Adobe beat its Q1 numbers, but investors didn’t care. A CEO exit and growing AI concerns sent the stock sliding after hours.
$ADBE Q1’26 EARNINGS HIGHLIGHTS
Revenue: $6.40B (Est. $6.28B)
; +12% YoY
Q2 Guide:
— Wall St Engine (@wallstengine) March 12, 2026
Shantanu Narayen, who has led Adobe for 18 years, announced he is stepping down. He will stay in the role until a replacement is found and will remain as board chair to help with the transition.
The announcement came the same evening Adobe reported fiscal first-quarter results that topped Wall Street expectations. Adjusted earnings came in at $6.06 per share on revenue of $6.4 billion, ahead of analyst estimates of $5.87 per share and $6.28 billion in revenue.
Despite the beat, the stock dropped 6.7% in after-hours trading. ADBE is now down 23% year-to-date and sits roughly 60% below its all-time closing high of $688.37, set in November 2021.
Adobe has been caught in a difficult spot with artificial intelligence. The worry among investors is that AI tools can replace what creative software does — and that Adobe is more exposed to this than most.
The numbers offer a mixed read. On one hand, Adobe’s AI-first annual recurring revenue more than tripled year-over-year. On the other, Barclays analyst Saket Kalia pointed out that generative AI tools like Adobe Firefly are eating into Adobe Stock sales. Users are generating images with text prompts instead of buying stock photos.
Kalia also flagged that faster growth in freemium users for Firefly and Express is pulling down average revenue per user. Barclays downgraded the stock to Equalweight from Overweight and cut its price target to $275 from $335.
Adobe had 80 million monthly active users for its freemium products at the end of Q1, with generative credit usage up 45% quarter-over-quarter.
For Q2, Adobe guided for earnings of $5.80 to $5.85 per share on revenue of $6.43 to $6.48 billion. The earnings midpoint is ahead of Wall Street’s $5.68 estimate.
The company left its fiscal 2026 ARR guidance unchanged, with the second half expected to benefit from enterprise tools and freemium monetization.
Barclays noted the CEO transition adds another layer of uncertainty. With an ARR base above $25 billion, any meaningful change in direction will take time.
Narayen, in his letter to employees, struck an optimistic tone: “Our mission, Empower Everyone to Create, represents an even larger opportunity in the AI era.”
As of March 13, ADBE was trading at $269.78, down 28.6% over the past year.
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