Investing.com -- Adobe (NASDAQ: ADBE) on Thursday said its chief executive of eighteen years, Shantanu Narayen, will step down and that its board had initiated a search for a successor.

The company separately announced a quarterly top- and bottom-line beat and issued current quarter guidance that was largely above expectations.

Shares of ADBE tumbled more than 8% in premarket trading Friday.

Top boss to step down

Narayen is an Adobe veteran, having joined the company in 1998 and promoted several times until finally taking on the helm of chief executive in December 2007. One of Narayen’s biggest moves was bundling the company’s various software products into a cloud-based subscription model.

Under Narayen, Adobe’s annual revenue has surged to a massive $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.

In Narayen’s time as CEO, Adobe’s stock price has swelled to $269.78 from $42.14. Note that the company undertook 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.

Adobe guidance largely beats

Turning to the company’s results, Adobe earned $6.06 per share on an adjusted basis on revenue of $6.40 billion for its fiscal Q1 2026. Analysts had expected a profit of $5.86 per share on revenue of $6.28 billion.

San Jose, California-based Adobe is known for its portfolio of software products such as image editor Photoshop and movie maker Premiere Pro. The company has also ventured into artificial intelligence with its Adobe Firefly, a suite of generative AI tools for images, video, audio, and vectors.

ADBE’s annualized recurring revenue (ARR) at the end of the quarter was $26.06 billion, while its remaining performance obligations were $22.22 billion. However, net new ARR of $400 million fell about 11% year over year, with management citing headwinds in the traditional Stock business and the timing of freemium monetization.

"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.

Turning to its guidance, Adobe sees fiscal Q2 earnings of $5.80 to $5.85 per share on an adjusted basis on revenue of $6.43 billion to $6.48 billion. Analysts expect earnings of $5.70 per share on revenue of $6.43 billion.

The company’s results come at a time when the perspective around AI has significantly shifted. Investors have moved from a "AI will benefit everything" mindset to "AI will create specific winners and losers." Concerns are swirling over potential disruptions from AI to legacy sub sectors such as software-as-a-service.

"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 trimming the target price to $320 from $375.