Adobe just announced its next CEO. Here's why its stock is dropping.

By Emily Bary

Incoming CEO Anil Chakravarthy is a company veteran. But another longtime business head will be departing Adobe, potentially foreshadowing further turnover in leadership.

Anil Chakravarthy, left, will become Adobe's next CEO on Dec. 1.

Adobe chose a corporate insider as its next leader, but not the one that many investors were anticipating, according to an analyst.

The maker of design software announced late Thursday that Anil Chakravarthy, who has been the president of Adobe's (ADBE) Customer Experience Orchestration business, will be taking over the CEO post starting on Dec. 1. He will replace Shantanu Narayen, who had previously disclosed plans to step down from the top spot.

In a statement, Narayen called Chakravarthy "an experienced transformational leader who leads with values, integrity and a deep knowledge of our business."

His unit, the Customer Experience Orchestration business, focuses on the use of artificial intelligence to help customers obtain information and connect with brands.

Jefferies analyst Brent Thill wrote that another Adobe veteran, David Wadhwani, had been seen as "the rational choice" given that he oversaw about three-quarters of Adobe's revenue through his position leading the company's creative business. He spent 19 years with the company, spanning two different stints, and commanded respect both internally and externally, according to Thill.

And there's another curveball for investors. Wadhwani announced on LinkedIn late Thursday that he would be departing from the company. "As much as Adobe means to me, I've decided this is the right moment for me to start a new chapter, and it's a great moment for Adobe to do the same as Anil steps into the CEO role," he wrote.

Thill wrote that he and his team "expect others to follow as Anil reshapes the organization."

"With Adobe facing significant headwinds from AI, we expect the board of directors may also see changes to onboard deeper AI expertise," the Jefferies analyst added.

Shares of Adobe were falling more than 6% in Friday morning action.

Adobe is in the midst of a tumultuous period as investors consider who wins and who loses in the era of AI.

The company built a name for itself by becoming the dominant force in creativity software, but even before AI became a mainstream trend, Adobe started to face competition from newer players like Canva and Figma (FIG). AI has posed an additional challenge as it's now easier for people to create things online using free tools. Like other software companies, Adobe must also determine the best way to price its offerings as AI disrupts the traditional software-as-a-service model of charging by "seats," or employees who use the service.

See also: How much should an AI agent cost? No one can agree - and it's creating chaos.

"Adobe has a history of building the future - not just through our technology, but through our people and our commitment to customers," Chakravarthy said in a statement. He sees the company in a good position to deliver "Adobe's next chapter of growth."

Shares of Adobe have lost 18% through Thursday's close, after falling 20%-plus in each of the prior two calendar years.

The company is due to report quarterly earnings on Sept. 10.

-Emily Bary

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09-04-26 0942ET