TLDR: Good quarter. Doesn't matter. The CEO is leaving.

What Happened

Adobe announced Thursday night that Shantanu Narayen, 62, will step down as CEO once a successor is named. He joined Adobe in 1998 and has run the company since 2007. He'll stay on as board chair.

The announcement hit right after Q1 results that actually beat on every line: $6.4 billion in revenue, up 12% year over year, and earnings per share of $6.06 against an estimate of $5.87. Annualized revenue from AI products more than tripled year over year.

None of it mattered. Shares fell more than 8% in Friday trading.

Why Investors Are Spooked

Part of the problem is the timing. Adobe has no successor named yet — the board appointed lead director Frank Calderoni to run the search, looking at both internal and external candidates. That kind of open-ended transition tends to make investors nervous, especially when the departing CEO was the one who navigated two of the biggest pivots in company history.

Narayen led Adobe's shift from boxed software to Creative Cloud subscriptions, and more recently pushed the company into generative AI. Under his watch, the stock climbed more than sixfold.

But Wall Street has spent two years questioning whether AI will cannibalize Adobe's core business rather than extend it. Adobe's stock is already down 23% in 2026 and is more than 60% off its 2021 record high. The concern: if AI tools make Photoshop and Illustrator feel optional, who wants to buy Creative Cloud at all?

What Comes Next

Bloomberg described the departure as happening "amid deep skepticism about the company's ability to thrive in the AI era." Second-quarter guidance was in line with estimates — not the accelerating growth story investors were hoping for.

The stock is now cheap by software standards, trading at less than 12x earnings. But "cheap for a reason" is still a reason.

The next CEO will inherit a company with 850 million monthly users and a real AI problem to solve.