Adobe announced Thursday that its long-time chief executive, Shantanu Narayen, will step down once a successor is named. He will remain as chairman of the board. The news, which overshadowed a quarterly earnings beat, sent shares down 7% in after-hours trading.

Narayen, 62, has led Adobe since 2007, presiding over its pivotal shift from selling software licenses to the subscription-based Creative Cloud. More recently, he has steered the company's aggressive push into generative AI. His tenure saw a more than sixfold increase in Adobe's stock price. A planned $20 billion acquisition of Figma collapsed under regulatory pressure last year, costing Adobe a $1 billion termination fee.

'Shantanu positioned Adobe for success in the AI-driven era,' said lead independent director Frank Calderoni in a statement, noting the board is now focused on selecting a leader for the company's 'next exciting chapter.'

Despite the leadership transition, Adobe's business shows strength. For the quarter ended Feb. 27, revenue hit $6.40 billion, above expectations, with annualized revenue from AI-centric products more than tripling. Subscription revenue for creative and marketing tools grew 12% to $4.39 billion.

Yet investors remain wary. Adobe's stock is down nearly 23% this year, reflecting broader concerns about how generative AI might disrupt established software markets. The company's guidance for the current quarter was slightly ahead of analyst forecasts.

In a memo to staff, Narayen reflected on his 28-year career at Adobe, citing its history of market creation and innovation. He pledged to support the next CEO, just as the company's founders did for him.

Source: CNBC