Adobe Picks Its Agentic-AI CEO — and the Market Just Read It Wrong

The market treated Adobe's leadership news as just another reason to sell. On September 3 the board named Anil Chakravarthy its next CEO, effective December 1, ending a search that had run since March. The stock fell roughly 7% to 8% the next day on "AI strategy doubts." That drop lands on top of a brutal two-year slide — shares are down more than 60% from their peak and trading near the bottom of a 52-week range that stretches from roughly $190 to $371.

The popular story hiding inside those numbers: Adobe is a legacy AI casualty, a creative-software empire that generative models like Midjourney and ChatGPT are quietly making obsolete. Buy the shares cheap, the bears say, and you're catching a falling knife chasing a dying duopoly.

Here's the case the market isn't pricing in. And Adobe reports fiscal Q3 earnings tomorrow, so it's about to be tested in real time.

The CEO pick was the signal

Chakravarthy isn't a creative-tools executive. He joined Adobe in 2020 to run its Digital Experience business, and today he leads what Adobe calls "Customer Experience Orchestration" plus worldwide field operations — the enterprise marketing-and-agents side, not Photoshop. Before Adobe he ran Informatica. He's the executive who built out the agentic AI products — Adobe CX Enterprise, GenStudio — that sit at the center of the company's newest strategy. He describes the coming period as the "next era of agentic software."

Wall Street read the internal hire as "more of the same," a continuity pick without the disruption a turnaround supposedly needs. Get past the optics and it's the opposite: the board is betting the next decade on the part of the business where Adobe's AI money actually flows — software that lets brands orchestrate AI agents and manage trusted content at scale — rather than on winning a raw content-generation arms race against Midjourney and Sora. Shantanu Narayen, who spent 18 years as CEO and grew revenue from under $1 billion to more than $25 billion, moves to executive chair. Handing the keys to the customer-experience operator is a statement of direction, not a lack of change.

The data contradicts the "dying company" story

Bear it with the numbers from the quarter Adobe already reported. In fiscal Q2, revenue hit a record $6.62 billion, up 13% year over year and above Wall Street expectations, and the company raised its full-year revenue and non-GAAP EPS targets. Total annualized recurring revenue reached $27.1 billion. Most importantly for the bull case: what Adobe calls "AI-first ARR" — revenue tied to its paid AI products — more than tripled year over year and topped $500 million.

A company that skeptics claim AI is making obsolete is growing fastest on AI products. The narrative and the data are pointing in different directions. That gap is where the work lives.

Abundance-scarcity, applied to Acrobat

The mechanism runs through Acrobat, the product the market mostly ignores. Think about what generative AI does. It makes content creation — images, video, copy, designs — nearly free and abundant. When any tool can produce any asset, the scarce thing becomes the opposite of raw generation: trust. Is this image real? Did the brand approve this content? Is this contract what it says it is? Who verified this document?

The PDF is the layer of record — the format people use when a document has to be true: contracts, filings, signatures. Adobe now sells an AI Assistant as a roughly $5-per-month add-on that lets users chat with their documents, and in May it rolled out a "productivity agent" that turns a PDF into live, interactive content — presentations, podcasts, even custom AI agents embedded in documents via "PDF Spaces." That's Adobe attaching the newest technology not to the generation of content but to the one asset guaranteed to stay scarce: the authenticated, organized document. As creation goes abundant, the layer of record gets more valuable, not less.

This is the asymmetry the market is ignoring. The bear case is fully priced in at 60% off the peak. The bull case — that Acrobat plus agentic customer experience compounds from an already-growing base — is barely priced in at all.

What to watch tomorrow

Adobe reports fiscal Q3 on September 10. Management guided to revenue of $6.67 billion to $6.72 billion and non-GAAP EPS of $6.05 to $6.10. But the number that matters isn't the headline — it's whether AI-first ARR keeps accelerating off that $500 million base, and whether Acrobat's AI attach rate moves the needle on the document business. Two other things are worth noting as honest risks. There's an interim CFO in place after Dan Durn left for Marvell, and a CEO transition, however orderly, carries real execution risk. The honest version of the thesis is: the market has already assumed the worst, and the question tomorrow is whether the data keeps contradicting that assumption — or starts confirming it.

Every stock price is a story about the future, and Adobe's is currently a story about a company AI is killing. The evidence says the company AI is actually helping — if it can keep the momentum through a leadership change. That's the trade. Watch the AI-first number. That's where the story gets decided.