Adobe Stock Drops As CEO Shantanu Narayen To Step Down; Q1 Results Climb, Sees Growth In Q2

(RTTNews) - Shares of Adobe Inc. were losing around 9 percent in the overnight trading after the tech major announced that its long-time Chief Executive Officer Shantanu Narayen plans to step down from the role after eighteen years. Meanwhile, the company reported higher first-quarter results and issued second-quarter outlook, expecting growth in earnings and revenues.

Narayen informed the Board of Directors of his decision to transition from his position as CEO after a successor has been appointed. However, he will remain as Chair of the Board.

The computer software company's board has launched a formal search for a new CEO, considering both internal and external candidates. Frank Calderoni has been appointed chair of a special committee overseeing the succession process.

Adobe said Narayen will continue serving as CEO during the transition period to help ensure continuity and a smooth leadership change.

As per an email sent by Narayen to his employees, the company during his time grew to over 30 thousand employees from around 3 thousand employees, and its revenue surged to more than $25 billion from less than $1 billion.

Narayen stated, "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.... I will ensure that I set up Adobe for its next decade of greatness with the right leader and executive team, in partnership with the Board, while continuing to deliver on our FY26 Must Wins."

Regarding its outlook, Adobe said it projects second-quarter earnings of $4.35 to $4.40 per share on a reported basis, and adjusted earnings of $5.80 to $5.85 per share.

Total revenue for the quarter is expected to be $6.43 billion to $6.48 billion.

In the previous year's second quarter, Adobe had recorded earnings of $3.94 per share and adjusted earnings of $5.06 per share on revenue of $5.873 billion.

For the second quarter, Business Professionals & Consumers subscription revenue would be $1.80 billion to $1.82 billion, and Creative & Marketing Professionals subscription revenue would be $4.41 billion to $4.44 billion.

In addition, Adobe reaffirmed previously issued fiscal 2026 targets.

In its first quarter, Adobe's earnings came in at $1.89 billion or $4.60 per share, higher than $1.81 billion or $4.14 per share last year.

Adjusted earnings were $2.49 billion or $6.06 per share for the period, compared to $2.22 billion or $5.08 per share a year ago.

The company's revenue for the period rose 11.9 percent to $6.40 billion from $5.71 billion last year. Revenue grew 11 percent in constant currency.

Total Customer Group subscription revenue was $6.17 billion, a 13 percent year-over-year growth.

Business Professionals & Consumers subscription revenue climbed 16 percent year-over-year to $1.78 billion, and Creative & Marketing Professionals subscription revenue grew 12 percent to $4.39 billion.

Total Adobe Annualized Recurring Revenue or ARR exiting the quarter was $26.06 billion.

Exiting the quarter, Remaining Performance Obligations or RPO were $22.22 billion, and Current Remaining Performance Obligations or cRPO were 67 percent.

In the overnight trading, the shares were trading at $246.81, down 8.5 percent, after closing Thursday's regular trading 1.4 percent lower, at $269.78.

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