Investing.com -- Barclays downgraded Adobe to Equal Weight from Overweight after the surprise announcement that long-time chief executive Shantanu Narayen will step down from the role, though he will remain board chair.

Analyst Saket Kalia wrote in a note that the firm is “stepping to the sidelines on this name,” citing both weaker-than-expected first-quarter metrics and uncertainty around leadership transition.

Adobe reported first-quarter net new ARR of $400 million, below Barclays’ $460 million estimate.

According to the firm, the shortfall was driven by a roughly $70 million hit to Adobe Stock as customers increasingly turn to generative AI tools like Firefly, which “moves from a high ARPU subscription to generative credit packs with lower ARPU.”

Barclays said ARR growth would have been 11.2 percent excluding this headwind, instead of the reported 10.9 percent.

Despite the miss, Adobe kept its fiscal 2026 guidance unchanged, and Barclays noted management expects NNARR acceleration in 2H from enterprise demand, freemium monetization of its 80 million monthly active users, and rising generative credit usage, which was up more than 45 percent quarter over quarter.

Barclays also highlighted a strategic shift toward faster-growing freemium products such as Express and Firefly.

The firm believes these categories could “offset the headwind in ARPU with more users,” though it added that the mix shift will take time to prove out.

The CEO transition, however, was the decisive factor. Kalia said the unexpected nature of Narayen’s move suggests the board “is looking for change which could take time to play out,” prompting the downgrade and a reduced price target of $275, down from $335.