email that the CEO transition "raises questions about strategic continuity, capital allocation priorities, and the pace of innovation. Investors will likely watch closely whether the new leadership can balance steady execution with aggressive AI investments, especially as competition in creative and enterprise AI intensifies."

The stock closed at $269.78 in New York on Thursday. In after-hours trading, the share price fell approximately 7.33%. Since the beginning of 2026, Adobe's stock has declined about 23%, approaching a three-year low.

As the developer of tools for creative professionals, such as Photoshop, Adobe is considered part of the application software sector alongside companies like Salesforce and Atlassian. These firms are facing challenges from new AI-focused competitors in attracting new customers. To protect its substantial market share, Adobe has been working to integrate AI tools into its creative and marketing software and has launched a series of AI models designed to generate images free from copyright risks.

Under Narayen's leadership, the company experienced significant growth. Since he took the helm at the end of 2007, Adobe's annual revenue grew nearly sixfold to approximately $24 billion, and its employee count increased from around 7,000 to over 30,000. He is widely regarded as one of the pioneers who successfully led the software industry's transition to a subscription model, where customers pay recurring fees for product bundles instead of making one-time purchases for individual applications.

Microsoft CEO Satya Nadella wrote on social media platform X that Narayen had a "legendary run" at Adobe. Dylan Field, CEO of Figma, a company Adobe attempted to acquire in 2022, described Narayen as "thoughtful, kind, and steadfast in his pursuit of Adobe's vision."

However, in recent years, investors have increasingly questioned Narayen's strategic direction. Generative AI has made it possible to create visual media without needing Adobe's expensive products. Many popular new AI creative tools, such as Google's Veo AI model, are built by competitors.

Frank Calderoni, the lead independent director on the board tasked with finding a successor, said, "We are focused on selecting the right leader for the company's next exciting chapter of growth and are grateful for Shantanu's continued leadership as CEO to ensure a smooth transition."

During the earnings call, Narayen stated that the annual recurring revenue from the company's AI-first products, such as Firefly, more than tripled in the first fiscal quarter compared to the same period last year. Last September, the company indicated that sales from these products had exceeded $250 million.

On the same day, Adobe provided guidance for the current quarter ending in May, forecasting revenue between $6.43 billion and $6.48 billion. The average analyst estimate was $6.43 billion. Adjusted earnings per share are projected to be between $5.80 and $5.85, compared to an average estimate of $5.70.

For the first fiscal quarter ended February 27, sales increased by 12% to $6.4 billion, exceeding the average analyst estimate of $6.28 billion. Adjusted earnings per share were $6.06, above the average estimate of $5.88. Subscription revenue from creative and marketing professionals contributed $4.39 billion, while commercial professionals and consumers contributed $1.78 billion.

An industry analyst, Anurag Rana, noted that Narayen's departure overshadows what were otherwise solid financial results. "Since the beginning of last year, Adobe's financial metrics have shown little significant change, yet the stock has fallen nearly 40% – this was likely a key reason for planning the CEO transition."