Q4 2023 Adobe Inc Earnings Call

Unknown Executive: Good day, and welcome to the 2-4 and FY 2023 Adobe earnings conference call. Today's conference is being recorded.

Jonathan Vaas: At this time I would like to turn the conference over to Jonathan Vaas, VP of Investory Relations. Please go ahead. Good afternoon and thank you for joining us.

Jonathan Vaas: With me on the call today are Shantanu Narayen, Adobe's Chair and CEO, David Wadhwani, President of Digital Media, Anil Chakravarthy, President of Digital Experience, and Dan Durn, Executive Vice President and CEO. On this call, which is being recorded, we will discuss Adobe's 4th quarter and fiscal year 2023 financial results. You can find our press release as well as PDFs of our prepared remarks and financial results on Adobe's Investory Relations website. The information discussed on this call, including our financial targets and product plans, is as of today December 13th and contains forward-looking statements that involve risk, uncertainty, and assumptions.

Jonathan Vaas: Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today's earnings release and Adobe's SEC filings. On this call, we will discuss GAP and non-GAP financial measures. Our reported results include GAP growth rates as well as constant currency rates. During this presentation, Adobe's executives will refer to constant currency revenue growth rates unless otherwise stated.

Shantanu Narayen: We will now turn the call over to Shantanu. Thanks, Jonathan. Good afternoon and thank you for joining us. Q4 was our first ever $5 billion quarter, a new record for the company. Adobe achieved revenue of $5.05 billion, representing 13% year-over-year growth. GAP earnings per share for the quarter was $3.23 and non-GAP earnings per share was $4.27, representing 28% and 19% year-over-year growth respectively. Q4 was the culmination of another record year for Adobe, achieving $19.41 billion in revenue, which represents $13% annual growth. GAP earnings per share in fiscal 2023 was $11.82 and non-GAP earnings per share was $16.07, both representing 17% year-over-year growth. We exited the year with $17.22 billion in our PO.

Shantanu Narayen: Our strong performance reflects the mission-critical role our products play in a digital first world, incredible product innovation and exceptional execution. Adobe Creative Cloud, Document Cloud and Experience Cloud have become the foundation of digital experiences, starting with the moment of inspiration to the creation and development of content and media, to the personalized delivery and activation across every channel. Adobe's mission of changing the world through personalized digital experiences and our delivery of foundational technology platforms set us up for the next decade of growth.

Shantanu Narayen: Jeff We take pride in being one of the most inventive, diversified and profitable software companies in the world. We believe that every massive technology shift offers generational opportunities to deliver new products and solutions to an ever expanding set of customers. AI and generative AI is one such opportunity and we have articulated how we intend to invest and differentiate across data, models and interfaces. We have delivered against the strategy and are pleased that a number of our groundbreaking innovations, including our Firefly models and integrations across Creative Cloud, liquid mode and integrations across Document Cloud, and AI services in our real-time customer data platform and integrations and experience cloud are now seeing tremendous usage by customers. We remain excited about the strategic opportunity with Figma to jointly advance product design, accelerate collaborative creativity on the web and redefine the future of creativity and productivity.

Shantanu Narayen: We continue to engage with the European Commission, the competition and markets authority in the UK and the US Department of Justice as they conduct their regulatory reviews. The EC has provided a preliminary statement of objections and the CMA has issued provisional findings of competition concerns. We strongly disagree with these findings in our responding to the respective regulators. As per their current timelines, the EC's decision deadline is February 5th and the CMA's is February 25th. While the DOJ does not have a formal timeline to decide whether to bring a complaint, we expected decision soon.

David Wadhwani: I'll now turn it over to David to discuss the momentum in our digital media business. Thanks, Shantanu. Hello, everyone.

David Wadhwani: In Q4, we achieved net new digital media ARR of $569 million and revenue of $3.72 billion, which grew 14% year-over-year, fueled by innovation in both our Creative and Document businesses. Starting with Creative Cloud, global demand for content is accelerating and continues to be a tailwind for the business. Creative Cloud remains the creativity platform of choice for creators across imaging, photography, design, video, web, animation, and 3D. Our rapid pace of product and AI model innovation is empowering a wide and growing base of individuals, students, creative professionals, small business owners, and enterprises to create and monetize amazing content more quickly and easily than ever before.

David Wadhwani: We were thrilled to come together in person with thousands of creators at Adobe Max and Los Angeles and at our Max event in Tokyo with millions more from our community engaging with us online. We reached a record 300 million social interactions in the month following Max.

David Wadhwani: Q4 was a record quarter for Creative Cloud, achieving $3 billion in revenue, which grew 14% year-over-year. Net new Creative Cloud ARR was $398 million. Mark Millian.

David Wadhwani: Business highlights include strong digital traffic resulting from product innovation, social engagement and our continued product led growth efforts which grow record new commercial subscriptions in the quarter. The general availability of our generative AI Firefly models and their integrations across Creative Cloud grow tremendous customer excitement with over four and a half billion generations since launch in March. The release of three new Firefly models Firefly Image 2 model, Firefly vector model and Firefly design model offering highly differentiated levels of control with effects, photo settings and generative match.

David Wadhwani: We also introduced generative credits as part of our Creative Cloud subscription plans. The general availability of Photoshop, generative fill and generative expand which are seeing record adoption. They're already among the most used features in the product.

David Wadhwani: Advances in Adobe Illustrator with the introduction of text-to-vector beta enabling users to generate icons, scenes, subjects, patterns and gradients. Adobe Premiere Pro advances include a significant performance improvement in the timeline for faster and smoother editing, new color preferences and improved tone mapping. Premiere Pro is now natively integrated with FAMIO offering faster content sharing and collaboration.

David Wadhwani: The combination of Adobe Express and Firefly is enabling everyone from Creative Pros to beginners to quickly move from ideation to task-based workflows and express dramatically expanding our reach and widening our top of funnel. The family of generative capabilities across Express including text to image, text effects, text to template and generative fill are driving adoption of Express and making it even faster and more fun for users of all skill levels. Express now comes pre-installed on all new Chromebooks making it accessible to students, educators and anyone using Chrome OS.

David Wadhwani: Continued strength in Adobe Stock which had its best year ever driven by accelerating demand for high quality image, vector, video and 3D content. Creative Cloud, Express and Firefly integrations with Adobe Gen Studio enabling ideation, creation and stakeholder collaboration as part of their overall content supply chain. Strong mid-market and enterprise adoption driven by upsell to Creative Cloud offerings with Firefly. Key customer wins include Cyberagent, Deloitte, Discovery Communications, NextR Media, Pepsi, Publifus and the United Nations.

David Wadhwani: We are thrilled with the momentum we're seeing in the Creative Business following a year of unprecedented innovation. Customer excitement around Firefly integrations across our applications has been great to see with community engagement, social interactions and creative marketing campaigns, driving organic brand search volume, traffic and record demand. While we started rolling out new Creative Cloud pricing in select geographies in November, the primary driver of growth continues to be new paid subscriptions across our road to market. We are excited to build on this momentum as we enter FY24.

David Wadhwani: Now turning to Document Cloud digital documents are essential enablers of our personal and professional lives. Document Cloud is a leader in digital documents powering all common document actions, including editing, sharing, reviewing, scanning and signing. Document Cloud innovations are advancing accessibility, comprehension, productivity, automation and security in document workflows across web desktop and mobile.

David Wadhwani: Paul. In Q4, we achieved Document Cloud Revenue of 721 million growing 17% year over year. We added a record 171 million of net new Document Cloud ARR with ending ARR growing 23% year over year in constant currency. Business highlights include Acrobat Web Growth, which continues to be an incredible source of customer acquisition with monthly active users up over 70% year over year. A surge in usage of link sharing for stakeholder collaboration around PDF files, which increased 400% year over year, creating a viral growth loop that is bringing tens of millions of users into the Acrobat ecosystem. This is a great example of how we are scaling our PLG motions.

David Wadhwani: Strong demand for Acrobat on mobile, with Mao surpassing 100 million users in Q4. Liquid mode has now served over 1 billion files to customers demonstrating how indispensable this technology has become on mobile devices. Adobe Acrobat to express workflows, making it even easier to import, edit, and enhance documents to create visually stunning PDFs. Key enterprise customer wins include Alshaya, Bank of America, Department of Veterans Affairs, MasterCard, State Farm Auto Insurance, and Volkswagen.

David Wadhwani: Much like the creative business, we expect generative AI to deliver additional value and attract new customers to document cloud. Acrobat's generative AI capabilities, which will enable new creation, comprehension, and collaboration functionality, have already been rolled out in a private beta. We expect to release this in a public beta in the coming months. It's been an extraordinary year for the digital media business, with the introduction of hundreds of transformative innovations that are reshaping the future of creativity, productivity, and digital experiences. Capping this year's many accolades, Time Magazine recognized Adobe Liquid mode, Photoshop Generative Fill, and Generative Expand, among the best inventions of 2023.

Anil Chakravarthy: I'll now pass it to a note. Thanks, David. Hello, everyone. Digital experiences are indispensable for every business and every world. Adobe's holiday shopping report, which analyzes trillions of data points, found that both Black Friday and Cyber Monday sales hit record highs of $9.8 billion, and $12.4 billion respectively, jumping 7.5% and 9.6% from last year. We predict that holiday 2023 spend will exceed $221 billion in the US alone.

Anil Chakravarthy: Adobe Experience Cloud is optimally positioned to capitalize on this massive global opportunity. Companies across B2C and B2B are turning to Adobe Experience Cloud as the platform to accelerate experience-led growth. Our leading solutions spanning data insights and audiences, content and commerce, customer journeys and marketing workflow, empower businesses to drive customer demand, engagement and growth, while simultaneously delivering productivity gains. Our comprehensive set of applications, including real-time CDP, are built natively on our highly differentiated Adobe Experience platform, providing companies with a unified profile of each of their customers to deliver personalized real-time experiences at. Skale, Generative AI accelerates our pace of innovation across the experience cloud portfolio, enabling us to build on our capabilities to deliver personalized digital experiences. Our efforts are focused in three areas.

Anil Chakravarthy: One, augmenting our applications with an AI assistant that significantly enhances productivity for current users, and provides an intuitive conversational interface to enable more knowledge workers to use our products. Two, reimagining existing experience cloud applications, like we did with Adobe Experience Manager. And three, developing entirely new solutions built for the age of generative AI like Adobe Gen Studio.

Anil Chakravarthy: In Q4, we continue to drive strong growth in the experience cloud business across our enterprise and mid-market customers, achieving $1.27 billion in revenue. Subscription revenue was $1.12 billion representing 12% year-over-year growth. Business highlights include strong momentum with Adobe Experience Platform and Native Applications, inclusive of real-time CDP, Adobe Journey Optimizer, and Customer Journey Analytics. AEP had its first $100 million quarter of net new business in Q4, and exceeded the year with a Facebook business.

Anil Chakravarthy: Release of Adobe Gen Studio, an end-to-end solution that brings together best-in-class applications across Creative Cloud, Express, and Experience Cloud with Firefly generative AI at the core to help brands meet the rising demand for content. Gen Studio provides a comprehensive offering spanning content ideation, creation, production, and activation.

Anil Chakravarthy: We are seeing tremendous interest in Gen Studio, from brands like Henkel, Pepsi, and Verizon, and agencies like Publishers, Omnicom, and Avas, as they look to accelerate and optimize their content supply chains. Pre-imagined customer experiences with the all-new Adobe Experience Manager sites that enable businesses and developers to quickly test and optimize web content, deliver fastest possible page load times, and maximize SEO rankings, lighthouse scores, and conversion. Adobe was recognized as a leader in over 25 industry analyst reports this year, including the Gotter Magic Quadrants for Digital Experience Platforms, B2B Marketing Automation Platforms, and Multi-Channel Marketing Hub.

Anil Chakravarthy: In the Forester Wave for Digital Experience Platforms, which was published last week, Adobe received the highest scores for strategy. Key customer wins include Alshaya, Coca-Cola, EY, IBM, Marriott, Riyadeer, Santander Brazil, Sony, Southern Graphics, Unilever, Vanguard, and Verizon. In our conversations with these and other customers around the world, fee-level executives are continuing to prioritize experience-led growth as a critical business imperative despite ongoing budget scrutiny.

David Wadhwani: Adobe Experience Cloud is well positioned to keep winning with innovative products that power end-to-end customer experiences and enable companies to simultaneously drive growth and profit. David Wadhwani, David Wadhwani, David Wadhwani, David Wadhwani, David Wadhwani, Gap EPS for the year was $11.82, and non-Gap EPS was $16.7, each growing 17% year-to-year. FY23 Business and Financial Highlights included, Digital Media Revenue of $14.22 billion, Net New Digital Media ARR of $1.91 billion, Digital Experience Revenue of $4.89 billion, cash flows from operations of $7.3 billion, RPO of $17.22 billion exiting the year, and repurchasing approximately $11.5 million shares of our stock during the year at a cost of $4.63 billion.

David Wadhwani: In the fourth quarter of FY23, Adobe achieved revenue of $5.05 billion, which represents $12% year-over-year growth, or 13% in constant currency. Gap DeLuDed earnings per share in Q4 was $3.23, and non-Gap DeLuDed earnings per share was a record $4.27, growing 28% and 19% year-over-year respectively.

David Wadhwani: Q4 Business and Financial Highlights included, Digital Media Revenue of $3.72 billion, Net New Digital Media ARR of $569 million, Digital Experience Revenue of $1.27 billion, cash flows from operations of $1.6 billion, adding approximately $1.5 billion to RPO in the quarter, our highest sequentially quarterly increase ever, and repurchasing approximately $1.8 million shares of our stock. In our Digital Media segment, we achieved Q4 Revenue of $3.72 billion, which represents $13% year-over-year growth, or $14% in constant currency.

David Wadhwani: Our Net New ARR in Q4 was $569 million, which was a quarterly record in constant currency, and we exited the quarter with $15.17 billion of Digital Media ARR. We achieved Creative Revenue of $3 billion, which represents $12% year-over-year growth, or $14% in constant currency, and we added $398 million of Net New Creative ARR in the quarter. Driving this performance was strong customer acquisition throughout the quarter, as well as strength during the peak holiday shopping weeks.

David Wadhwani: Fourth quarter creative growth drivers included. Individual subscriber growth fueled by targeted campaigns in strong web traffic. A strong quarter for Creative Cloud all-app subscriptions across customer segments, and geographies with particular strength in emerging markets. Phillips, Sales of CC single apps, including a strong quarter for imaging and photography offerings. Continued growth of our frame I.O, offering and Adobe stock, which kept off its best year ever in terms of net new ARR. Customer demand and education driven by back-to-school purchasing, as well as migrations to full-priced offerings by graduating students entering the workforce.

David Wadhwani: In typical Q4 strength in the enterprise, including significant upsell of our new Firefly and Express offerings. Adobe achieved document cloud revenue of 721 million, which represents 16% year-over-year growth, or 17% in constant currency. We added a record 171 million of net new document cloud ARR in the quarter. Fourth quarter document cloud growth drivers included. Acrobat subscription demand across all customer segments, routes to market and geographies. Continued strength of our free-to-paid funnels, including Reader on the desktop and Acrobat Web.

David Wadhwani: Strong performance of our collaboration services, including PDF link sharing and sign, which are virally bringing new users to the Acrobat ecosystem. An outstanding quarter for Acrobat mobile as a result of increased proliferation, usage, and conversion, and year-end seasonal strength in SMD and enterprise.

David Wadhwani: Turning to our digital experience segment, in Q4 we achieved revenue of 1.27 billion, growing 10% year-over-year, or 11% in constant currency. We achieved subscription revenue of 1.12 billion, which represents 12% year-over-year growth. Fourth quarter digital experience growth drivers included. Strong year-end bookings across solutions with particular strength in North America. Continued success closing multi-solution transformational deals with large enterprises.

David Wadhwani: Momentum with AEP and native applications with the FY23 exiting book of business growing greater than 60% year-over-year. Strong net dollar retention for early adopters of AEP, demonstrating the value enterprises are realizing from a real-time data platform and integrated offerings. And strength across our data and insights.

Daniel Durn: Content and workfront solutions and growing customer interest and pipeline for our new Gen Studio solution. We drove world-class operating margins in Q4 and throughout fiscal 2023 by making disciplined investments in R&D, marketing, and sales, and we're pleased that we grew EPS faster than revenue. Adobe's effective tax rate in Q4 was 18% on a gap basis and 18.5% on a non-gap basis in line with our expectations. RPO exiting the quarter was 17.22 billion, growing 13% year-over-year.

Daniel Durn: Our ending cash and short-term investment position exiting Q4 was 7.84 billion, and cash flows from operations in the quarter were 1.6 billion. After making a previously discussed payment in the quarter of 826 million of US federal taxes that we deferred from the second and third quarters of FY23. Thank you for we entered into a $1 billion share of purchase agreement and we currently have $2.15 billion remaining of our $15 billion authorization granted in December 2020. As a reminder, we measure ARR on a constant currency basis during a fiscal year and re-value ARR at year end.

Daniel Durn: FX rate changes between December of 2022 and this year have resulted in a $160 million increase to digital media ARR balance entering FY24, which is now $15.33 billion and is reflected in our updated investor data sheet. Factoring in the momentum across our businesses and current expectations for the macroeconomic and foreign exchange environments, for FY24 we are targeting. Total Adobe revenue of 21.30 to 21.50 billion. Digital media net new ARR approximately 1.9 billion.

Daniel Durn: Digital media segment revenue of 15.75 to 15.85 billion. Digital experience segment revenue of 5.275 to 5.375 billion. Digital experience subscription revenue of 4.75 to 4.80 billion. Tax rate of approximately 18% on a gap basis and 18.5% on a non-gap basis. Gap earnings per share of $13.45 to $13.85 and non-gap earnings per share of $17.60 to $18.00. As a reminder, and as is customary, these targets do not reflect our planned acquisition of Figma.

Daniel Durn: We expect normal seasonality throughout the year, with a seasonal step down for new business into the first quarter, sequential growth from Q1 to Q2, typical Q3 summer seasonality and a strong finish to the year in Q4. We expect our cash tax rate to improve sequentially in FY24 by 2 percentage points as the amortization of previously capitalized R&D increases or deductions next year for tax purposes, benefiting our operating cash flows next year.

Daniel Durn: For Q1, FY24, we're targeting total Adobe revenue of 5.10 to 5.15 billion. Digital media net new ARR of approximately 410 million. Digital media segment revenue of 3.77 to 3.80 billion. Digital experience segment revenue of 1.27 to 1.29 billion. Digital experience subscription revenue of 1.14 to 1.16 billion. Tax rate of approximately 18% on gap basis and 18.5% on a non-gap basis. Gap earnings per share of $3.35 to $3.40. While the implied operating margin for Q1 is up sequentially, we expect a typical seasonal margin step down starting in Q2 as a result of the annual merit increases and discipline investments to drive growth.

Daniel Durn: In summary, I couldn't be prouder of the company's performance in FY23 and the momentum we're carrying into 2024 across Creative Cloud, Document Cloud and Experience Cloud, our strategy, scale, speed of execution and profitability position us for years of sustained success.

Shantanu Narayen: Shantanu, back to you. Thanks, Dan. In addition to our financial accomplishments, we are proud to once again be recognized for our industry leadership. Content credentials and Adobe's approach to responsible AI were recognized by fast company as one of the years breakthrough innovations. We were again named to the Dow Jones Sustainability Index. Glassdoor listed Adobe as one of the best places to work. An Interbrand ranked us in the top 20 best global brands as a rising brand for the eighth year in a row.

Shantanu Narayen: Digital remains a massive tailwind as content demand and consumption continues to grow and businesses of all sizes are focused on transforming their customer experiences. Adobe is incredibly well positioned to lead and capitalize on this opportunity. Thanks to our innovative roadmap, expanding global customer base, strong brand and the best employees in the world. Our fiscal 24 financial targets reflect our confidence in continuing to drive strong top line growth and world-class profitability. I'm more certain than ever that Adobe's best days are ahead of us. Thank you and we will now take questions.

Unknown Executive: Operator? If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow the signal to reach our equipment. We ask that you please limit yourself to one question. Again, press star one to ask a question. We'll pause for just a moment to assemble the queue.

Keith Weiss: We'll take our first question from Casheringham with Goldman Sachs. Please go ahead.

Keith Weiss: Hi, thank you very much. Congrats on the quarter and happy holidays. I'm wondering if you're going into 2024, it definitely feels like the economy is in stable footing and in general, the software metrics are all improving as this year unfolded. I'm very different from going from 22 to 23.

Shantanu Narayen: The DM you aired our guidance is about the same as how you started last year, but you got the benefit of January the way I tell which from the economy you got pricing and fireflies. Can you just help us understand if you isolate for those factors, what has gone into your guidance for this seems like the exclude the optionality that you have including the tailrooms and economy that that guidance looks like it's very conservative. Maybe that's the right thing to do, but just want to understand your top classes.

Shantanu Narayen: Thank you so much. Yeah, thanks, Casher. I mean, certainly really thrilled with what a phenomenal we had across all aspects of the business, whether it was the $5 billion quarter, $5 billion book of business now in DX exiting and certainly digital media ARR performance. Now, let's, if you reflect, I mean, you talked about the guidance that we gave at the beginning of 23 and 24, if you recall, we actually had guided to 1650 first, then we opted as you know to 1750 and ended with 1913 and so to your point on the execution front, we've delivered some great innovative products.

Shantanu Narayen: We've expanded the customer base with new products like Express and Firefly, we're certainly focused on surfaces, you know, and making sure all of our flagship products are available across all surfaces. And so we do have multiple growth drivers to your point and we are focused on monetizing the opportunity. I mean, I would say, you know, we take our guide very seriously. The other way of looking at it cash is it's the highest annual guide ever in terms of, you know, what the guide we issued. It's the highest Q1 guide ever and, you know, we want to go again, execute against this large opportunity and have another record here. So we're feeling good.

Keith Weiss: The momentum is certainly there in the business, but we take our guidance at this point of the year very serious. Ashley, thank you so much and happy holidays. All the best for 2024. Thanks, happy holidays.

Keith Weiss: We will take our next question from Keith Weiss with Morgan Stanley. Please go ahead.

David Wadhwani: Thank you guys for taking the question. I think this is in a similar vein to what cash was trying to get out, but maybe a little bit more focused on Q4 in particular. When we look at the digital media and the new ARR ads in Q4, it looks like you had a very, very strong document cloud, record quarter, like you were saying, really strong year on year growth in those net ads.

David Wadhwani: Creative Cloud, where we actually saw a price increase and we have all the excitement and firefly, that was actually down on a year on your basis. And this is the first time since 2018, we've seen creative cloud net new ARR below 400 million. I think that's the surprise for investors or the negative surprise for investors that we're trying to figure out, was there something dragging the creative cloud side of the equation this year or a tough comp from last year or something that explains why the price increases in all the positive momentum and innovation out of Adobe Max is in translating into net new ARR growth for creative cloud in particular.

David Wadhwani: Yeah, happy to take that Keith Davis here. So first of all, as you mentioned in the DME business, we're really excited about the results for 24, you know, over 1.9 billion in net new ARR, obviously well above the guide. We see an expanding base of customers and a lot of momentum coming from Jenny as you as you noted, as part of this, we delivered, you know, what we delivered in Q4 was net new ARR was a record net new ARR and constant currency.

David Wadhwani: Now specific to your question on creative cloud momentum and how to interpret the numbers that you see there. Underlying all this is very strong momentum because we delivered a record creative cloud new commercial subscriptions number in the year. So that is really the foundation on the base of customers coming in and really benefiting from not just what we get in this in this quarter, but also how we build on that going forward.

David Wadhwani: So it really sets us up well for FY 24. As you look at the numbers for creative cloud ARR net new ARR in the quarter, you have to look at it relative Q4 FY23 relative to Q4 FY22, as you mentioned, you need to consider that FY22 had two pricing actions that accrue to creative cloud that are much lower now in Q4 FY23. So if you normalize for the impact of the pricing that rolled off and the pricing that came on, creative cloud net new ARR in Q4 grew on a constant currency basis.

David Wadhwani: And he just to punctuate the two points that David met David said first, it was a record for creative ARR as it related to subscriptions in Q4 of 2023 and creative ARR would have grown if you had backed out the pricing. So, you know, the business continues to be extremely healthy to your point. Excellent. Thank you, guys.

Alex Zukin: We will take our next question from Alex Zuchen with Wolf Research. Please go ahead.

Alex Zukin: Hey guys, thanks for taking my question. I guess maybe looking at next year, as we look at how much of the renewal-based and creative cloud is potentially up for that type of pricing uplift. And as we look at Acrobat specifically, the AI functionality that you're releasing into public beta, how should we think about the tailwind to both creative cloud from pricing and to document clouds specifically from an AI product monetization perspective for caliber 24. Yeah, happy to take that, Alex. A lot packed into that question.

David Wadhwani: So let me try to, to the part, let me first start with the question around FY24 and the impact of pricing. Before we jump straight into that, I do want to take a bit of a step back and just remind everyone that digital media ARR is a mix of a few things, new subscriptions, which as I mentioned, we had a record number of new subscriptions in Q4 upsell and crosssell, which is transitioning people to higher plans from the plan that they're on. And then lastly, offer optimization.

David Wadhwani: And as you've noted in the last couple of years, we've really been broadening the number of offers we have all the way down from free price points to, you know, to the all-app price points. But even beyond that, we now have capabilities to sell add-ons to all apps as well. And of course, all of this does include the pricing increases that you had mentioned where we've added more value. I do want to just stress because I know there's a lot of attention on the pricing impact that we've always, we always have seen and continue to believe that the primary growth driver for ARR will be new subscriptions in 24.

David Wadhwani: So, you know, that's why we're so focused on the top of funnel and new customer acquisition. But specific to your question on pricing, you need to consider a few things. First, our recently announced pricing changes will impact less than half the creative cloud base. So, there was a very specific question you asked. Hopefully, that gives you the answer.

David Wadhwani: But it also leaves us the opportunity to price in new value in the years ahead as we move forward. Second, the impact will be more visible in net new ARR in the back half of FY24 as we lap the previous pricing actions that I was talking to Keith about from last year. And as we roll out the pricing over the next few quarters, so the second half of FY24 will see more visibility into the benefits of that to net new ARR.

David Wadhwani: Third, given that we're rolling out these prices across plans and across Geos incrementally over the year, the benefit to ARR will actually be spread across FY24 and FY25. And fourth, if you really want to sort of sharpen your pencil, the pricing impact on ARR in 24 is actually lower than the pricing impact was in 23 to creative cloud. So, hopefully, that gives you a sense. But again, it comes back to this is why we're so excited about the momentum we're seeing in new subscriptions, which is really bowed well for the business this year and in the long term.

David Wadhwani: Hopefully, that gives you a pretty good sense on that. And then really quickly on document cloud, you know, we're thrilled with the performance of document cloud. A lot of that comes down to our course strategy, which has been around, you know, integrating the desktop, the web and mobile into a single ecosystem. And really driving the monthly active usage of document cloud up through all of the product like growth motions we have and converting people on the back end of that.

David Wadhwani: What we're really excited about as we bring the AI assistant to market, which by the way, as I mentioned is now in private beta, expected to come out in the next few months as a public beta, and then, you know, GA later in the year. But what we're really excited about there is being able to not just service the paid acrobat base with that, but also start to bring that to the free reader base. So lots of opportunity and excitement for the year ahead for dot cloud.

David Wadhwani: Rizal. Perfect. Thank you for the very fine, for the very fine pointed answer. No problem.

Kirk Materne: So you'll take our next question from Kirk Materne with Evercore ISI. Please go ahead. Oh yeah, thanks and congrats on the quarter and heavy holidays. David, I guess I'll go back to you again.

David Wadhwani: You know, in the commentary you all talked about, Enterprise Strength and specifically upselling of Firefly and Express and your Enterprise customer base. Could you just give us some more quite a qualitative color on what those discussions are like? Are they lead as this part of the reason you're seeing sort of an uptick in new subscriptions and the Enterprise in particular. And then on Express, you know, could just talk again about sort of what you're seeing in terms of leading indicators of that being an enterprise product that can continue to expand into fiscal 24. Thanks.

David Wadhwani: Yeah, maybe maybe I'll start in the milk and add because this does cross over our two businesses. So with Firefly and Express, you know, very excited about the momentum that we continue to see. You heard that we cross four and a half billion generations now.

Shantanu Narayen: So we continue to see really, really strong adoption and usage of it partially as a standalone business, but also integrated into our Photoshop and Illustrator and these existing workflows. And we're starting to see a lot of interest, not just in the context of, you know, using it as part of those the existence. The existing products, but also using it as part of the ecosystem within enterprises. So we've been working with a number of customers, not just enable them with that with Firefly, which is the predominance of the growth that we're seeing Q4 for and for enterprise adoption, but also have a number of pilot customers already engaged around custom model extension so that they can bring their own assets and their own content into what Firefly generates.

Shantanu Narayen: Second, we're also enabling the ability to expose it through API so they can build it into their existing workflows. And third, we're of course connecting it and tying it all into Adobe Express, which now also has its own Firefly and additional capabilities like things so that you can not just sort of create content using Firefly, but then start to assemble it, start to schedule social posts around it, start to do multi language translation.

Shantanu Narayen: Those are all features that are already in there, and then create a stakeholder workflow from people working in Photoshop to the marketers that are trying to post externally. So that's where things get very interesting and exciting in terms of the connection we have with Jen Studio and everything that they're nils doing. We're just building on that Jen Studio since we announced it at max. We've had a tremendous amount of interest both from enterprise customers, you know, like Henkel and Pepsi and Ryzen, as well as a number of the agencies as well. And primarily it goes back to what we discussed at Summit.

Shantanu Narayen: Now the demand for content is expected to grow 5X over the next couple of years, and every brand in the world is looking at, hey, how can we speed up the production of quality on brand content? How can we let a number of other people in marketing other areas of the company create their own content according to the standards enterprise standards? And the combination of what we have in the digital experience portfolio will be experience manager and assets, as well as what we have in the creative cloud, especially around express and creative cloud.

Shantanu Narayen: Really let's enterprises get that kind of agility and the cost effectiveness of producing content at scale. So that's what we're seeing and we're seeing a tremendous amount of money. Drusla, and maybe I'll just add a little bit to that curve. I mean, I think the exciting thing about what people are doing is they're standardizing on Firefly and the fact that we have responsible generations for the entire enterprise. So the interest level has been around, how do we standardize that for all of the image or vector or other generations that they want to do for all the knowledge workers in the enterprise? So really good adoption of Firefly. Thank you.

Karl Keirstead: We will take our next question from Karl Keirstead with UBS. Please go ahead.

David Wadhwani: Thanks. I'd like to ask about a different subject and that's a creative express product now that it's being sold into the enterprise. I'm wondering if you could offer some color on the adoption ramp, the competitiveness versus Canva, and whether your plans around driving express revenues versus driving user adoption have changed at all. Thank you.

David Wadhwani: Yeah, happy to take that. Express is off to a great start. As you remember, we went general availability in August with the latest version of it. It's been getting a lot of very, very positive reaction response. And, you know, frankly, since then in Q42, we've added a ton of new innovation. Firefly integration started with text to image and text effects, but we also added text to template that will create a fully formed template for you and generative fill so you can iteratively change things on the fly. We now let you draw and paint on the campus. We've can't canvas.

David Wadhwani: We've given you given users much more video support. We've really built an incredible best of breed PDF support and workflow with Acrobat in there as well. You know, some of the other things that now start to bleed into the enterprise. Also, we have we have integrated social workflows so that people can schedule their posts. We've we've enabled people to do auto translation so you can post multiple geographies and languages.

David Wadhwani: We've we've opened up our ecosystem for partner plugins and we have now over 50 extensions and we've added enterprise features like AEM integration and template locking so that the core, you know, brand police in an organization can manage and make sure that the brand elements that they don't want changing, you know, are locked when you disseminate this more broadly. What we've seen is really, you know, I think some very exciting broad based benefits from this.

David Wadhwani: One is we've seen new tri-lists coming in growing very quickly after this launch, which is exciting to see. We've seen education users starting to adopt this very quickly as well. The creative cloud probe paid base has been coming on and growing very quickly in terms of their usage. And then enterprise as we talked about from a usage perspective. And again, it expresses a core part of how a mill and team are now selling Gen Studio. And the last thing is like this is just setting up the momentum for the year to come.

David Wadhwani: We have a mobile release coming out, which will be very exciting for users to be able to use this on the go. We have thousands of people already using that beta. We announce our Chromebooks partnership. So anyone that buys a new Chromebook is going to have this. We have partnerships with folks like Wix for their workflows. We're going to be doing deeper integrations into Acrobat. So we're very excited about where this goes.

David Wadhwani: That is a long way to answer a very simple question. We want a lot of people using this. So our primary focus continues to be around broadening the top of funnel. Of course, as part of that, we are constantly and continually, as I mentioned, journeying people for upselling cross sell opportunities to the paid plan and over to Creative Cloud and other products. But our primary focus continues to be adoption and broad proliferate. Krish, Got it. Thank you.

Brad Zelnick: We will take our next question from Brad Zelnick with Deutsche Bank. Please go ahead.

Daniel Durn: Great. Thanks very much. This is for Dan or maybe Anil.

Daniel Durn: As we think about the momentum within the DX business, it's great to hear things like the 60% increase in your AEP and native apps book of business, the strong net dollar retention and you talked about overall strong year end bookings. But what is it maybe about the pipeline ahead? Bookings conversion or perhaps other factors that account for the degree of DSL that you're guiding for it into next year. Thanks. Thanks, Brad.

Daniel Durn: I mean, we are really excited about this massive multi-year opportunity. If we look at any enterprise customers around the world, everybody recognizes the long term imperative of transforming their customer experiences and we're seeing that in these transformational deals that we talked about. And as you mentioned, for example, with the AEP, our first 100 million net new business quarter and ending with over 700 million in our annualized book of business. With that said, it's definitely, we're seeing macro economic impact just like other enterprise software companies are.

Daniel Durn: Every customer looks at the total cost of deploying the software and then what it would take to get the payback and ROI. And as a result, there's definitely some scrutiny and caution there. But that said, you know, if we look at going into next year, we do see the pipeline across both our industry verticals as well as our mid market customers. And we continue to be the leader in the market and we get that recognition from both analysts and customers. Okay. Thank you.

Brent Thill: We will take our next question from Brent deal with Jeffries. Please go ahead. Dan, if you could just review the broader assumptions in your guide, I think there's still a little, you know, concerned from the street in terms of why you're guiding where you're guiding relative to where the street was at. And maybe just tie it in and shot you to the guide.

Daniel Durn: If you could just give us your top line in line view of, do you feel like the improved environments improving? Do you think it's just stabilizing just any thoughts in terms of a high level, what you think is happening as we go into next year? Yeah.

Daniel Durn: So thanks for the question, Brent. When we take a look at the guide, if we think about where we're at at this point in time as we're looking forward to the FY 24. Clearly, we see a lot of momentum in the business. The company's engine of innovation has been incredibly strong and you see the strong financial performance of the company that's both from a top line standpoint as well as profitability and cash flow standpoint.

Daniel Durn: So clearly a lot of momentum around the business as they think about where we sit today, we printed a 46.4% operating margin. As we look forward into next year, we take into account everything we can see. As Shantanu said, we take the guidance seriously and we set expectations in a prudent way.

Shantanu Narayen: There's an opportunity to do better than the expectations that we set. Clearly the company's going to be driving towards that. As we think about the engine of innovation, we think the pipeline is strong. We're going to continue to invest in the drivers of growth. This company's going to orient towards growth when I think about the investment profile. Not only are we going to be disciplined, but we're going to continue to invest in those drivers of growth on the DX side and they'll talk about AEP and apps, strong book of business, strong growth.

Shantanu Narayen: We're laying the groundwork and content supply chain with the GenStudio Solution. Sion, Scaling that motion and engaging with customers to go from ideation to creation to activation, delivering new technologies, products, AEM sites, incorporating intelligence into those products. On the DME side, you can see it across the portfolio, AI Assistant Acrobat, it's in private beta, it's going to be in public beta in the coming months.

Shantanu Narayen: You look at Firefly, Express, natively and deeply integrating these technologies throughout the product portfolio, there is going to be continual investment as it relates to that innovation. As you think about the momentum exiting this year, and as you think about the guide into Q1, you can see that momentum continuing, got operating margin up a little bit, and then throughout the year, as we said at our FAA day, and the last year's earnings call, you can see a mid-40s expectation around operating margin for the company, as we drive this investment cycle, as we drive leadership in our core markets and our key catalyst in the trends that are shaping those markets.

Shantanu Narayen: So again, taking a step back, it nets into account the macro that Anil talked about, everything we see from a core business standpoint, and the investment profile that we're going to drive to lead, there's an opportunity to do better than where we set those expectations, we're certainly going to do it. And maybe just to add to that, Brett, since you asked first, let me clarify, there's nothing as it relates to the economic indicators that we saw, you know, anything that would give us possible concerns. So let me start off by saying that.

Shantanu Narayen: I think at our investor meeting, we told you that, you know, we would expect a strong quarter, I think you would acknowledge, we posted some really strong numbers in the momentum continues. And I think as it relates to creative cloud, it's going to be driven by new customer acquisition, which is the engine that's driven the business. And, you know, maybe perhaps the sell side looked at, you know, some of the pricing and put more of that in 24 than in 24 and 25, and that'll spread out.

Shantanu Narayen: And perhaps they put a little bit more in what percentage of the base that impact. So, you know, from my perspective, the good news about creative is it's being driven by, you know, massive new adoption into the platform on document cloud, really strong results. I think as Dan said, as we put the AI pack on there as well, that should help fuel more adoption and digital experience. You know, I mean, I know that Brad also asked that question.

Shantanu Narayen: I mean, it's great to see the adoption of AP and apps. I mean, that is clearly the future of digital experiences, you know, driving 100 million quarter, the 700 in the annualized book of business, which I think will reflect, you know, the next generation customer experience architecture. So we're feeling positive and we're going to go execute against that, Brad. So nothing that we see, you know, on the horizon would tell us either from the economic or competition that we're not poised to have another great year, you know, and profitability as well.

Shantanu Narayen: I mean, look at, you know, the numbers that we posted, both in terms of Q4 as well as for fiscal 24. And that is, you know, that does not in any way mean that we're not going to invest in all of the cloud and the foundation model. So I, I feel, I feel really good.

Daniel Durn: And then just one thing to add, Brent, if we were here a year ago, the expectations going into the year where FX was going to be a pretty decent headwind to the performance. You see that in the way we've reported our results and then compare it to a constant currency basis. We started with a pretty decent spread between the as reported numbers and constant currency and Q1. By the time we got the Q4, you saw that spread compress as I look forward into FY24, it's more of a neutral footing to maybe a slight headwind to early to really call it with precision, but I see that set up being slightly different and maybe just a slight headwind versus what we were seeing a year ago.

Unknown Executive: Thanks for the car.

Jay Vleeschhouwer: We'll take our next question from Jay Vleeschhouwer with Griffin Securities. Please go ahead.

Daniel Durn: Thank you. You noted the strength and RPO in the quarter, including the record sequential increase. Could you talk about how you're thinking about RPO for fiscal 24, would you expect it to continue to be able to outgrow as you grow by several points as you did in fiscal 23. Perhaps talk about the ingredients that will continue to drive RPO either by segment or any other considerations that you'd like to talk about in that. Yeah, thanks Jay.

Daniel Durn: As I pull some of the threads together that we've heard on this call, Anil talked about large transformational deals being the platform of choice with customer experience management, simultaneously driving top line and bottom line productivity and the investments around driving those are an imperative in the market. We see a similar dynamic with the new technologies that we're bringing to market on the DME side of the business, we're stringing seeing strong pull from the enterprise.

Daniel Durn: And so as I net out that environment and our performance against that opportunity, it goes to produce the type of sequential RPO progression that we saw Q3 to Q4. Every quarter won't be that large, but the backdrop around that dynamic for the company given the setup we see, it should be another strong year for RPO throughout the year.

Unknown Executive: Thank you. Hey operator, we're getting close to the top of the hour. We'll take two more questions and then we'll wrap up things.

Ciket Kalea: We'll take our next question from Ciket Kalea with Mark Lays. Please go ahead.

David Wadhwani: Okay, great. Hey guys, thanks for taking my question and congrats on a nice quarter. David, maybe for you, I had a question just on Firefly and the subscription packets. You know, I know that the commercial model for commercial, I'm sorry for Firefly credit packets really just started about six weeks ago. So, are there any early observations that you've seen just on customers willingness to add those packets or maybe how they're consuming the initial credit allocation that they get with the creative public subscription? Yeah, happy to take that.

David Wadhwani: First of all, I think philosophically going back to what we said at the investor meeting at Macs, our primary focus here is to drive usage of the generative capabilities and you see that with the $4.5 billion images generated, that strategy is working. Secondly, we price the generative packs, sorry, we integrated the generative capabilities and credits directly into our paid plans with the express intent of driving adoption of the paid subscription plans and getting broad proliferation of the ability to use those.

David Wadhwani: And what we are seeing is, you know, heavy usage within those paid plans is I think, as we've mentioned in the past, I think I mentioned earlier today as well, we, generative fill, for example, in Photoshop is the fastest growing feature that we've put into Photoshop in recent memories. So, the usage is great, the utilization is great.

David Wadhwani: I don't personally expect generative packs to have a large impact in the short term other than to drive more customers to our paid existing subscription plans. But what will happen over the course of the year and the next few years is that we will be integrating more and more generative capabilities into the existing product workflows. And that will drive and will be integrating capabilities like video generation, which will cost more than one generation, and that will drive a natural inflation in that market, and that will become a driver for growth, you know, subsequently.

David Wadhwani: But this year is really primarily focused on getting people into the right paid plans of our flagship applications or Adobe Express and then drive usage in that sense, and then as that happens, the rest will take care of itself in the years. Mark Moerdler, Mark Moerdler, Mark Moerdler, Now that you have had a bit of time in market, can you explain how you think about how this will drive the paid seed growth? How strong it could be?

David Wadhwani: And should we expect those seeds are going to be lower unit price because they're going to be entry level? What do you think that will get offset by these higher priced, firefight driven sales into the enterprise? Thank you.

David Wadhwani: Yeah, thanks, Mark. I think at the core of bringing this technology to life, as a standalone application to drive an ideation part of the process, but value in deeply integrating these capabilities into the flagship applications and the workflows that define the creation process. It gives us a lot of surface area with customers and meeting them where they are in their particular needs and use case specific needs. And so bringing people efficiently, pop a funnel, establishing the segmentation across that product portfolio, driving efficiency into the creation process and allowing velocity to enter the ideation, creation, activation. And then instrumentation of that to really refine how companies engage with customers.

David Wadhwani: So it lays the groundwork for us to touch more customers where they are in the ecosystem, bring them on board in use case specific way, and then take them on digital journeys, which something the company is very skill that with our didom to cross sell and upsell over the life of their engagement with our ecosystem. From a product perspective, you know, when you think about it, Mark, for us, the biggest thing that we want to do is how do we further make our products accessible for, you know, fun and affordable for increasing set of customers. And I think Firefly is one of those inflection points that will help everybody get over the blank screen fear that they have.

David Wadhwani: And so first, as you think about Firefly as an ideation and people just coming and want to have creative inspiration, this is whether you're an individual user, whether your agencies were seeing a lot of adoption of Firefly to just start the entire creative process. And that, you know, sort of brings them as an on-gram into express, which would be the other part expresses certainly, you know, the introductory pricing, the ability to get, you know, millions more into the fold.

David Wadhwani: And, you know, the ability right now, it used to be that express and other offerings in that ilk used to all worry about, do I have the right templates? Well, AI is going to completely change that we have our own models.

David Wadhwani: And so Firefly will allow anybody to take whatever creative idea that they have and make that available. So I think, you know, Firefly really helps with the express offering on the creative cloud. David mentioned this.

David Wadhwani: I mean, if you look at the adoption of that functionality and usage, that's being driven, whether it's in Photoshop right now, Illustrator as we add video, both in terms of, you know, providing greater value. And, you know, we certainly will therefore have the uplift in pricing as well as, you know, the attentive ability for Firefly. That's where I think you're going to see a lot of the really interesting aspects of how Firefly will drive both adoption as well as monetization.

David Wadhwani: And then if you go at the other end of the spectrum to the enterprise, you know, Gen Studio, every single marketer that I know and CFO and CMO are all watered about, how much am I spending on data? How do I get agility in my campaigns?

David Wadhwani: And, you know, the fact that Firefly is integrated into both express as well as when we do the custom models for them. So they can upload their own models and then have the brand consistency that they want. So Firefly really is the fact that we have our own models, a great catalyst for business, you know, all across the spectrum. And, you know, the usage and the adoption shows that in emerging markets, you know, as people there in emerging markets are increasingly used to create variance of content and localization of content.

David Wadhwani: That's where we're also seeing a tremendous usage, you know, of these particular technologies. So really exciting. And then, you know, you take the same technology that we have in creative and think about its impact in both document cloud when we do that and, you know, the ability to have summaries and have conversational interfaces with PDF. They're by making every single PDF as David again said, both for communication collaboration and creation, far more compelling.

Shantanu Narayen: I think you're going to see that same kind of uplift in usage and therefore monetization on the acrobat side. And since it was the last question, I mean, you know, for us, we look at FY 23 and we're really proud of what we were able to accomplish, you know, across all spectrum stop line revenue, RPO and driving book of business, creative cloud, document cloud and experience cloud and profitability. And, you know, we think 24 is going to be exactly more of the same, which is, you know, continuing to drive great innovation, great product growth, great profitability.

Shantanu Narayen: Clearly, I think, you know, there's been a set of questions around the digital media, ARR and, you know, what I take is on that. And, you know, we're extremely confident about how that continues to be a growth business. And, you know, perhaps the pricing impact was overestimated.

Shantanu Narayen: And as we said, you know, this is again a new growth business. And it'll be a multi year pricing, you know, benefit for us as we think about the uplift that we have. So, we're really pleased. We appreciate your being on the call. And like many of you wished us happy holidays. And, you know, we hope to see you soon. Thank you for joining us. Josh, thanks everyone. Happy Holidays. This concludes the call. Once again, this concludes today's call. Thank you for your participation. You may now disconnect.

[music].

Yeah.

Good day and welcome to the Q4 and FY 2023 Adobe earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Jonathan Boss VP of Investor Relations. Please go ahead.

Good day and welcome to the Q4 and FY2023 Adobe Earnings Conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jonathan Voss, VP of Investor Relations. Please go ahead.

Speaker Change: Good afternoon, and thank you for joining us with me on the call today are shunted Neuner, Ryan Adobe's Chair and CEO, David Wadhwani, President of digital media and they'll chocolate Marty President of digital experience and Dan Durn Executive Vice President and CFO on this call, which is being recorded we will discuss adobe's.

With me on the call today are Shantanu Narayan, Adobe's Chair and CEO , David Woodwani, President of Digital Media, and El Chacavarthi, President of Digital Experience, and Dan Dern, Executive Vice President and CS.

On this call, which is being recorded, we will discuss Adobe's fourth quarter and fiscal year 2023 financial results.

Speaker Change: With quarter and fiscal year, 2023 financial results.

You can find our press release, as well as PDFs of our prepared remarks and financial results, on Adobe's Investor Relations website.

Speaker Change: Can find our press release as well as pdfs of our prepared remarks in financial results on Adobe's Investor Relations website.

The information discussed on this call, including our financial targets and product plans, is as of today, December 13th, and contains forward-looking statements that involve risk, uncertainty, and assumptions. Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today's earnings release, and Adobe's SEC file.

Speaker Change: The information discussed on this call, including our financial targets and product plans.

Speaker Change: As of today December 13th and contains forward looking statements that involve risks uncertainty and assumptions actual results may differ materially from those set forth in these statements.

Speaker Change: For more information on those risks. Please review today's earnings release, and Adobe's SEC filings.

On this call, we will discuss GAP and non- GAAP financial measures.

Speaker Change: On this call, we will discuss GAAP and non-GAAP financial measures.

A reported results include gap growth rates, as well as constant currency rates.

Speaker Change: Our reported results include GAAP growth rates as well as constant currency rates.

During this presentation, Adobe's executives will refer to constant currency revenue growth rates unless otherwise stated. Reconciliations between the two are available in our earnings release and on Adobe's IR website. I will now turn the call to the next speaker. Thank you for joining us. We are now at the end of the webinar. If you have any questions, please feel free to contact us. We will be back in just a few minutes. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Operator: Good day, and welcome to the Q4 and FY2023 Adobe Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jonathan Voss, VP of Investor Relations. Please go ahead.

Speaker Change: During this presentation Adobe's executives will refer to constant currency revenue growth rates unless otherwise stated reconciliations between the two are available in our earnings release and on Adobe's IR website, I will now turn the call over to Sean to now.

Jonathan Voss: Good afternoon, and thank you for joining us. With me on the call today are Shantanu Narayen, Adobe's Chairman and CEO, David Wadwani, President of Digital Media, Anil Chakravarty, President of Digital Experience, and Dan Dern, Executive Vice President and CFO. On this call, which is being recorded, we will discuss Adobe's fourth quarter and fiscal year 2023 financial results. You can find our press release, as well as PDFs of our prepared remarks and financial results, on Adobe's Investor Relations website. The information discussed on this call, including our financial targets and product plans, is as of today, December 13th, and contains forward-looking statements that involve risk, uncertainty, and assumptions. actual results may differ materially from those set forth in these statements.

Sean: Thanks, Jonathan Good afternoon, and thank you for joining us.

Thanks Jonathan, good afternoon and thank you for joining us.

Q4 was our first ever $5 billion quarter, a new record for the company.

Sean: Q4 was our first ever a $5 billion quarter, a new record for the company.

Adobe achieve revenue of 5.05 billion, representing 13% year over year growth.

Sean: Adobe achieved revenue of $5 or 5 billion, representing 13% year over year growth.

Gap earnings per share for the quarter was 323. And non-gap earnings per share was 427, representing 28% and 19% year over year growth respectively.

Sean: GAAP earnings per share for the quarter was $3 23, and non-GAAP earnings per share was <unk>, 27, representing 28% and 19% year over year growth respectively.

Q4 was the culmination of another record year for Adobe, achieving 19.41 billion in revenue, which represents 13% annual growth.

Sean: Q4 was the culmination of another record year for Adobe achieving 19, four 1 billion in revenue, which represents 13% annual growth.

Gap earnings per share in fiscal 2023 was $11.82. And non-gap earnings per share was $16.07, both representing 17% year-over-year growth.

Sean: GAAP earnings per share in fiscal 2023 was 11 82 and non-GAAP earnings per share was <unk> 16, or seven both representing 17% year over year growth.

Jonathan Voss: For more information on those risks, please review today's earnings release and Adobe's SCC file. On this call, we will discuss GAAP and non-GAAP financial measures. Our reported results include gap growth rates as well as constant currency rates. During this presentation, Adobe's executives will refer to constant currency revenue growth rates unless otherwise stated. Reconciliations between the two are available in our earnings release and on Adobe's investor relations website. I will now turn the call over to Shantanu Narayen.

We exited the year with 17.22 billion in RPO.

We exited the year with $17 2 billion in our appeal.

A strong performance reflects the mission critical role our products play in a digital first world. Incredible product innovation and exceptional execution.

Sean: Our strong performance reflects the mission critical role our products play in a digital first world incredible product innovation and exceptional execution.

Adobe Creative Cloud, Document Cloud, and Experience Cloud have become the foundation of digital experience.

Sean: Adobe Creative cloud document cloud and experience cloud has become the foundation of digital experiences starting with a moment of inspiration to the creation and development of content and media.

Shantanu Narayen: Thanks, Jonathan. Good afternoon, and thank you for joining us. Q4 was our first ever $5 billion quarter, a new record for the company. Adobe achieved revenue of $5.05 billion, representing 13% year-over-year growth. Gap earnings per share for the quarter were $3.23, and non-gap earnings per share were $4.27, representing 28% and 19% year-over-year growth, respectively.

starting with the moment of inspiration to the creation and development of content and media, to the personalized delivery and activation across every channel.

To the personalized delivery and activation across every channel.

Adobe's mission of changing the world through personalized digital experiences and our delivery of foundational technology platforms set us up for the next decade of growth.

Sean: Adobe's mission of changing the world through personalized digital experiences and our delivery of foundational technology platforms set us up for the next decade of growth.

We take pride in being one of the most inventive, diversified and profitable software companies in the world.

Sean: We take pride in being one of the most inventive diversified and profitable software companies in the world.

Shantanu Narayen: Q4 was the culmination of another record year for Adobe, achieving $19.41 billion in revenue, which represents 13% annual growth. Gap earnings per share in fiscal 2023 were $11.82 and non-gap earnings per share were $16.07, both representing 17% year-over-year growth. We exited the year with $17.22 billion in RPO. Our strong performance reflects the mission-critical role our products play in a digital-first world, incredible product innovation, and exceptional execution. Adobe Creative Cloud, Document Cloud, and Experience Cloud have become the foundation of the digital experience, starting with a moment of inspiration through the creation and development of content and media, to personalized delivery and activation across every channel.

We believe that every massive technology shift offers generational opportunities to deliver new products and solutions to and ever expand

Sean: We believe that every massive technology shift offers generational opportunities to deliver new products and solutions to an ever expanding set of customers.

AI and generative AI is one such opportunity, and we have articulated how we intend to invest and differentiate across data, models, and interfaces.

Sean: In general the Bailey is one such opportunity and we've articulated how we intend to invest and differentiate across data models and interfaces.

We have delivered against the strategy and are pleased that a number of our groundbreaking innovations.

Sean: We have delivered against this strategy and are pleased that a number of our groundbreaking innovations.

including our Firefly models and integrations across Creative Cloud.

Including our Firefly models and integrations across creative cloud.

Liquid mode and integrations across document class.

Sean: Liquid mode and integrations across document cloud <unk>.

And AI services in our real-time customer data platform and integrations and experience cloud are now seeing tremendous usage by customers.

Sean: And AI services in a real time customer data platform and integrations in experience cloud and now seeing tremendous usage by customers.

We remain excited about the strategic opportunity with Figma to jointly advance product design, accelerate collaborative creativity on the web, and redefine the future of creativity and productivity.

Sean: We remain excited about the strategic opportunity with Sigma to jointly advance product design accelerate collaborative creativity on the web and redefine the future of creativity and productivity.

Shantanu Narayen: Adobe's mission of changing the world through personalized digital experiences and our delivery of foundational technology platforms set us up for the next decade of growth. We take pride in being one of the most inventive, diversified, and profitable software companies in the world. We believe that every massive technology shift offers generational opportunities to deliver new products and solutions to an ever-expanding set of customers. AI and generative AI is one such opportunity, and we have articulated how we intend to invest in and differentiate across data models and interfaces. We have delivered against the strategy and are pleased that a number of our groundbreaking innovations, including our Firefly models and integrations across Creative Cloud, Liquid Mode, and integrations across Document Cloud.

We continue to engage with the European Commission, the competition and markets authority in the UK, and the US Department of Justice, as they conduct their regulatory reviews.

Sean: We continue to engage with the European Commission, the competition and markets authority in the UK and the U S Department of Justice as they conduct their regulatory reviews.

The EC has provided a preliminary statement of objections and the CMA has issued provisional findings of competition concern.

Sean: The EC has provided a preliminary statement of objections and the CMA has issued provisional findings of competition concerns.

We strongly disagree with these findings in our responding to the respective regulators.

Speaker Change: We strongly disagree with these findings and are responding to the respective regulators.

Speaker Change: As per the current timelines the Ec's decision deadline is February 5th and the CMA is is February 21st.

The EC's decision deadline is February 5th, and the CMAs is February 25th.

While the DOJ does not have a formal timeline to decide whether to bring a complaint, we expect a decision soon.

Speaker Change: While the Doj does not have a formal timeline to decide whether to bring a complaint we expect a decision soon.

I'll now turn it over to David to discuss the momentum in our digital media business.

Speaker Change: I'll now turn it over to David to discuss the momentum in our digital media business.

Shantanu Narayen: And AI services in our real-time customer data platform and integrations in Experience Cloud are now seeing tremendous usage by customers. We remain excited about the strategic opportunity with Figma to jointly advance product design, accelerate collaborative creativity on the web, and redefine the future of creativity and productivity. We continue to engage with the European Commission, the Competition and Markets Authority in the UK, and the U.S. Department of Justice as they conduct their regulatory reviews. The Commission has provided a preliminary statement of objections, and the CMA has issued provisional findings of competition concern.

Thanks, Shotnew. Hello, everyone. In Q4, we achieved net new digital media ARR of 569 million and revenue of 3.72 billion, which grew 14% year-over-year, fueled by innovation in both our creative and document business.

David Wadhwani: Thanks shot new Hello, everyone. In Q4, we achieved net new digital media <unk> of $569 million and revenue of $3 72 billion, which grew 14% year over year fueled by innovation in both our creative and document businesses.

Starting with Creative Cloud, global demand for content is accelerating and continues to be a tailwind for the business.

David Wadhwani: Starting with creative cloud global demand for content is accelerating and continues to be a tailwind for the business.

Creative Cloud remains the creativity platform of choice for creators across imaging, photography, design, video, web, animation, and 3D.

David Wadhwani: Creative cloud remains the creativity platform of choice for creators across imaging photography design video web animation and <unk>.

A rapid pace of product and AI model innovation is empowering a wide and growing base of individuals, students, creative professionals, small business owners, and enterprises to create and monetize amazing content more quickly and easily than ever before.

David Wadhwani: Our rapid pace of product and AI model innovation is empowering a wide and growing base of individuals students creative professionals small business owners and enterprises to create and monetize amazing content more quickly and easily than ever before.

Shantanu Narayen: We strongly disagree with these findings and are responding to the respective regulators, as per the current timeline. The EC's decision deadline is February 5th, and the CMA's is February 25th. While the DOJ does not have a formal timeline to decide whether to bring a complaint, we expect a decision soon.

We were thrilled to come together in person with thousands of creators at Adobe Maxton Los Angeles and at our Max event in Tokyo with millions more from our community engaging with us online.

David Wadhwani: We were thrilled to come together in person with thousands of creators at Adobe Max in Los Angeles and at our Max event in Tokyo with millions more from our community engaging with us online.

We reached a record 300 million social interactions in the month following Mac.

David Wadhwani: We reached a record 300 million social interactions in the months following Max.

Q4 was a record quarter for Creative Cloud, achieving 3 billion in revenue, which grew 14% year-over-year. Net new Creative Cloud AR was 398.

Q4 was a record quarter for creative cloud, achieving 3 billion in revenue, which grew 14% year over year.

David Wadwani: I'll now turn it over to David to discuss the momentum in our digital media business. Thanks, Shantanu. Hello, everyone.

David Wadhwani: Net new creative cloud <unk> was $398 million.

Business highlights include strong digital traffic resulting from product innovation, social engagement, and our continued product-led growth efforts, which drove record new commercial subscriptions in the quarter.

David Wadhwani: Business highlights include strong digital traffic, resulting from product innovation, social engagement and our continued product led growth efforts, which drove record new commercial subscriptions in the quarter.

David Wadwani: In Q4, we achieved net new digital media ARR of $569 million and revenue of $3.72 billion, which grew 14% year over year, fueled by innovation in both our creative and document business. Starting with Creative Cloud, global demand for content is accelerating and continues to be a tailwind for the business. Creative Cloud remains the creativity platform of choice for creators across imaging, photography, design, video, web, animation, and 3D.

The general availability of our generative AI Firefly models and their integrations across Creative Cloud grow tremendous customer excitement with over 4.5 billion generations since launch in March.

David Wadhwani: The general availability of our generative AI Firefly models and their integrations across creative cloud drove tremendous customer excitement with over $4 5 billion generations since launch in March.

The release of three new Firefly models, Firefly Image 2 model, Firefly Vector model, and Firefly Design model, offering highly differentiated levels of control with effects, photo settings, and generative match. We also introduced generative credits as part of our Creative Cloud subscription plan.

The release of three new Firefly models Firefly image to model Firefly Vectra model and Firefly design model offering highly differentiated levels of control with effects photo settings and generative match. We also introduced generative credits as part of our creative cloud subscription plans.

David Wadwani: Our rapid pace of product and AI model innovation is empowering a wide and growing base of individuals, students, creative professionals, small business owners, and enterprises to create and monetize amazing content more quickly and easily than ever before. We were thrilled to come together in person with thousands of creators at Adobe MAX in Los Angeles and at our MAX event in Tokyo, with millions more from our community engaging with us online. We reached a record 300 million social interactions in the month following MAPS.

The general availability of Photoshop, Generative Fill, and Generative Expand, which are seeing record adoption, they're already among the most used features in the product.

David Wadhwani: The general availability of Photoshop generative, Phil and generative expand which are seeing record adoption. There are already among the most used features in the product.

Advanced is an Adobe Illustrator with the introduction of text-to-vector beta enabling users to generate icons, scenes, subjects, patterns, and gradient.

David Wadhwani: Advances in Adobe illustrator with the introduction of text of vector beta, enabling users to generate icons scenes subjects patterns and gradients.

Adobe Premiere Pro advances include a significant performance improvement in the timeline for faster and smoother editing, new color preferences and improved tone mapping. Premiere Pro is now natively integrated with FAMIO offering faster content sharing and collaboration.

David Wadhwani: Adobe premiere pro advances include a significant performance improvement and the timeline for faster and smoother editing new color preferences and improved tone mapping premiere pro is now natively integrated with frame Io offering faster content sharing and collaboration.

David Wadwani: Q4 was a record quarter for Creative Cloud, achieving $3 billion in revenue, which grew 14% year-over-year. Net new Creative Cloud ARR was $398 million. Business highlights include strong digital traffic resulting from product innovation, social engagement, and our continued product-led growth efforts, which drove record new commercial subscriptions in the quarter. The general availability of our generative AI Firefly models and their integrations across Creative Cloud drove tremendous customer excitement with over four and a half billion generations since launch in March. The release of three new Firefly models, Firefly Image 2 model, Firefly Vector model, and Firefly Design model, offering highly differentiated levels of control with effects, photo settings, and generative match.

The combination of Vidobi Express and Firefly is enabling everyone from creative pros to beginners to quickly move from ideation to task-based workflows and express, dramatically expanding our reach and widening our top of funnel.

David Wadhwani: The combination of Adobe Express and Firefly is enabling everyone from creative pros to beginners to quickly move from ideation to task based workflows and express dramatically expanding our reach and widening our top of funnel.

The family of generative capabilities across Express, including text image, text effects, text to template, and generative fill, are driving adoption of Express and making it even faster and more fun for users of all skill levels.

David Wadhwani: The family of generative capabilities across express, including text to image text effects text, a template and generative Phil are driving adoption of express and making it even faster and more fun for users of all skill levels.

Express now comes pre-installed on all new Chromebooks, making it accessible to students, educators, and anyone using Chrome OS.

David Wadhwani: Express now come screen installed on all new chromebooks, making it accessible to students educators and anyone using chrome OS.

continued strength in Adobe Stock, which had its best year ever, driven by accelerating demand for high quality image, vector, video, and 3Dcon.

David Wadhwani: Continued strength in Adobe stock, which had its best year ever driven by accelerating demand for high quality image vector video and <unk> content.

David Wadwani: We also introduced generative credits as part of our Creative Cloud subscription plan, and the general availability of Photoshop Generative Fill and Generative Expand, which are seeing record adoption; they're already among the most used features in the product. ADVENT is an Adobe Illustrator with the introduction of text-to-vector beta, enabling users to generate icons, scenes, subjects, patterns, and gradients. Adobe Premiere Pro advances include a significant performance improvement in the timeline for faster and smoother editing, new color preferences, and improved tone mapping. Premiere Pro is now natively integrated with Frame.io, offering faster content sharing and collaboration.

Creative Cloud, Express, and Firefly Integrations with Adobe Gen Studio, enabling ideation, creation, and stakeholder collaboration as part of their overall content supply chain.

David Wadhwani: Creative Cloud Express and Firefly integrations with Adobe Gen studio, enabling ideation creation and stakeholder collaboration as part of their overall content supply chain.

Strong mid-market and enterprise adoption driven by upsell to creative cloud offerings with fire.

David Wadhwani: Strong mid market and enterprise adoption, driven by upsell to creative cloud offerings with Firefly.

Key customer wins include cyber agent, Deloitte, discovery communications, next-arm media, Pepsi, Publisus, and the United Nations.

David Wadhwani: Key customer wins include cyber agent, Deloitte Discovery Communications, Nexstar media, Pepsi Publicis and the United Nations.

We are thrilled with the momentum we're seeing in the creative business following a year of unprecedented innovation. Customer excitement around firefly integrations across our applications has been great to see with community engagement, social interactions, and creative marketing campaigns, driving organic brand search volume, traffic and record demand.

David Wadhwani: We are thrilled with the momentum we're seeing in the creative business. Following a year of unprecedented innovation customer excitement around Firefly integrations across our applications has been great to see with community engagement, social interactions and creative marketing campaigns, driving organic brand search volume traffic and record.

David Wadwani: The combination of Adobe Express and Firefly is enabling everyone from creative pros to beginners to quickly move from ideation to task-based workflows in Express, dramatically expanding our reach and widening our top of funnel. The family of generative capabilities across Express, including text-to-image, text-to-fx, text-to-template, and generative fill, are driving adoption of Express and making it even faster and more fun for users of all skill levels Express Now comes pre-installed on all new Chromebooks, making it accessible to students, educators, and anyone using Chrome OS.

David Wadhwani: <unk>.

While we started rolling out new creative cloud pricing in select geographies in November , the primary driver of growth continues to be new paid subscriptions across our RUGS2 market.

While we started rolling out new creative cloud pricing in select geographies in November the primary driver of growth continues to be new paid subscriptions across our routes to market.

We're excited to build on this momentum as we entered FY24.

David Wadhwani: We're excited to build on this momentum as we enter FY 'twenty four.

Now turning to Document Cloud. Digital documents are essential enablers of our personal and professional lives. Document Cloud is a leader in digital documents powering all common document actions, including editing, sharing, reviewing, scanning, and signing. Document Cloud innovations are advancing accessibility, comprehension, productivity, automation, and security, in document workflows across web desktop and mobile.

David Wadhwani: Now turning to document cloud digital documents are essential enablers of our personal and professional lives.

David Wadwani: Continued strength in Adobe Stock, which had its best year ever, driven by accelerating demand for high-quality image, vector, video, and 3D content. Creative Cloud, Express, and Firefly integrations with Adobe GenStudio, enabling ideation, creation, and stakeholder collaboration as part of their overall content supply chain. Strong mid-market and enterprise adoption, driven by upsell to creative cloud offerings with Firefox. Key customer wins include CyberAgent, Deloitte, Discovery Communications, Nextar Media, Pepsi, Publicis, and the United Nations.

David Wadhwani: Document cloud as a leader in digital documents powering all common document actions, including editing sharing reviewing scanning and signing document cloud innovations are advancing accessibility comprehension productivity automation and security and document workflows across web desktop and mobile.

In Q4, we achieved document cloud revenue of 721 million growing 17% year over year. We added a record 171 million of net new document cloud ARR with ending ARR growing 23% year over year in constant current.

David Wadhwani: In Q4, we achieved document cloud revenue of $721 million growing 17% year over year, we added a record $171 million of net new document cloud <unk> with ending arrow growing 23% year over year in constant currency.

David Wadwani: We are thrilled with the momentum we're seeing in the creative business following a year of unprecedented innovation. Customer excitement around Firefly integrations across our applications has been great to see, with community engagement, social interactions, and creative marketing campaigns driving organic brand search volume, traffic, and record demand. While we started rolling out new Creative Cloud pricing in select geographies in November, the primary driver of growth continues to be new paid subscriptions across our routes to market. We are excited to build on this momentum as we enter FY24. Now turning to Document Cloud. Digital documents are essential enablers of our personal and professional lives. Document Cloud is a leader in digital documents, powering all common document actions, including editing, sharing, reviewing, scanning, and signing.

Business highlights include Acrobat Web Growth, which continues to be an incredible source of customer acquisition with monthly active users up over 70% year over year.

David Wadhwani: Business highlights include acrobat web growth, which continues to be an incredible source of customer acquisition with monthly active users up over 70% year over year.

A surge in usage of link sharing for stakeholder collaboration around PDF files, which increased 400% year-over-year, creating a viral growth loop that is bringing tens of millions of users into the Acrobat ecosystem. This is a great example of how we are scaling our PLG motion.

The surgeon usage of linked sharing for stakeholder collaboration around PDF files, which increased 400% year over year, creating a viral growth loop that is bringing tens of millions of users into the acrobat ecosystem. This is a great example of how we are scaling our plc motions.

Strong demand for Acrobat on mobile, with Mao surpassing 100 million users in Q4. Liquid mode has now served over one billion files to customers demonstrating how indispensable this technology has become on mobile devices.

David Wadhwani: Strong demand for acrobat on mobile with MAU, surpassing 100 million users in Q4 liquid mode has now served over 1 billion files to customers demonstrating how indispensable. This technology has become on mobile devices.

Adobe Acrobat to express workflows making it even easier to import, edit and enhance documents to create visually stunning PDFs.

David Wadhwani: Adobe Acrobat to express workflows, making it even easier to import edit and enhanced documents to create visually stunning pdfs.

David Wadwani: Document Cloud innovations are advancing accessibility, comprehension, productivity, automation, and security in document workflows across web, desktop, and mobile. In Q4, we achieved Document Cloud revenue of $721 million, growing 17% year-over-year. We added a record $171 million of net new Document Cloud ARR, with ending ARR growing 23% year-over-year in constant currency. Business highlights include Acrobat Web Growth, which continues to be an incredible source of customer acquisition, with monthly active users up over 70% year over year. A surge in usage of link sharing for stakeholder collaboration around PDF files, which increased 400% year-over-year, creating a viral growth loop that is bringing tens of millions of users into the Acrobat ecosystem. This is a great example of how we are scaling our PLG movement. Due to strong demand for Acrobat on mobile, with Mao surpassing 100 million users in Q4, Liquid Mode has now served over 1 billion files to customers, demonstrating how indispensable this technology has become on mobile devices. Adobe Acrobat to express workflows, making it even easier to import, edit, and enhance documents to create visually stunning PDFs.

Key enterprise customer wins include Alshaya, Bank of America, Department of Veterans Affairs, MasterCard, State Farm Auto Insurance, and Volkswagen.

David Wadhwani: Key enterprise customer wins include Australia Bank of America Department of Veterans Affairs, Mastercard State Farm auto insurance and Volkswagen.

Much like the creative business, we expect generative AI to deliver additional value and attract new customers to document cloud. Acrobat's generative AI capabilities, which will enable new creation, comprehension, and collaboration functionality, have already been rolled out in a private beta. We expect to release this in a public beta in the coming months.

David Wadhwani: Much like the creative business, we expect generative AI to deliver additional value and attract new customers to document cloud acrobat degenerative AI capabilities, which will enable new creation comprehension and collaboration functionality have already been rolled out in a private data we expect to release this in a public beta in the coming months.

It's been an extraordinary year for the digital media business with the introduction of hundreds of transformative innovations that are reshaping the future of creativity, productivity, and digital experiences. Capping this year's many accolades, Time Magazine recognized Adobe Liquid Mode, Photoshop Generative Fill, and Generative Expand, among the best inventions of 2023. I'll now pass it to a nil.

David Wadhwani: It's been an extraordinary year for the digital media business with the introduction of hundreds of transformative innovations that are reshaping the future of creativity productivity and digital experiences capping. This year's many accolades time magazine recognized Adobe liquid mode, Photoshop generative fill and generative expand among the best inventions.

David Wadhwani: 2023.

Speaker Change: I'll now pass it to Aneel.

Aneel: Thanks, David Hello, everyone.

Digital experiences are indispensable for every business and every category. Enabling companies of all sizes to engage and transact with customers around the world.

Aneel: Digital experiences are indispensable for every business in every category.

Aneel: Enabling companies of all sizes to engage and transact with customers around the world.

Adobe's Holiday Shopping Report, which analyzes trillions of data points, found that both Black Friday and Cyber Monday sales hit record highs of $9.8 billion, and $12.4 billion respectively, jumping 7.5% and 9.6% from last.

Aneel: Adobe's holiday shopping report, which analyzes trillions of data points found that both black Friday, and cyber Monday sales hit record highs of $9 8 billion.

Aneel: And $12 4 billion, respectively, jumping seven 5% and nine 6% from last year.

David Wadwani: Key enterprise customer wins include Alshaya, Bank of America, Department of Veterans Affairs, MasterCard, State Farm Auto Insurance, and Volkswagen. Much like the creative business, we expect generative AI to deliver additional value and attract new customers to Document Cloud. Acrobat's generative AI capabilities, which will enable new creation, comprehension, and collaboration functionality, have already been rolled out in a private beta.

We predict that holiday 2023 spend will exceed $221 billion in the US.

Aneel: We predict that holiday 2023 spend will exceed $221 billion in the U S alone.

Adobe Experience Cloud is optimally positioned to capitalize on this massive global operation.

Adobe experience cloud is optimally positioned to capitalize on this massive global opportunity.

Companies across B2C and B2B are turning to Adobe Experience Cloud as the platform to accelerate experienced let-girl.

Aneel: Companies across B to C and <unk> are turning to Adobe experience cloud as the platform to accelerate experience led growth.

Our leading solutions spanning data insights and audiences, content and commerce, customer journeys and marketing workflow, empower businesses to drive customer demand, engagement and growth, while simultaneously delivering productivity gain.

Anil Chakravarty: We expect to release this in a public beta in the coming months. It's been an extraordinary year for the digital media business, with the introduction of hundreds of transformative innovations that are reshaping the future of creativity, productivity, and digital experiences. Capping this year's many accolades, Time Magazine recognized Adobe Liquid Mode, Photoshop Generative Fill, and Generative Expand among the best inventions of 2020. I'll now pass this to Anil. Thanks, David. Hello, everyone.

Aneel: Our leading solutions spanning data insights and audiences.

Aneel: <unk> commerce customer journeys and marketing workflow empower businesses to drive customer demand engagement and growth while simultaneously delivering productivity gains.

our comprehensive set of applications, including real-time CDP, or built natively on our highly differentiated Adobe Experience platform, providing companies with a unified profile of each of their customers to deliver personalized real-time experiences at.

Our comprehensive set of applications, including real time CDP are built natively on our highly differentiated adobe experience platform, providing companies with a unified profile of each of their customers to deliver personalized real time experiences at scale.

Anil Chakravarty: Digital experiences are indispensable for every business in every category, enabling companies of all sizes to engage and transact with customers around the world. Adobe's Holiday Shopping Report, which analyzes trillions of data points, found that both Black Friday and Cyber Monday sales hit record highs of $9.8 billion and $12.4 billion, respectively, jumping 7.5% and 9.6% from last month. We predict that holiday 2023 spend will exceed $221 billion in the U.S. alone.

Genitive AI accelerates our pace of innovation across the experienced Cloud portfolio, enabling us to build on our capabilities to deliver personalized digital experience.

Aneel: Generally we accelerated our pace of innovation across the experience cloud portfolio, enabling us to build on our capabilities to deliver personalized digital experiences.

Our efforts are focused in three areas. One, augmenting our applications with an AI assistant that significantly enhances productivity for current users and provides an intuitive conversational interface to enable more knowledge workers to use our products.

Aneel: Our efforts are focused in three areas one augmenting our applications with an AI assistant that significantly enhances productivity for current users and provides an intuitive conversational interface to enable more knowledge workers to use our products.

to reimagining existing experience cloud applications, like we did with Adobe Experience Manager.

To re imagining existing experience cloud applications like we did with Adobe experience manager.

Anil Chakravarty: Adobe Experience Cloud is optimally positioned to capitalize on this massive global opportunity. Companies across B2C and B2B are turning to Adobe Experience Cloud as the platform to accelerate experience-led growth. Our leading solutions, spanning data insights and audiences, content and commerce, customer journeys, and marketing workflow, empower businesses to drive customer demand, engagement, and growth while simultaneously delivering productivity gains. Our comprehensive set of applications, including real-time CDP, are built natively on our highly differentiated Adobe Experience platform.

And three, developing entirely new solutions built for the age of generative AI like Adobe Gen Studio.

And three developing entirely new solutions built for the age of generative AI like Adobe Gen studio.

Aneel: In Q4, we continued to drive strong growth in the experience cloud business across our enterprise and mid market customers, achieving $1 7 billion in revenue.

In Q4, we continue to drive strong growth in the experience cloud business across our enterprise and mid-market customers, achieving $1.27 billion in revenue.

Subscription revenue was 1.12 billion dollars representing 12% year-over-year growth.

Aneel: Subscription revenue was $1, one 2 billion.

Aneel: Representing 12% year over year growth.

Business highlights include strong momentum with Adobe experience platform and native applications inclusive of real time, CDP Adobe journey, optimizer and customer journey analytics.

Business highlights include strong momentum with Adobe Experience Platform and Native Applications, inclusive of real-time CDP, Adobe Journey Optimizer and Customer Journey Analytics.

AEP had its first $100 million quarter of net new business in Q4 and exceeded the year with a greater than $700 million annualized book of business.

Anil Chakravarty: Providing companies with a unified profile of each of their customers to deliver personalized, real-time experiences at scale. Generative AI accelerates our pace of innovation across the experience cloud portfolio, enabling us to build on our capabilities to deliver personalized digital experiences. Our efforts are focused in three areas. One, augmenting our applications with an AI assistant that significantly enhances productivity for current users and provides an intuitive conversational interface to enable more knowledge workers to use our products; two, reimagining existing experience cloud applications like we did with Adobe Experience Manager, and 3. Developing entirely new solutions built for the age of generative AI like Adobe GenStudio.

Aneel: AEP had its first $100 million a quarter of net new business in Q4, and exited the year with a greater than $700 million annualized book of business.

Release of Adobe Gen Studio, an end-to-end solution that brings together best-in-class applications across Creative Cloud, Express, and Experience Cloud, with Firefly, Generative AI at the core to help brands meet the rising demand for content.

Aneel: Release of Adobe Gen studio and end to end solution that brings together the best in class applications across creative cloud Xpress in experience cloud with Firefly generative AI at the core to help brands meet the rising demand for content.

Aneel: Jen studio provides a comprehensive offering spanning content ideation creation production and activation.

Gen Studio provides a comprehensive offering, spanning, content ideation, creation, production and activation.

Aneel: We're seeing tremendous interest in Gen studio from brands like Henkel, Pepsi and Verizon and agencies like Publicis Omnicom in us as they look to accelerate and optimize their content supply chain.

We are seeing tremendous interest in Gen Studio from brands like Henkel, Pepsi and Verizon and agencies like Publices, Amnickham and Avas as they look to accelerate and optimize their contents applied.

Pre-imagined customer experiences with the all new Adobe Experience Manager sites that enable businesses and developers to quickly test and optimize web content, deliver fastest possible page load times, and maximize SEO rankings, lighthouse scores, and conversion.

Aneel: Three imagine customer experiences with the all new Adobe experience manager sites that enabled businesses and developers to quickly test and optimize web content deliver.

Anil Chakravarty: In Q4, we continue to drive strong growth in the experienced cloud business across our enterprise and mid-market customers, achieving $1.27 billion in revenue. Subscription revenue was $1.12 billion, representing 12% year-over-year growth. Business highlights include strong momentum with Adobe Experience Platform and native applications, inclusive of real-time CDP, Adobe Journey Optimizer, and Customer Journey Analytics. AEP had its first $100 million quarter of net new business in Q4 and exited the year with a greater than $700 million annualized book of business. Release of Adobe GenStudio, an end-to-end solution that brings together best-in-class applications across Creative Cloud, Express, and Experience Cloud with Firefly Generative AI at the core to help brands meet the rising demand for content. GenStudio provides a comprehensive offering spanning content ideation, creation, production, and activation.

Aneel: Deliver fastest possible page load times.

Aneel: And maximize Seo rankings lighthouse scores and conversion.

Adobe was recognized as a leader in over 25 industry analyst reports this year, including the Gartner Magic Quadrants for Digital Experience platforms, B2B Marketing Automation platforms, and Multi-Channel Marketing Hub.

Aneel: Adobe was recognized as a leader in over 25 industry analyst reports this year, including the Gartner Magic quadrant for digital experience platforms.

Aneel: <unk> marketing automation platforms, and multichannel marketing hubs.

Aneel: In the Forrester wave for digital experience platforms, which was published last week Adobe received the highest scores for strategy.

In the forested wave for digital experience platforms which was published last week, Adobe received the highest scores for strad.

Key customer bins include Alshaya, Coca Cola, EY, IBM, Maria, Riyadhere, Santander, Brazil, Sony, Southern Graphics, Unilever, Vanguard and Verizon.

Aneel: Key customer wins include a Shire Coca Cola E Y IBM Marriott re are Theyre, Santander Brasil, Sony Southern graphics, Unilever Vanguard and Verizon.

In our conversations with these and other customers around the world, see-level executives are continuing to prioritize experience-led growth as a critical business imperative, despite ongoing budget schools.

Aneel: In our conversations with these and other customers around the world C level executives are continuing to prioritize experience led growth as a critical business imperative despite ongoing budget scrutiny.

Anil Chakravarty: We are seeing tremendous interest in GenStudio from brands like Henkel, Pepsi, and Verizon and agencies like Publisys, Omnicom, and Avas as they look to accelerate and optimize their content supply. Pre-imagined customer experiences with the all-new Adobe Experience Manager sites that enable businesses and developers to quickly test and optimize web content to deliver the fastest possible page load times and maximize SEO rankings, Lighthouse scores, and conversions.

Adobe Experience Cloud is well positioned to keep winning with innovative products that power end-to-end customer experiences and enable companies to simultaneously drive growth and profit.

Aneel: Adobe experience cloud is well positioned to keep winning with innovative products that power end to end customer experiences and enable companies to simultaneously drive growth and profitability.

We are looking forward to continuing our leadership and momentum into 2024.

Aneel: We are looking forward to continuing our leadership and momentum into 2024.

I'll now pass it to Dan.

Dan Durn: Thanks Sunil are.

Our earnings report today covers both Q4 and FY23 results. What a year 2023 was.

Dan Durn: Our earnings report today covers both Q4 and FY2023 results what a year 2023 was fueled by a deep understanding of our customers' product innovation and outstanding execution, we delivered strong financial results and World class margins positioning the company for years of continued growth.

Anil Chakravarty: Adobe was recognized as a leader in over 25 industry analyst reports this year, including the Gartner Magic Quadrants for Digital Experience Platforms, B2B Marketing Automation Platforms, and Multi-Channel Marketing Hub. In the Forrester Wave for Digital Experience Platforms, which was published last week, Adobe received the highest score for strategy. Key customer wins include Alshaya, Coca-Cola, EY, IBM, Marriott, Riad Air, Santander Brazil, Sony, Southern Graphics, Unilever, Vanguard, and Verizon. In our conversations with these and other customers around the world, C-level executives are continuing to prioritize experience-led growth as a critical business imperative, despite ongoing budget scrutiny.

Fueled by a deep understanding of our customers, product innovation and outstanding execution, we delivered strong financial results and world-class margins, positioning the company for years of continued growth.

In FY23, Adobe Chief Record Revenue of 19.41 billion, which represents 10% year-over-year growth, or 13% growth in constant current.

Dan Durn: In FY2023 Adobe achieved record revenue of $19, four 1 billion, which represents 10% year over year growth or 13% growth in constant currency.

Gap EPS for the year was $11.82. And non-Gap EPS was $16.7. Each growing 17% year over year.

Dan Durn: GAAP EPS for the year was $11 82.

Dan Durn: And non-GAAP EPS was $16 seven.

Dan Durn: Each growing 17% year over year.

FY23 Business and Financial Highlights included. Digital Media Revenue of 14.22 billion. Net New Digital Media ARR of 1.91 billion. Digital Experience Revenue of 4.89 billion. Cash flow from operations of 7.3 billion. RPO of 17.22 billion exiting the year.

Dan Durn: FY2023 business and financial highlights included Digi.

Dan Durn: Digital media revenue of $14, two 2 billion net new digital media <unk> of $1 91 billion digital experience revenue of $4 $89 billion cash flows from operations of $7 3 billion RP O a $17 two 2 billion exiting the year.

Dan Dern: Adobe Experience Cloud is well-positioned to keep winning with innovative products that power end-to-end customer experiences and enable companies to simultaneously drive growth and profitability. We are looking forward to continuing our leadership and momentum into 2024.

and repurchasing approximately 11.5 million shares of our stock during the year, at a cost of 4.63 billion.

Dan Durn: And repurchasing approximately 11 5 million shares of our stock during the year at a cost of $4 63 billion.

In the fourth quarter of FY 23, Adobe achieved revenue of 5.05 billion, which represents 12% year-over-year growth, or 13% in constant currents.

Dan Durn: In the fourth quarter of FY 'twenty, three Adobe achieved revenue of 5.05 billion, which represents 12% year over year growth or 13% in constant currency GAAP diluted earnings per share in Q4 was $3 23.

Dan Dern: Thanks, Janelle. Our earnings report today covers both Q4 and FY23 results. What a year 2023 was. Fueled by a deep understanding of our customers, product innovation, and outstanding execution, we delivered strong financial results and world-class margins, positioning the company for years of continued growth. In FY23, Adobe achieved record revenue of $19.41 billion, which represents 10% year-over-year growth or 13% growth in constant currency. Gap EPS for the year was $11.82, and non-gap EPS was $16.07, each growing 17% year-over-year.

Gap the Looted earnings per share in Q4 was $3.23. And non-gap the Looted earnings per share was a record $4.27, growing 28%, and 19% year-over-year respect.

Dan Durn: And non-GAAP diluted earnings per share was a record $4 27.

Dan Durn: Growing 28% and 19% year over year, respectively.

Q4 Business and Financial Highlights included. Digital Media Revenue of 3.72 billion.

Dan Durn: Q4 business and financial highlights included.

Dan Durn: Digital media revenue of $3 72 billion.

Net new digital media ARR of 569 million.

Dan Durn: Net new digital media <unk> of $569 million.

Digital Experience Revenue of 1.27 billion. Cast close from operations of one-

Dan Durn: Digital experience revenue of $1 $2 7 billion.

Dan Durn: Cash flows from operations of $1 6 billion.

adding approximately 1.5 billion to RPO in the quarter our highest sequential quarterly increase ever.

Dan Durn: Adding approximately $1 5 billion to <unk> in the quarter, our highest sequential quarterly increase ever Andrew.

Dan Dern: FY23 business and financial highlights include Digital Media Revenue of $14.22 billion, Net New Digital Media ARR of $1.91 billion, Digital Experience Revenue of $4.89 billion, Cash Flows from Operations of $7.3 billion, RPO of $17.22 billion ending the year and repurchasing approximately 11.5 million shares of our stock during the year at a cost of $4.63 billion. In the fourth quarter of FY23, Adobe achieved revenue of $5.05 billion, which represents 12% year-over-year growth or 13% in constant currency. Gap diluted earnings per share in Q4 were $3.23, and non-gap diluted earnings per share were a record $4.27, growing 28% and 19% year-over-year, respectively.

and repurchasing approximately 1.8 million shares of her stock.

Dan Durn: And repurchasing approximately one 8 million shares of our stock.

In our digital media segment, we achieve Q4 revenue of 3.72 billion, which represents 13% year-over-year growth, or 14% in constant current.

Dan Durn: In our digital media segment, we achieved Q4 revenue of $3 72 billion, which represents 13% year over year growth.

Dan Durn: Our 14% in constant currency.

Our net new ARR in Q4 was $569 million, which was a quarterly record in constant currency. And we exited the quarter with $15.17 billion of digital media ARR.

Dan Durn: Our net new <unk> in Q4 was $569 million, which was a quarterly record in constant currency and we exited the quarter with $15 $1 7 billion of digital media <unk>.

We achieve creative revenue of $3 billion, which represents 12% year-over-year growth, or 14% in constant currency. And we added $398 million of net new creative ARR in this.

Dan Durn: We achieved creative revenue of $3 billion, which represents 12% year over year growth of 14% in constant currency and we added 398 million of net new creative <unk> in the quarter.

Driving this performance was strong customer acquisition throughout the quarter, as well as strength during the peak holiday shopping weeks. Fourth quarter creative growth.

Dan Durn: Driving this performance with strong customer acquisition throughout the quarter as well as strength during the peak holiday shopping weeks.

Fourth quarter creative growth drivers included.

Dan Dern: Q4 Business and Financial Highlights Included Digital Media Revenue of $3.72 Billion, Net New Digital Media ARR of $569 million, Digital Experience Revenue of $1.27 Billion, Cash flows from operations of $1.6 billion, adding approximately $1.5 billion to RPO in the quarter, our highest sequential quarterly increase ever, and repurchasing approximately 1.8 million shares of our stock. In our digital media segment, we achieved Q4 revenue of $3.72 billion, which represents 13% year-over-year growth or 14% in constant currency. Our net new ARR in Q4 was $569 million, which was a quarterly record in constant currency, and we exited the quarter with $15.17 billion of digital media ARR. We achieved creative revenue of $3 billion, which represents 12% year-over-year growth or 14% in constant currency, and we added $398 million of net new creative ARR in the fourth quarter. Driving this performance was strong customer acquisition throughout the quarter, as well as strength during the peak holiday shopping week. Fourth quarter creative growth drivers included individual subscriber growth fueled by targeted campaigns and strong web traffic. A strong quarter for Create-A-Cloud All-Apps subscriptions across Sales of CC Single Apps, including a strong quarter for imaging and photography offerings.

Individual subscriber growth fueled by targeted campaigns and strong web traffic

Dan Durn: Individual subscriber growth fueled by targeted campaigns and strong web traffic.

a strong quarter for Creative Cloud all-app subscriptions across customer segments and geographies with particular strength and emerging markets.

Dan Durn: A strong quarter for creative cloud, all apps subscriptions across customer segments and geographies with particular strength in emerging markets.

sales of CC single apps, including a strong quarter for imaging and photography offering.

Dan Durn: Sales of Cc single apps, including a strong quarter for imaging and photography offerings.

continue growth of our frame I.O. offering and Adobe Stock, which capped off its best year ever in terms of net new ARR.

Dan Durn: Continued growth of our frame Io offering and Adobe stock, which capped off its best year ever in terms of net new IRR.

customer demand and education driven by back to school purchasing, as well as migrations to full priced offerings by graduating students entering the workforce. And typical Q4 strength in the enterprise, including significant upsell of our new Firefly and Express Office.

Customer demand in education, driven by back to school purchasing as well as migrations to full priced offerings by graduating students entering the workforce and.

Dan Durn: And typical Q4 strength in the enterprise, including significant upsell of our new Firefly and express offerings.

Adobe Achieve Document Cloud Revenue 721 million, which represents 16% year-over-year growth, or 17% in constant currency. We added a record 171 million of net new document cloud ARR in the quarter. Fourth quarter document.

Dan Durn: Adobe achieved document cloud revenue of 721 million, which represents 16% year over year growth or 17% in constant currency. We added a record $171 million of net new document cloud <unk> in the quarter.

Dan Durn: Fourth quarter document cloud growth drivers included.

Acrobat subscription demand across all customer segments, routes to market and geography.

Dan Durn: Acrobat subscription demand across all customer segments routes to market and geographies.

Continued strength of our free-to-paid funnels, including Reader on the Desktop and Acrobat Web.

Dan Durn: Continued strength of our free to paid funnels, including reader on the desktop and acrobat web.

strong performance of our collaboration services, including PDF link sharing and sign, which are virally bringing new users to the Acrobat ecosystem.

Dan Durn: Strong performance of our collaboration services, including PDF linked sharing and sign which are virally, bringing new users to the acrobat ecosystem.

an outstanding quarter for Acrobat Mobile as a result of increased proliferation, usage, and conversion, and year-end seasonal strength.

Dan Durn: An outstanding quarter for acrobat mobile as a result of increased proliferation usage and conversion.

And year end seasonal strength in SMB and enterprise.

Dan Dern: Continued growth of our Frame.io offering and Adobe Stock, which capped off its best year ever in terms of net new ARR. Customer demand in education driven by back-to-school purchasing, as well as migrations to full-priced offerings by graduating students entering the workforce, and typical Q4 strength in the enterprise, including significant upsell of our new Firefly and Express offices. Adobe achieved document cloud revenue of $721 million, which represents 16% year-over-year growth or 17% in constant currency.

Turning to our digital experience segment, in Q4, we achieved revenue of 1.27 billion, growing 10% year over year, or 11% in constant currency.

Dan Durn: Turning to our digital experience segment in Q4, we achieved revenue of $1 $2 7 billion growing 10% year over year or 11% in constant currency.

We achieve subscription revenue of 1.12 billion, which represents 12% year-over-year growth.

Dan Durn: We achieved subscription revenue of $1, one 2 billion, which represents 12% year over year growth.

Fourth quarter digital experience growth drivers included. Strong year end bookings across solutions with particular strength in North America.

Dan Durn: Fourth quarter digital experienced growth drivers included strong year end bookings across solutions with particular strength in North America.

Continue success closing multi-solution transformational deals with large enterprise.

Dan Durn: Continued success closing multi solution transformational deals with large enterprises.

Momentum with the AEP and native applications, with the FY23 exiting book of business growing greater than 60% year over year.

Dan Durn: Momentum with AEP and native applications with the FY2023 exiting book of business growing greater than 60% year over year.

Dan Dern: We added a record $171 million of new document cloud ARR in the fourth quarter. Fourth quarter document cloud growth drivers included Acrobat subscription demand across all customer segments, routes to market, and geography. Continued strength of our free-to-paid funnels, including Reader on the desktop and Acrobat Web. Strong performance of our collaboration services, including PDF link sharing and sign, which are virally bringing new users to the Acrobat ecosystem. An outstanding quarter for Acrobat Mobile as a result of increased proliferation, usage, and conversion, and year-end seasonal strength in S&B and enterprise.

strong net dollar retention for early adopters of AEP, demonstrating the value enterprises are realizing from a real-time data platform and integrated offerings. And strength across

Dan Durn: Strong net dollar retention for early adopters of AEP, demonstrating the value and our prices are realizing from our real time data platform and integrated offerings.

Dan Durn: And strength across our data and insights content and workflow solutions and growing customer interest in pipeline for our new Gen studio solution.

Content and work front solutions and growing customer interest and pipeline for a new Gen Studio solution.

We draw world-class operating margins in Q4 and throughout fiscal 2023 by making disciplined investments in R&D, marketing and sales, and we're pleased that we grew EPS faster than revenue.

Dan Durn: We drove world class operating margins in Q4 and throughout fiscal 2023 by making disciplined investments in R&D marketing and sales and we're pleased that we grew EPS faster than revenue.

Adobe's effective tax rate in Q4 was 18% on a gap basis, and 18.5% on a non-gap basis in line with our expectation.

Dan Durn: Adobe's effective tax rate in Q4 was 18% on a GAAP basis, and 18, 5% on a non-GAAP basis in line with our expectations.

Dan Dern: Turning to our digital experience segment, in Q4, we achieved revenue of $1.27 billion, growing 10% year-over-year or 11% in constant currency. We achieved subscription revenue of $1.12 billion, which represents 12% year-over-year growth. Fourth quarter digital experience growth drivers included strong year-end bookings across solutions with particular strength in North America, continued success closing multi-solution transformational deals with large enterprises, Momentum with AEP and native applications with the FY23 exiting book of business growing greater than 60% year-over-year, and strong net dollar retention for early adopters of AEP. Demonstrating the value enterprises are realizing from a real-time data platform and integrated offering, and strength across our data and insight.

RPO, exiting the quarter was 17.22 billion, growing 13% year over year.

Dan Durn: <unk> exiting the quarter was $17, two 2 billion growing 13% year over year.

Our ending cash and short-term investment position, exiting Q4, was $7.84 billion. And cash flows from operations in the quarter were $1.6 billion. After making a previously discussed payment in the quarter of $826 million of US federal taxes that we deferred from the second and third quarters of FY23.

Dan Durn: Our ending cash and short term investment position exiting Q4 was 784 billion in cash flows from operations in the quarter were $1 6 billion after making a previously discussed payment in the quarter of $826 million of U S. Federal taxes that we deferred from the second and third quarters of <unk>.

Dan Durn: 'twenty three.

Dan Durn: In Q4, we entered into a $1 billion share repurchase agreement and we currently have two <unk>, one 5 billion remaining of our $15 billion authorization granted in December 2020.

In Q4, we entered into a $1 billion share purchase agreement, and we currently have $2.15 billion remaining of our $15 billion authorization granted in December 2020.

As a reminder, we measure ARR on a constant currency basis during a fiscal year and revalue ARR at year end.

Dan Durn: As a reminder, we measure <unk>.

Dan Durn: On a constant currency basis during a fiscal year and revalue <unk> at year end.

Dan Dern: Content and Workfront Solutions and growing customer interest and pipeline for our new GenStudio solution. We drove world-class operating margins in Q4 and throughout fiscal 2023 by making disciplined investments in R&D, marketing, and sales, and we're pleased that we grew EPS faster than revenue. Adobe's effective tax rate in Q4 was 18% on a gap basis and 18.5% on a non-gap basis, in line with our expectations.

FX rate changes between December of 2022, and this year have resulted in a $160 million increase to digital media ARR balance entering FY24, which is now $15.33 billion, and is reflected in our updated investor data sheet.

Dan Durn: FX rate changes between December of 2022, and this year have resulted in a $160 million increased digital media <unk> balance entering FY 'twenty, four which is now $15 three 3 billion and is reflected in our updated investor data sheet.

Factoring in the momentum across our businesses and current expectations for the macroeconomic and foreign exchange environments for FY 'twenty four we are targeting.

Factoring in the momentum across our businesses and current expectations for the macroeconomic and foreign exchange environments. For FY 24, we are targeting.

Dan Dern: RPO exiting the quarter was $17.22 billion, growing 13% year over year. Our ending cash and short-term investment position, exiting Q4, was $7.84 billion, and cash flows from operations in the quarter were $1.6 billion, after making a previously discussed payment in the quarter of $826 million of U.S. federal taxes that we deferred from the second and third quarters of FY23.

Total Adobe revenue of 21.30 to 21.50 billion.

Dan Durn: Total Adobe revenue of 20, 130 to 20 150 billion Digi.

Digital Media Net New ARR approximately 1.9 billion.

Dan Durn: Digital media net new IRR of approximately $1 9 billion.

Digital Media Sigmite revenue of 15.75 to 15.85 billion.

Dan Durn: Digital media segment revenue of $15 75 to $15 85 billion.

Digital Experience Sigmund revenue of 5.275 to 5.375 billion.

Dan Durn: Digital experience segment revenue of $5 $2 75 to $5 $3 75 billion.

Digital Experience Subscription Revenue 4.75-4.80B

Dan Durn: Digital experience subscription revenue of $4 75 to $4 eight zero billion tax rate of approximately 18% on a GAAP basis, and 18, 5% on a non-GAAP basis.

Tax rate of approximately 18% on a gap basis, and 18.5% on a known gap base.

Dan Dern: In Q4, we entered into a $1 billion share of purchase agreement, and we currently have $2.15 billion remaining of our $15 billion authorization granted in December 2020. As a reminder, we measure ARR on a constant currency basis during a fiscal year and revalue ARR at year-end. FX rate changes between December of 2022 and this year have resulted in a $160 million increase in the digital media ARR balance entering FY24, which is now $15.33 billion and is reflected in our updated investor data sheet. Factoring in the momentum across our businesses and current expectations for the macroeconomic and foreign exchange environment. For FY24, we are targeting Total Adobe revenue of $21.30 to $21.50 billion; Digital Media Net New ARR of approximately $1.9 Billion; Digital Media Segment revenue of $15.75 to $15.85 billion.

Gap earnings per share of $13.45 to $13.85.

Dan Durn: GAAP earnings per share of $13 45.

Dan Durn: The $13 85.

and non-gap earnings per share of $17.60 to $18.

Dan Durn: And non-GAAP earnings per share of $17.60 to $18.

Dan Durn: As a reminder, and as is customary these targets do not reflect our planned acquisition of Sigma we.

As a reminder, and as is customary, these targets do not reflect our planned acquisition of Figma.

We expect normal seasonality throughout the year, with a seasonal step down for new business into the first quarter, sequential growth from Q1 to Q2, typical Q3 summer seasonality, and a strong finish to the year in Q4.

Dan Durn: We expect normal seasonality throughout the year with a seasonal step down for new business into the first quarter sequential growth from Q1 to Q2 typical Q3 summer seasonality and a strong finish to the year in Q4.

We expect our cash tax rate to improve sequentially in FY 24 by two percentage points, as the amortization of previously capitalized R&D increases or deductions next year for tax purposes, benefiting our operating cash flows next year. For Q1, F1.

We expect our cash tax rate to improve sequentially in FY 'twenty four by two percentage points as the amortization of previously capitalized R&D increases our deductions next year for tax purposes, benefiting our operating cash flows next year.

Dan Durn: For Q1, FY 'twenty four we're targeting.

Total Adobe revenue of 5.10 to 5.15 billion.

Dan Durn: Total Adobe revenue of $5, one zero to 515 billion.

Dan Durn: Digital media net new IRR of approximately $410 million.

Digital Media Net New ARR approximately 410 million.

Dan Dern: Digital Experience Segment revenue of $5.275 to $5.375 billion; Digital Experience Subscription revenue of $4.75 to $4.80 billion; tax rate of approximately 18% on a gap basis and 18.5% on a non-gap basis. Gap earnings per share of $13.45 to $13.85, and non-GAAP earnings per share of $17.60 to $18.

Digital Media Segment Revenue 3.77 to 3.80 Billion.

Digital media segment revenue of $3 77 to 380 billion.

Digital Experience Segment Revenue of 1.27 to 1.29 billion.

Dan Durn: Digital experience segment revenue of $1, two seven to $1 $2 9 billion.

Digital Experience Subscription revenue of 1.14 to 1.16.

Digital experience subscription revenue of 114 to one $1 6 billion.

Dan Durn: Tax rate of approximately 18% on GAAP basis, and 18, 5% on a non-GAAP basis.

Tax rate of approximately 18% on a gap basis, and 18.5% on a non-gap.

Gap earnings per share of $3.35 to $3.40.

Dan Durn: Earnings per share of $3 35 to.

Dan Dern: As a reminder, and as is customary, these targets do not reflect our planned acquisition of Figma. We expect normal seasonality throughout the year, with a seasonal step-down for new business into the first quarter, sequential growth from Q1 to Q2, typical Q3 summer seasonality, and a strong finish to the year in Q4. We expect our cash tax rate to improve sequentially in FY24 by 2 percentage points as the amortization of previously capitalized R&D increases our deductions next year for tax purposes, benefiting our operating cash flows next year. For Q1 FY24, we're targeting total Adobe revenue of $5.10 to $5.15 billion. Digital Media Net New ARR of approximately $410 million. Digital Media Segment revenue of $3.77 to $3.80 billion.

Dan Durn: To $3 40.

and non-gap earnings per share $4.35 to $4.40.

Dan Durn: And non-GAAP earnings per share $4 35.

Dan Durn: The $4 40.

While the implied operating margin for Q1 is up sequentially, we expect a typical seasonal margin step down starting in Q2 as a result of the annual merit increases and discipline investments to drive growth.

Dan Durn: While the implied operating margin for Q1 is up sequentially. We expect a typical seasonal margin step down starting in Q2 as a result of annual merit increases and disciplined investments to drive growth.

In summary, I couldn't be prouder the company's performance in FY23 and the momentum we're carrying into 2024 across creative cloud, document cloud, and experience cloud, our strategy, scale, speed of execution, and profitability position us for years of sustained success.

In summary, I couldn't be prouder of the Companys performance in FY 'twenty, three and the momentum we're carrying into 2024 across creative cloud document cloud and experience cloud our strategy scale speed of execution and profitability position us for years of sustained success.

Anthony back to you.

Thanks Dan. In addition to our financial accomplishments, we are proud to once again be recognized for our industry leadership.

Anthony: Thanks, Dan in addition to our financial accomplishments, we are proud to once again be recognized for our industrial leadership.

Content credentials and Adobe's approach to responsible AI were recognized by fast company as one of the years breakthrough innovation.

Anthony: Content credentials and Adobe's approach to responsible AI were recognized by fast company as one of the year's breakthrough innovations. We were again named to the Dow Jones sustainability index.

Dan Dern: Digital Experience Segment revenue of $1.27 to $1.29 billion. Digital Experience Subscription revenue of $1.14 to $1.16 billion. Tax rate of approximately 18% on a GAAP basis and 18.5% on a non-GAAP basis, GAAP earnings per share of $3.35 to $3.40, and non-GAAP earnings per share of $4.35 to $4.40.

We were again named to the Dow Jones Sustainability Index.

Glassdoor, listed Adobe is one of the best places to work. An Interbrand ranked us in the top 20 best global brands as a rising brand for the A-Fear in a row.

Anthony: Glassdoor listed Adobe is one of the best places to work.

Anthony: And Interbrand ranked us in the top 20, best Global brands as a rising brand for the eighth year in a row.

Digital remains a massive tailwind as content demand and consumption continues to grow and businesses of all sizes are focused on transforming their customer experience.

Anthony: Digital remains a massive tailwind as content demand and consumption continues to grow and businesses of all sizes are focused on transforming their customer experiences.

Dan Dern: While the implied operating margin for Q1 is up sequentially, we expect a typical seasonal margin step down starting in Q2 as a result of the annual merit increases and disciplined investments to drive growth. In summary, I couldn't be prouder of the company's performance in FY23 and the momentum we're carrying into 2024 across Creative Cloud, Document Cloud, and Experience Cloud. Our strategy, scale, speed of execution, and profitability position us for years of sustained success. Shantanu, back to you.

Adobe is incredibly well positioned to lead and capitalize on this opportunity. Thanks to our innovative roadmap, expanding global customer base, strong brand and the best employees in the world.

Anthony: Adobe is incredibly well positioned to lead and capitalize on this opportunity. Thanks to our innovative roadmap expanding global customer base strong brand and the best employees in the world.

Our fiscal 24 financial targets reflect our confidence in continuing to drive strong top line growth and world class profitability.

Our fiscal 'twenty four financial targets reflect our confidence in continuing to drive strong topline growth and world class profitability.

I'm more certain than ever that Adobe's best days are ahead of us. Thank you and we will now.

Anthony: I am more certain than ever that Adobe is best days are ahead of us.

Shantanu Narayen: Thanks, Dan. In addition to our financial accomplishments, we are proud to once again be recognized for our industry leadership. Content Credentials and Adobe's approach to responsible AI were recognized by Fast Company as one of the year's breakthrough innovations. We were again named to the Dow Jones Sustainability Index. Glasdore listed Adobe as one of the best places to work, and Interbrand ranked us in the top 20 best global brands as a rising brand for the eighth year in a row.

Anthony: Thank you and we will now take questions operator.

Anthony: Operator.

If you would like to ask a question, please single by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow the signal to reach our equipment. We ask that you please limit yourself to one question.

Speaker Change: If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow the signal to reach our equipment. We ask that you. Please limit yourself to one question again press star one to ask a question, we'll pause for just a moment.

again press star one to ask a question. We'll pause for just a moment to assemble the

Speaker Change: Assemble the queue.

We'll take our first question from Casheringham with Goldman Sachs. Please go ahead.

Speaker Change: We will take our first question from Kash Rangan with Goldman Sachs. Please go ahead.

Hi, thank you very much. Congrats on the quarter and happy holidays.

Kash Rangan: Hi, Thank you very much congrats on the quarter and happy holidays shopping entertainment I'm wondering.

Operator: Digital remains a massive tailwind as content demand and consumption continues to grow and businesses of all sizes are focused on transforming their customer experience. Adobe is incredibly well positioned to lead and capitalize on this opportunity thanks to its innovative roadmap, expanding global customer base, strong brand, and the best employees in the world. Our fiscal 24 financial targets reflect our confidence in continuing to drive strong top-line growth and world-class profitability. I'm more certain than ever that Adobe's best days are ahead of us. Thank you, and we will now take questions. Operator. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment.

Shantan and the team, I'm wondering, they're going into 2024. It definitely feels like the economy is in.

Kash Rangan: Going into 2024, it definitely feels like the economy is in.

stable footing and General the soft for metrics are all in pulling as this year unfolded

Kash Rangan: Stable footing and.

Kash Rangan: Generally the software metrics are all improving this year unfolded very different from going from 22 to 'twenty three yet.

And very different from going from 22 to 23 yet you

A new era of guidance is about the same as how you started last year, but you got the benefit of January the day I tell which from the economy you got pricing and firefly can you just help us understand a few isolate for those factors what has gone into your like free exclude in quarantine you did.

Speaker Change: D M. You add our guidance, it's about the same as having started last year, but you've got the benefit of generative AI tailwind from the economy, you've got pricing and Firefly can you just help us understand if you isolate for those factors.

Speaker Change: What has gone into your into your guidance because it seems like if we exclude the optionality that you have including the tailwind in the economy that that guidance looks.

The optionality that you have, including the tailrooms in the economy that that guidance looks

Like it's very conservative and maybe that's the right thing to do but just want to understand your top process. Thank you.

Speaker Change: Like it's very conservative and maybe that's the right thing to do but just wanted to understand your thought process. Thank you so much.

Yeah, thanks, Cash. I mean, thirdly, really thrilled with what a phenomenal year we had across all aspects of the business, whether it was the $5 billion quarter, $5 billion book of business now in DX, exiting, and thirdly digital media, ARR performance.

Yeah. Thanks, Kash, I mean, certainly really thrilled with water phenomena Leo we.

Speaker Change: We had across all aspects of the business, whether it was the $5 billion quarter 5 billion book of business now in Dx exiting.

Kash Rangan: We ask that you please limit yourself to one question. Again press star 1 to ask a question. We'll pause for just a moment to assemble the, We'll take our first question from Kash Rangan with Goldman Sachs. Please go ahead. Hi, thank you very much. Congrats on the quarter and happy holidays. Shantanu and team, I'm wondering, going into 2024, it definitely feels like the economy is going, Stable footing and in general the software metrics are all improving as this year unfolded and very different from going from 22 to 23, yet your DM, you had our guidance is not the same as how you started last year, but you got the benefit of generative AI, tailwinds from the economy, you got pricing and Firefly, can you just help us understand if you isolate for those factors what has gone into your guidance because it seems like we exclude the optionalities that you have, including the tailwinds and economy, that that guidance looks like it's very conservative and maybe that's the right thing to do, but just want to understand your thought process.

Speaker Change: Certainly digital media at our performance.

Now, let's, if you reflect, I mean, you talked about the guidance that we gave at the beginning of 23 and 24. If you recall, we actually had guided to 1650 first, then we opted, as you know, to 1750 and ended with, you know, 1913. And so to your point, on the execution front, we've delivered some great innovative products.

Speaker Change: Now, let's if you reflect I mean.

Speaker Change: <unk> talked about the guidance that we gave at the beginning of <unk>.

Speaker Change: <unk>, 3% and 24, if you recall, we actually had guided to $16 51, and then we update as you know to $17 50 and ended with.

Speaker Change: And a 191 three and so.

Speaker Change: To your point on the execution front, we have delivered some great innovative products, we've expanded the customer base with new products like Express and Firefly, We're certainly focused on surfaces.

We've expanded the customer base with new products like Express and Firefly, we're certainly focused on surfaces and making sure all of our flagship products are available across all surfaces. And so we do have multiple growth drivers to your point and we are focused on monetizing the opportunity. I mean, I would say, we take our guide very seriously, the other way of looking at it gashes.

Speaker Change: And making sure all of our flagship products are available across all surfaces and so we do have multiple growth drivers to your point and we are focused on monetizing the opportunity I mean, I would say is we take our guide very fiercely the other way of looking at it cashes its our highest annual guide ever in terms of.

It's the highest annual guide ever in terms of what the guide we've issued. It's the highest Q1 guide ever and we want to go again, execute against this large opportunity and have another record here. So we're feeling good. The momentum is certainly there in the business, but we take our guidance at this point of the year, very fierce.

What the guide we've issued its our highest Q1 guide ever and you know we want to again execute against this large opportunity and have another record year. So we're feeling good the momentum is certainly there in the business.

Kash Rangan: Thank you. Yeah, thanks, Kash. I mean, certainly really thrilled with what a phenomenal year we had across all aspects of the business, whether it was the $5 billion quarter, $5 billion book of business now in DX exiting, and certainly digital media ARR performance. Now, if you reflect, I mean, you talked about the guidance that we gave at the beginning of 23 and 24. If you recall, we actually guided them to 1650 first, then we upped it, as you know, to 1750 and ended with, you know, 1913.

Speaker Change: But we take our guidance at this point of the year very seriously.

Thank you so much and happy holidays. All the best for 2024.

Speaker Change: Thank you so much and happy holidays, all the best for 2024.

Speaker Change: Thanks Happy holidays.

We will take our next question from Keith Live with Morgan Stanley . Please go ahead.

Speaker Change: We will take our next question from Keith Weiss with Morgan Stanley. Please go ahead.

As someone, thank you guys for taking the question. I think this is in a similar vein to what Cash was trying to get at, but maybe a little bit more focused on Q4 in particular. When we look at the digital media and the new ARR ads in Q4, it looks like you had a very, very strong document cloud, record quarter, like you were saying, really strong year on year growth in those net ads. Creative cloud, where we actually saw a price increase and we have all the excitement and firefly, but that was actually down on a year on your...

Keith Weiss: Excellent. Thank you guys for taking the question I think this is in a similar vein to what what cash was trying to get at but maybe a little bit more focused on Q4 in particular.

Keith Weiss: When we look at the digital media New Air ads in Q4, it looks like you had a very very strong document cloud ready.

Shantanu Narayen: And so, to your point on the execution front, we've delivered some great innovative products. We've expanded the customer base with new products like Express and Firefly. We're certainly focused on surfaces, you know, and making sure all of our flagship products are available across all surfaces.

Keith Weiss: Third quarter like you were saying.

Keith Weiss: Strong year on year growth in and those net adds creative cloud, where we actually saw a price increase and we have all the excitement of Firefly that was actually down on a year on year basis.

And this is the first time since 2018, we've seen Creative Cloud NetNueAR R below for.

Shantanu Narayen: And so we do have multiple growth drivers, to your point. And we are focused on monetizing the opportunity. I mean, I would say, you know, we take our guide very seriously.

Keith Weiss: And this is the first time since 2018, we've seen creative cloud net new AOR below $400 million I think that's the surprise for investors with a negative surprise for investors that we're trying to figure out was there something dragging.

I think that's the surprise for investors or the negative surprise for investors that we're trying to figure out. Is there something dragging the creative cloud-fired equation this year or a tough comp from last year or something that explains why the price increases in all the positive momentum and innovation out of Adobe Max is and translating into net new error, gross poor creative cloud.

Shantanu Narayen: The other way of looking at it, Kash, is that it's the highest annual guide ever in terms of, you know, what the guide was. It's the highest annual guide we've ever issued. It's the highest Q1 guide ever.

Keith Weiss: The creative cloud side of the equation this year or a tough comp from last year or something that explains why.

Shantanu Narayen: And, you know, we want to go again, execute against this large opportunity and have another record year. So we're feeling good. The momentum is certainly there in the business. But we take our guidance at this point in the year very seriously. Thank you so much, and happy holidays.

Keith Weiss: The price increases in all of the positive momentum and innovation out of Adobe Max isn't translating into net new <unk> growth for creative cloud in particular.

Yeah, happy to take that Keith Davis here. So first of all, as you mentioned in the DME business, we're really excited about the results for 24, you know, over 1.9 billion in net new air are obviously well above the guide. We see an expanding base of customers and a lot of momentum coming from Genie I as you noted.

Speaker Change: Yeah happy to take that Keith David here.

Speaker Change: First of all as you.

Speaker Change: You mentioned in the DIY business, we're really excited about the results for 24.

Shantanu Narayen: All the best for 2024. Thanks. Happy Holidays.

Speaker Change: Over $1 9 billion in net new <unk> Air are obviously, well above the guide we see an expanding base of customers and a lot of momentum coming from Gen. AI as you as you as you noted.

Keith Eric Weiss: We will take our next question from Keith Weiss with Morgan Stanley. Please go ahead. Excellent, thank you guys for taking the question. I think this is in a similar vein to what Kash was trying to get at, but maybe a little bit more focused on the program.

As part of this, we delivered, you know, what we delivered in Q4 was net new AR, was a record net new AR and constant currents.

As part of this we delivered what we delivered in Q4 was net new <unk> was a record net new <unk> in constant currency now specific to your question on critical cloud momentum and how to interpret the numbers that you see there.

Now, specific to your question on Creative Cloud Momentum and how to interpret the numbers that you see there, underlying all this is very strong momentum because we delivered a record Creative Cloud new commercial subscriptions number in the year. So that is really the foundation on the base of customers coming in and really benefiting from not just what we get in this quarter but also how we build on that going forward. So it really sets us up well for FY24.

Speaker Change: Underlying all of this has very strong momentum because we delivered a record creative cloud new commercial subscriptions number in the year. So that is really the foundation on the base of customers coming in and really benefiting from.

David Wadwani: And this is the first time since 2018 we've seen Creative Cloud's Net New ARR below 4%. I think that's the surprise for investors or the negative surprise for investors that we're trying to figure out. Was there something dragging the creative cloud side of the equation this year or a tough comp from last year or something that explains why the price increases and all the positive momentum and innovation out of Adobe Max aren't translating into a net new era or growth for Creative Cloud? Yeah, happy to take that, Keith.

Speaker Change: Not just what we get in the in this quarter, but also how we build on that going forward. So it really sets us up well for FY 'twenty for as you look at the numbers for creative cloud <unk> net new <unk> in the quarter you have to look at it relative.

As you look at the numbers for Creative Cloud ARR, Net New ARR in the quarter, you have to look at it relative, you know, Q4 FY23 relative to Q4 FY22, as you mentioned.

Speaker Change: Q4, FY2023 relative to Q4 FY 'twenty two as you mentioned.

You need to consider that FY22 had two pricing actions.

Speaker Change: You need to consider that FY 'twenty, two had two pricing actions that accrued to creative cloud.

that accrue to Creative Cloud uh... that are much lower now in q4 uh... f-white uh... twenty three so if you normalize for the impact of the pricing that rolled off and the pricing that came on uh... creative cloud net new a rr and q4 grew on a constant

Speaker Change: Or a much lower now in Q4 FY2023 so if you normalize for the impact of the pricing that rolled off and the pricing that came on.

David Wadwani: So first of all, you know, as you mentioned, in the DME business, we're really excited about the results for 24, over 1.9 billion in net new ARR, obviously well above the guide. We see an expanding base of customers and a lot of momentum coming from Gen AI, as you noted. As part of this, we delivered, you know, what we delivered in Q4 was net new ARR, was a record net new ARR in constant currency. Now, specific to your question on Creative Cloud momentum, and you know, how to interpret the numbers that you see there.

Speaker Change: Greater cloud net new <unk> in Q4 grew on a constant currency basis.

Speaker Change: And Keith just to punctuate the two points that David met David said first it was a record for creative.

And he just to punctuate the two points that David said first, it was a record for creative ARR as it related to subscriptions. In Q4 of 2023 and creative ARR would have grown if you had backed out the pricing. So, you know, the business continues to be extremely healthy to your point.

Speaker Change: <unk> as it related to subscriptions in Q4 of 2023 and creative IRR would have grown if you had backed out the pricing. So the business continues to be extremely healthy to your point.

David Wadwani: Underlying all this is very strong momentum because we delivered a record number of Creative Cloud new commercial subscriptions in the year. So that is really the foundation and the base of customers coming in and really benefiting from not just what we get in this quarter but also how we build on that going forward. So it really sets us up well for FY20 and FY24. As you look at the numbers for Creative Cloud ARR, net new ARR in the quarter, you have to look at it relative to, you know, Q4 FY23 relative to Q4 FY22. As you mentioned, you need to consider that FY22 had two pricing actions that accrued to Creative Cloud that are much lower now in Q4 FY23.

Speaker Change: Excellent. Thank you guys.

Speaker Change: We will take our next question from Alex Zukin with Wolfe Research. Please go ahead.

We will take our next question from Alex Zoukin with Wolf Research. Please go ahead.

Hey guys, thanks for taking my question. I guess maybe looking at next year, as we look at how much of the renewal based and creative cloud is.

Alex Zukin: Hey, guys. Thanks for taking my question I guess, maybe looking at it.

Next year as we look at how much of the renewal base in creative cloud.

potentially up for that type of the pricing uplift. And as we look at Acrobat specifically, the AI functionality that you're releasing into public data, how should we think about the tailwind to both Creative Cloud from pricing and to document clouds specifically from an AI product monetization?

Alex Zukin: Potentially.

Alex Zukin: Sure.

Alex Zukin: That type of a pricing uplift and as we look at acrobat, specifically the AI functionality that you're releasing into public data how should we think about the tailwind.

Alex Zukin: To both creative cloud from pricing and to document cloud specifically.

Alex Zukin: From an NII.

David Wadwani: So if you normalize for the impact of the pricing that rolled off and the pricing that came on, Creative Cloud net new ARR in Q4 grew on a constant currency basis. And Keith, just to punctuate the two points that David said, first, it was a record for creative ARR as it related to subscriptions in Q4 of 2023, and creative ARR would have grown if you had backed out the pricing. So, you know, the business continues to be extremely healthy, to your point. Excellent. Thank you, guys.

Alex Zukin: Monetization perspective from 2004, our calendar.

Speaker Change: Yeah happy to take that Alex.

Yeah, happy to take that Alex. A lot packed into that question. So let me try to to the part. Let me first start with the question around FY 24 and the impact of pricing.

Speaker Change: A lot packed into that question. So let me try to tease. It apart let me first start with the question around FY 'twenty, four and the impact of pricing.

Before we jump straight into that, I do want to take a bit of a step back and just remind everyone that digital media AR is a mix of a few things. New subscriptions, which as I mentioned, we had a record number of new subscriptions in Q4.

Speaker Change: Before we jump straight into that I do want to take a bit of a step back and just remind everyone that digital media <unk> is a mix of a few things new subscriber new subscriptions, which as I mentioned, we had a record number of new subscriptions in Q4, upsell and cross sell which is transitioning people to higher plans from the time that they're on and then lastly off.

upsell and cross-sell which is transitioning people to higher plans from the plan that they're on and then uh... lastly offer optimization and as you've noted that you know in the last couple years we've really been broadening the number of offers we have all the way down from free price points to you know uh... to the all-apps price points but even beyond that we now have uh... uh... capabilities to sell add-ons to all-apps as well

Speaker Change: The optimization and as you've noted in the last couple of years, we've really been broadening the number of offers we have all the way down from free price points too.

Alex J. Zukin: We will take our next question from Alex Zukin with Wolf Research. Please go ahead. Hey guys, thanks for taking my question. I guess maybe looking at next year, as we look at how much of the renewal base and creative cloud is potentially up for that type of pricing uplift. And as we look at Acrobat, specifically the AI functionality that you're releasing into public beta, how should we think about the tailwind to both creative cloud from a pricing perspective and to document cloud specifically from an AI perspective? product monetization,

Speaker Change: Two the all apps price points, but even beyond that we now have capabilities.

Speaker Change: Capabilities to sell add ons to all apps as well.

And of course all of this does include the pricing increases that you had mentioned where we've added more value.

Speaker Change: And of course all of this doesn't include the pricing increases that you had mentioned where we've added more value.

I do want to just stress because I know there's a lot of attention on the pricing impact that we've always have seen and continue to believe that the primary growth driver for ARR will be new subscriptions in 24. So that's why we're so focused on the top of funnel in new customer acquisition.

I do want to just rest because I know theres a lot of attention on the pricing impact that we've always.

Speaker Change: We have seen and continue to believe that the primary growth driver for <unk> will be new subscriptions in 24. So.

Speaker Change: That's why we're so focused on the top of funnel and new customer acquisition, but specific to your question on pricing you need to consider a few things first our recently announced pricing changes will impact less than half the creative cloud base. So there was a very specific question you asked hopefully that gives you the answer.

David Wadwani: , for Calendar 20. Yeah, happy to take that, Alex. There is a lot packed into that question, so let me try to tease it apart. Let me first start with the question about FY24 and the impact of pricing. Before we jump straight into that, I do want to take a bit of a step back and just remind everyone that digital media ARR is a mix of a few things. New subscriptions, which, as I mentioned, we had a record number of new subscriptions in Q4. Upsell and cross-sell, which is transitioning people to higher plans from the plan that they're on. And then lastly, offer optimization. And as you've noted, in the last couple of years, we've really been broadening the number of offers we have all the way down from free price points to all-apps price points.

specific to your question on pricing you need to consider a few things uh... first are recently announced pricing changes

But it also leaves us the opportunity to price in new value in the years ahead as we move forward. Second, the impact will be more visible in NetNUAR in the back half of FY24 as we lap the previous pricing actions that I was talking to Keith about from last year. And as we roll out the pricing over the next few quarters. So the second half of FY24 will see more visibility into the benefits of that to NetNUAR. Third, given that we're rolling out these prices across plans and across Geos incrementally.

Speaker Change: But it also leaves us the opportunity to price and new value in the years ahead as we as we move forward second the impact will be more visible in net new <unk> in the back half of FY 'twenty four as we lap the previous pricing actions that I was talking to Keith about from last year and as we roll out the pricing over the <unk>.

Speaker Change: Few quarters. So the second half of FY 'twenty four we will see more visibility into the benefits of that to net net new <unk> third given that we're rolling out these prices across plans and across Geos incrementally over the year the benefit to <unk> will actually be spread across FY 'twenty, four and FY 'twenty five.

Third, given that we're rolling out these prices across plans and across Geos incrementally over the year, the benefit to ARR will actually be spread across FY24 and FY25.

David Wadwani: But even beyond that, we now have the ability to sell add-ons for all apps as well. And, of course, all of this does include the pricing increases that you had mentioned where we've added more value. I do want to just stress, because I know there's a lot of attention on the pricing impact, that we always have seen and continue to believe that the primary growth driver for ARR will be new subscriptions in 24. So that's why we're so focused on the top of the funnel and new customer acquisition. But specific to your question on pricing, you need to consider a few things. First, our recently announced pricing changes will impact less than half of the creative cloud base. So that was a very specific question you asked. Hopefully, that gives you the answer.

And fourth, if you really want to sort of sharpen your pencil, the pricing impact on ARR and 24.

Speaker Change: And fourth if you really want to sort of.

Speaker Change: Sharpen your pencils, the pricing impact on <unk> and 'twenty four is actually lower than the pricing impact was in 2003 to creative cloud. So hopefully that gives you a sense, but again it comes back to this is why we're so excited about the momentum we're seeing in new subscriptions, which is really bodes well for the business. This year.

is actually lower than the pricing impact was in 23 to creative cloud. So hopefully that gives you a sense. But again, it comes back to, this is why we're so excited about the momentum we're seeing in new subscriptions, which is really...

Boads well for the business this year and in the long term. Hopefully that gives you a pretty good sense on that. And then really quickly on Dr. Mn Cloud, you know, we're thrilled with the performance of Dr. Mn Cloud. A lot of that comes down to our course strategy, which has been...

Speaker Change: And in the long term hopefully that gives you a pretty good sense on that.

Speaker Change: And then really quickly on document cloud.

Speaker Change: We're thrilled with the performance of document cloud a lot of that comes down to our core strategy, which has been around integrating the desktop web and mobile into a single ecosystem and really driving the monthly active usage of document cloud up through all of the product led growth margins, we have and converting people on the back end of that what we are.

I'm integrating the desktop, the web, and mobile into a single ecosystem, and really driving the monthly active usage of document cloud up through all of the product-like growth motions we have, and converting people on the back end of that. What we're really excited about as we bring the AI assistant to market, which by the way, as I mentioned, is now in private data, we expect it to come out in the next few months.

David Wadwani: But it also leaves us the opportunity to price in new value in the years ahead as we move forward. Second, the impact will be more visible in net new ARR in the back half of FY24 as we pass the previous pricing actions that I was talking to Keith about from last year. And as we roll out the pricing over the next few quarters, so the second half of FY24, we'll see more visibility into the benefits of that to net new ARR. Third, given that we're rolling out these prices across plans and across geos incrementally over the year, the benefit to ARR will actually be spread across FY24 and FY25. And fourth, if you really want to sharpen your pencils, the pricing impact on ARR in 24 is actually lower than the pricing impact was in 23 for creative cloud. So hopefully, that gives you a sense. But again, it comes back to this why we're so excited about the momentum we're seeing in new subscriptions, which really bodes well for the business this year and in the long term. Hopefully, that gives you a pretty good sense of that.

Speaker Change: We're really excited about as we bring the AI assistant to market, which by the way as I mentioned is now in private beta you expect it to come out in the next few months.

uh... as a as a public beta and then you know uh... g.a. later in the year but what we're really excited about there is being able to not just service the paid acrobat base with that but also start to bring that to the free reader base so lots of opportunity excitement for the year head for dot cloud

Speaker Change: As a public data and then.

Speaker Change: Later in the year, but what we're really excited about there is being able to not just service the paid acrobat base with that but also start to bring that to the free reader base, so lots of opportunity and excitement for the year ahead for Doc cloud as well.

Perfect. Thank you for the very fine, for the very fine pointed answer.

Speaker Change: Okay perfect. Thank you for the for the verified.

Very fine pointed answer.

Okay.

Speaker Change: No problem.

We will take our next question from Kirk Meturn with Evercore ISI. Please go ahead.

We will take our next question from Kirk <unk> with Evercore ISI. Please go ahead.

Oh, yeah, thanks. And congrats on the quarter and heavy holidays. David, I guess I'll go back to you again. In the commentary you all talked about, Enterprise Strength and specifically upselling of Firefly and Express and your Enterprise customer base. Can you just give us some more quite as qualitative color on what those discussions are like? Are they lead as part of the reason you're seeing sort of an uptick in new subscriptions and the Enterprise in particular? And then on Express,

Kirk <unk>: Oh, yes, thanks, and congrats on the quarter and happy holidays, I'm, David I guess I'll go back to you again.

Speaker Change: In the commentary you all talked about enterprise strength, and specifically Upselling of Firefly in express in your enterprise customer base can you just give us some more I guess qualitative color on what those discussions are like are they lean into this part of the reason you're seeing sort of an uptick of new subscriptions in the enterprise in particular and then on express.

David Wadwani: And then really quickly on document cloud. We're thrilled with the performance of document cloud. A lot of that comes down to our core strategy, which has been around integrating the desktop, the web, and mobile into a single ecosystem and really driving the monthly active usage of document cloud up through all of the product-led growth movements we have and converting people on the back end of that. What we're really excited about as we bring the AI assistant to market, which, by the way, as I mentioned, is now in private beta, expected to come out in the next few months as a public beta, and then GA later in the year. But what we're really excited about there is being able to not just service the paid Acrobat base with that but also start to bring that to the free reader base. So lots of opportunity and excitement for the year ahead for doc Cloud. Perfect. Thank you for the very fine point. No problem. We will take our next question from Kirk Materne with Evercore ISI. Please go ahead.

You know, Q's talk again about sort of what you're seeing in terms of leading indicators of that being an enterprise product that can continue to expand into fiscal 24. Thanks.

Speaker Change: Just talk again about sort of what youre seeing in terms of leading indicators of that being an enterprise product that can continue to expand into fiscal 'twenty four.

Yeah, maybe I'll start in the milk and add because this does cross over our two businesses. So with Firefly and Express, you know, very excited about the momentum that we continue to see. You heard that we cross four and a half billion.

Speaker Change: Yes.

Speaker Change: Maybe I'll start and then Neill can add because this does crossover our two businesses so with Firefly and expressed very excited about the momentum that we continue to see you heard that we cross $4 5 billion.

generations now, so we continue to see really, really strong adoption and usage of it. Partially as a standalone business, but also integrated into our Photoshop and Illustrator and these existing workflows.

Speaker Change: Generations.

Speaker Change: Now so we're continuing to see really really strong adoption and usage of it.

Speaker Change: Partially as a standalone business, but also integrated into our Photoshop and illustrator in these existing workflows and.

And we're starting to see a lot of interest, not just in the context of

Speaker Change: And we're starting to see a lot of interest not just in the context of.

using it as part of the existing products, but also using it as part of the ecosystem within enterprises. So we've been working with a number of customers, not just enable them with Firefly, which is the predominance of the growth that we're seeing in Q4.

Speaker Change: Or using it as part of the existing products, but also using it as part of the ecosystem within enterprises. So we've been working with a number of customers. So not just enable them with that with Firefly, which is the predominance of the growth that we're seeing in Q4, four and four enterprise adoption, but also have a number of pilot customers already.

Kirk Materne: Yeah, thanks and congrats on the quarter and happy holidays. David, I guess I'll go back to you again. You know, in the commentary, you all talked about enterprise strength and specifically upselling Firefly and Express in your enterprise customer base. Can you just give us some more, I guess, qualitative color on what those discussions are like? Is this part of the reason you're seeing sort of an uptick in new subscriptions in the enterprise, in particular? And then on Express, you know, can you just talk again about sort of what you're seeing in terms of leading indicators of that being an enterprise product that can continue to expand into fiscal 24? Thanks.

for enterprise adoption, but also have a number of pilot customers already engaged around custom model extensions so that they can bring their own assets and their own content into what Firefly generates.

Speaker Change: <unk> engaged around custom model extension, so that they can bring their own assets in their own content into what Firefly generates.

Second, we're also enabling the ability to expose it through API so they can build it into their existing workflows.

Speaker Change: Second we're also enabling the ability to expose it through Apis. So they can build it into their existing workflows and third we are of course connecting it in tying it all into Adobe Express, which now also has its own firefly and additional capabilities like things. So that you can not just sort of create content using firefly, but.

And third, we're of course connecting it and tying it all into Adobe Express, which now also has

its own Firefly and additional capabilities, like things so that you can not just create content using Firefly, but then start to assemble it, start to schedule social posts around it, start to do multi-language translation, that those are all features that are already in there, and then create a stakeholder workflow from people working in Photoshop to the marketers that are trying to post externally. So that's where things get very interesting and exciting in terms of the connection we have with Gen Studio and everything that is.

David Wadwani: Yeah, maybe I'll start and then Anil can add, because this does cross over our two businesses. So with Firefly and Express, you know, we are very excited about the momentum that we continue to see. You know, you heard that we have crossed four and a half billion generations now.

Then start to assemble it start to schedule, a social posts around it start to do multi language translations that those are all features that are already in there and then create a stakeholder workflow from people working in Photoshop to the marketers that are trying to post externally. So that's where things get very interesting and exciting in terms of the connection we have with.

David Wadwani: So we continue to see really, really strong adoption and usage of it, partially as a standalone business, but also integrated into our Photoshop and Illustrator and these existing workflows. And we're starting to see a lot of interest, not just in the context of, you know, using it as part of the existing products, but also using it as part of the ecosystem within enterprises. So we've been working with a number of customers to not just enable them with Firefly, which is the majority of the growth that we're seeing in Q4 for enterprise adoption, but we also have a number of pilot customers already engaged around custom model extensions so that they can bring their own assets and their own content into what Firefly generates.

Speaker Change: Jen studio and everything that the mill is doing.

Here's a building on that, Gen Studio since we announced it at Max. We've had a tremendous amount of interest both from enterprise customers, you know, like Henkel and Pepsi and Verizon, as well as a number of the agencies as well. And primarily it goes back to what we discussed at Summit.

Speaker Change: Building on that Gen studio since we announced it at Max we've had a tremendous amount of interest both from enterprise customers like Henkel, and Pepsi and Verizon as well as a number of the agencies as well and primarily it goes back to what we discussed at summit now the demand for content is expected to grow five X over the next couple of years and every.

Now the demand for content is expected to grow 5X over the next couple of years. And every brand in the world is looking at, Hey, how can we speed up the production of quality on brand content? How can we let a number of other people in marketing other areas of the company create their own content according to the standards enterprise standards?

Speaker Change: Brand in the World is looking at Hey, how can we speed up the production of quantity on brand content. How can we let a number of other people in marketing other areas of the company create their own content. According to the standards enterprise standards and the combination of what we have in the digital experience portfolio like Adobe experience manager and assets as well as what we have in the creative cloud, especially around <unk>.

And the combination of what we have in the digital experience portfolio, like Adobe Experience Manager and Asset.

David Wadwani: Second, we're also enabling the ability to expose it through APIs so they can build it into their existing workflows. And third, we're, of course, connecting it and tying it all into Adobe Express, which now also has its own Firefly and additional capabilities like things so that you can not just sort of create content using Firefly but then start to assemble it, start to schedule social posts around it, start to do multi-language translations. Those are all features that are already in there. And then create a stakeholder workflow from people working in Photoshop to the marketers that are trying to post externally.

as well as what we have in the creative cloud, especially around Express and Creative Cloud, really lets enterprises get that kind of agility and the cost effectiveness of producing content at scale. So that's what we're seeing and we're seeing a tremendous model.

Speaker Change: Press in creative cloud.

Speaker Change: Really let's enterprises get that kind of agility and cost effectiveness of producing content at scale. So that's what we're seeing and we're seeing a tremendous amount of interest for that and maybe I'll just add a little bit to that Kirk I mean, I think the exciting thing about what people are doing is they're standardizing on Firefly and the fact that.

And maybe I'll just add a little bit to that curve. I mean, I think the exciting thing about what people are doing is they're standardizing on Firefly and the fact that we have responsible generations for the entire enterprise. So the interest level has been around, how do we standardize that for all of the image or vector or other generations that they want to do for all the knowledge workers in the enterprise? So really good adoption of Firefly. You can also save your world.

Speaker Change: We have responsible generations for the entire enterprise. So the interest level has been around how do we standardize that for all of the image or vector or other generations that they wanted to do for all the knowledge workers in the enterprise so really good adoption of Firefly.

Anil Chakravarty: So that's where things get very interesting and exciting in terms of the connection we have with GenStudio and everything that Anil's doing. Just building on that, GenStudio, since we announced it at MAX, we've had a tremendous amount of interest, both from enterprise customers, you know, like Henkel and Pepsi and Verizon, as well as a number of agencies as well. And primarily, it goes back to what we discussed at Summit: the demand for content is expected to grow 5x over the next couple of years. And every brand in the world is looking, hey, how can we speed up the production of quality on brand content? How can we let a number of other people in marketing and other areas of the company create their own content according to the standards, enterprise standards?

Speaker Change: Thank you.

We will take our next question from Carl Kiersted with UBS. Please go ahead.

Speaker Change: We will take our next question from Karl Keirstead with UBS. Please go ahead.

I'd like to ask about a different subject, and that's a creative express product now that it's being sold in the enterprise. Wondering if you could offer some color on the adoption ramp, the competitiveness versus Canva, and whether you're plans around driving express revenues versus driving user adoption have changed at all. Thank you.

Karl Keirstead: Thanks, I'd like to ask about a different subject and that's a creative express product now that it's being sold into the enterprise I'm wondering if you could offer some color on the adoption ramp the competitiveness versus cans.

Karl Keirstead: And whether your your plans around driving express revenues versus driving user adoption have changed at all thank you.

Yeah, happy to take that. Express is off to a great start. As you remember, we went general availability in August with the latest version of it. It's been getting a lot of very, very positive.

Speaker Change: Yes happy to take that.

Speaker Change: Express is off to a great start as you remember we went general availability in August with the latest.

Version of it it's been getting a lot of very very positive reaction response and frankly since then in Q4, two we've added a ton of new innovation.

Anil Chakravarty: And the combination of what we have in the digital experience portfolio, like Adobe Experience Manager and Assets, as well as what we have in the Creative Cloud, especially around Express and Creative Cloud, really lets enterprises get that kind of agility and the cost effectiveness of producing content at scale. So that's what we're seeing, and we're seeing a tremendous amount of it. And maybe I'll just add a little bit to that, Kirk.

reaction response and you know frankly since then in q4-2 we've added a ton of new innovation uh... firefly integration started with text image and text effects but we also added uh... text template that'll create a fully formed template for you and generative bills so you can iteratively uh... change things on the fly we now let you draw paint on the campus

Speaker Change: Firefly integration started with text to image and text effects, but we also added text a template that will create a fully formed template for you and generative feels so you can iteratively change things on the fly we know that you're drawing paint on the campus we've kept canvas.

We've given users much more video support. We've really built an incredible best-to-breed PDF support and workflow with Acrobat.

Speaker Change: We've given you given users much more video support we have.

Shantanu Narayen: I mean, I think the exciting thing about what people are doing is they're standardizing on Firefly and the fact that we have responsible generations for the entire enterprise. So the interest level has been around how do we standardize that for all of the image or vector or other generations that they want to do for all the knowledge workers in the enterprise. So a really good adoption of Firefly. Thank you all. We will take our next question from Karl Kirsted with UBS. Please go ahead. Thank you for watching. I'll see you next time.

Speaker Change: Really built an incredible best of breed PDF support and workflow with acrobat in there as well.

and there's well, you know, some of the other things that now start to bleed into the enterprise also, we have integrated social workflows so that people can schedule their posts. We've enabled people to do auto-translation so you can post multiple geographies and languages.

Speaker Change: Some of the other things that now start to bleed into the enterprise also we have we've integrated social workflows. So that people can schedule their posts. We've enabled people to do auto translation. So you can post in multiple geographies and languages.

We've opened up our ecosystem for partner plug-ins and we have now over 50 extensions.

<unk>.

Speaker Change: <unk> opened up our ecosystem for partner plug ins and we have now over 50 extensions.

and we've added enterprise features like AEM integration and template locking so that the core brand police in an organization can manage and make sure that their brand elements that they don't want changing uh... you know are locked when you disseminate this more broadly what we've seen is really you know i think some very exciting broad based uh... uh... you know benefits from this

Speaker Change: And we've added.

Enterprise features like AAM integration and template locking so that the core.

Karl Kirsted: I'd like to ask about a different subject, and that's the Creative Express product now that it's being sold into the enterprise. I'm wondering if you could offer some color on the adoption ramp, the competitiveness versus Canva, and whether your plans around driving Express revenues versus driving user adoption have changed it all. Thank you.

Speaker Change: Brand police and an organization can manage and make sure that their brand elements that they don't want changing.

Speaker Change: Our locked when you disseminate this more broadly what we've seen is really I think some very exciting broad based.

Speaker Change: Benefits from this.

One is we've seen new tri-lists coming in, growing very quickly after this launch, which is exciting to see. We've seen education, users starting to adopt this very quickly as well. The Creative Cloud paid base has been coming on and growing very quickly in terms of their usage, and then enterprise as we talked about from a usage perspective. And again, express is a core part of how a mill and team are now selling Gen Studio. The last thing is, this is just setting up the momentum for the year to come. We have a mobile release coming out, which will be very exciting for users to be able to use this on the go. We have thousands of people already using that beta. We announce our Chromebooks partnership. So anyone that buys a new Chromebook is going to have this. We have partnerships with folks like Wix for their workflows.

Speaker Change: One is we've seen new triallist coming in growing very quickly. After this launch which is exciting to see we've seen education.

David Wadwani: Great. Yeah, happy to take that. Express is off to a great start. As you remember, we went general availability in August with the latest version of it. It's been getting a lot of very, very positive reactions and responses. And, you know, Frankly, since then, in Q4, too, we've added a ton of new innovation. Firefly integration started with text to image and text effects, but we also added text to template that will create a fully formed template for you and generative fills so you can iteratively change things on the fly.

Speaker Change: Users are starting to adopt this very quickly as well the creative cloud.

Speaker Change: Paid base has been coming on and growing very quickly in terms of their usage and then enterprise as we talked about from a usage perspective, and again express is a core part of how <unk> team are now selling Gen studio and the last thing is like this is just setting up the momentum for the year to come we have a mobile release coming out which will.

Speaker Change: Be very exciting for users to be able to use this on the go we have thousands of people are already using that data.

Speaker Change: We announced our chromebooks.

David Wadwani: We now let you draw and paint on the canvas. We've given users much more video support. We've really built an incredible best of breed PDF support and workflow with Acrobat in there as well. You know, some of the other things that are now starting to bleed into the enterprise. Also, we have integrated social workflows so that people can schedule their posts, and we've enabled people to do auto translation so you can post a mobile post in multiple geographies and languages.

Speaker Change: Partnership so anyone that buys a new chromebook is going to have this we have partnerships with folks like wix for their workflows.

We're going to be doing deeper integrations into Acrobat. So we're very excited about where this goes.

Speaker Change: We're going to be doing deeper integrations into acrobat. So we're very excited about where this goes that is a long way to answer a very simple question. We want a lot of people are using this so our primary focus continues to be around broadening the top of funnel of course as part of that we are constantly and continually as I mentioned journey people for upsell.

That is a long way to answer a very simple question. We want a lot of people using this. So our primary focus continues to be around broadening the top of funnel. Of course, as part of that, we are constantly and continually, as I mentioned, journeying people for upsell and cross-sell opportunities to the paid plan and over to Creative Cloud and other products. But our primary focus continues to be adoption and broad proliferation.

Speaker Change: And cross sell opportunities to the paid plan and over to creative cloud and other products, but our primary focus continues to be adoption and broad proliferation.

David Wadwani: We've opened up our ecosystem for partner plugins, and we now have over 50 extensions. And we've added enterprise features like AEM integration and template locking so that the core, you know, brand police in an organization can manage and make sure that their brand elements that they don't want changing are locked when you disseminate this more broadly. What we've seen is really, you know, I think some very exciting broad-based benefits from this. One is that we've seen new trialists coming in and growing very quickly after this launch, which is exciting to see. We've seen education users start to adopt this very quickly as well.

Got it thank you.

Speaker Change: We will take our next question from Brad Zelnick with Deutsche Bank. Please go ahead.

We will take our next question from Brad Zelnick with Deutsche Bank. Please go ahead.

Great, thanks very much. This is for Dan or maybe a nil. As we think about the momentum within the DX business, it's great to hear things like the 60% increase in your AEP and native apps, book of business, the strong net dollar retention and you talked about overall strong year end bookings. But what is it maybe about the pipeline ahead? Bookings conversion or perhaps other factors that account for the degree of V-cell that you're guiding for into next year, thanks.

Brad Zelnick: Great. Thanks, very much this is for Dan or maybe a nil.

Speaker Change: We think about the momentum within the Dx business, it's great to hear things like the 60% increase in your AEP and native apps book of business. The strong net dollar retention and you talked about overall strong year end bookings or what does it maybe about the pipeline ahead bookings conversion or perhaps other factors that account for the degree of T cell that youre guiding for.

David Wadwani: The Creative Cloud paid base has been coming on and growing very quickly in terms of their usage. And then enterprise, as we talked about, from a usage perspective. And again, Express is a core part of how Anil and his team are now selling GenStudio. And the last thing is, like, this is just setting up the momentum for the year to come. We have a mobile release coming out, which will be very exciting for users to be able to use this on the go. We have thousands of people already using the beta. We announced our Chromebooks partnership. So anyone that buys a new Chromebook is going to have this.

Speaker Change: For into next year. Thanks.

Yeah, thanks, Brad. We all really accept about this massive multi-year opportunity. If we look at any enterprise customers around the world, everybody recognizes the long-term imperative of transforming their customer experiences. And we're seeing that in these transformational deals that we talked about. And as you mentioned, for example, with the AEP, our first 100 million net new business quarter, and ending with over 700 million in our analyzed book of business.

Speaker Change: Yes. Thanks, Brian we are really excited about this massive multiyear opportunity. If we look at any enterprise customers around the world everybody recognizes the long term imperative of transforming their customer experiences and we're seeing that in these transformational deals that we talked about and as you mentioned for example with <unk>.

Speaker Change: Our first $100 million net new business quarter, and ending with over $700 million annualized book of business.

With that said, it's definitely, we're seeing macro economic impact just like other enterprise software companies are.

Speaker Change: With that said there is definitely we're seeing the macroeconomic impact just like other enterprise software companies on every customer looks at the total cost of deploying the software and then what it would take to get the payback in ROI and as a result, theres definitely some scrutiny and caution there.

David Wadwani: We have partnerships with folks like Wix for their workflows, and we're going to be doing deeper integrations into Acrobat. So we're very excited about where this goes. That is a long way to answer a very simple question.

Every customer looks at the total cost of deploying the software and then what it would take to get the payback and ROI. And as a result, there is definitely some scrutiny and caution there. But that said, you know, we'll look at going into next year. We do see the pipeline across both our industry verticals as well as our mid market customers.

Speaker Change: That said, if we look at.

Speaker Change: Going into next year, we do see the pipeline across both our <unk>.

David Wadwani: We want a lot of people using this, so our primary focus continues to be around broadening the top of the funnel. Of course, as part of that, we are constantly and continually, as I mentioned, educating people for upsell and cross-sell opportunities to the paid plan and over to Creative Cloud and other products. But our primary focus continues to be adoption and broad proliferation.

Industry verticals as well as our mid market customers and we continue to be the leader in the market and we did get that recognition from both analysts and customers.

And we continue to be the leader in the market and we get that recognition from both analysts and customers.

Speaker Change: Okay. Thank you.

We will take our next question from Brent Thiel with Jeffries. Please go ahead.

We will take our next question from Brent Thill with Jefferies. Please go ahead.

Brent Thill: Dan If you could just review the broader assumptions are in your guide I think theres still little.

Dan, if you could just review the broader assumptions in your guide, I think there's still a little you know, concerned from the street in terms of why you're guiding where you're guiding relative to where the street was at. And maybe just tie it in and shot you to the guide. If you could just give us your top line view of, do you feel like the environment's improving? Do you think it's just stabilizing just any thoughts in terms of a high level? What you think is happening is we go into next.

Brad Zelnick: Thank you. We will take our next question from Brad Zelnick with Deutsche Bank. Please go ahead. Great, thanks very much. This is for Dan or maybe Anil.

Speaker Change: Concern from the street in terms of why you are guiding where you're guiding relative to where the street was that and maybe just tie in and Sean you to the guidance.

Anil Chakravarty: As we think about the momentum within the DX business, it's great to hear things like the 60% increase in your AEP and native apps book of business, strong net dollar retention, and you talked about overall strong year-end bookings. But what is it, maybe, about the pipeline ahead, bookings conversion, or perhaps other factors that account for the degree of de-sell that you're guiding for into next year? Thanks.

Speaker Change: If you could just give us your.

Speaker Change: Topline line view of do you feel like the environment's improving do you think it's just stabilizing just any any thoughts in terms of a high level. What you think is happening as we go into next year.

Yeah, so thanks for the question, Brent. When we take a look at the guide, if we think about where we're at at this point in time as we're looking forward to in FY24, clearly we see a lot of momentum in the business. The company's engine of innovation has been incredibly strong, and you see the strong financial performance of the company that's both from a top line standpoint, as well as profitability and cash flows standpoint. So clearly a lot of momentum around the business. As they think about where we sit.

Speaker Change: Yeah. So thanks for the question Brian.

Speaker Change: When we take a look at the guide if we think about where we're at at this point in time as we're looking forward into FY 'twenty four clearly we see a lot of momentum in the business. The company's engine of innovation has been incredibly strong and you see the <unk>.

Anil Chakravarty: Thanks, Brad. I mean, we are really excited about this massive multi-year opportunity. If we look at any enterprise customers around the world, everybody recognizes the long-term imperative of transforming their customer experiences. And we're seeing that in these transformational deals that we talked about, as you mentioned, for example, with AEP, our first $100 million net new business quarter and ending with over $700 million in our annualized book of business. With that said, definitely, we're seeing macroeconomic impact, just like other enterprise software companies are. Every customer looks at the total cost of deploying the software and then what it would take to get the payback and ROI. And as a result, there's definitely some scrutiny and caution there.

Speaker Change: Strong financial performance of the company and Thats, both from a top line standpoint, as well as profitability and cash flow standpoint, So clearly a lot of momentum around the business as I think about where we sit today, we printed a 46, 4% operating margin as we look forward into next year, we take.

reprinted a 46.4% operating margin. As we look forward in the next year, we take into account everything we can see.

Speaker Change: Into account everything we can see as Sean said, we take the guidance seriously and we set expectations in a prudent way, there's an opportunity to do better than the expectations that we set clearly the company is going to be driving towards that as we think about the engine of innovation. We think the pipeline is strong.

As Shantanu said, we take the guidance seriously and we set expectations in a prudent way. There's an opportunity to do better than the expectations that we set. Clearly the company's gonna be driving towards that. As we think about the engine of innovation, we think the pipeline is strong. We're gonna continue to invest in the drivers of growth. This company's gonna orient towards growth. When I think about the investment profile, not only are we gonna be disciplined, but we're gonna continue to invest in those drivers of growth on the DX side. And they'll talk about AEP and apps.

Speaker Change: To continue to invest in the drivers of growth. This company is going to Orient towards growth when I think about the investment profile.

Speaker Change: Not only are we going to be disciplined, but we're going to continue to invest in those drivers of growth on the Dx side, and <unk> talked about AEP and apps strong book of business strong growth, we're laying the groundwork and content supply chain with the Gen studio solution scaling that motion and engaging with customers to <unk>.

Anil Chakravarty: But that said, if we look at going into next year, we do see the pipeline across both our industry verticals, as well as our mid-market customers, and we continue to be the leader in the market. And we get that recognition from both analysts. Okay, thank you.

strong book of business, strong growth, we're laying the groundwork and content supply chain with the Gen Studio solutions.

Galing that motion and engaging with customers to go from ideation to creation to activation.

So from ideation to creation to activation delivering new technologies products Aam's sites, incorporating intelligence into those products on the D&A side, you can see it across the portfolio AI assistant acrobat, it's in private beta it's going to be in public beta in the coming months.

delivering new technologies, products, AEM sites, incorporating intelligence into those products. On the DME side, you can see it across the portfolio. AI Assistant Accurbat, it's in private beta, it's gonna be in public beta in the coming months.

Brent Thill: We will take our next question from Brent Thill with Jeffreys, please go ahead. Dan, could you just review the broader assumptions in your guide? I think there's still a little concern from the street in terms of why you're guiding where you're guiding relative to where the street was, and maybe just tying Shantanu to the guide.

You look at Firefly, Express, natively and deeply integrating these technologies throughout the product portfolio. There is going to be continual investment as it relates to that innovation.

Speaker Change: You look at Firefly Express natively and deeply integrating these technologies throughout the product portfolio. There is going to be continual investment as it relates to that innovation as you think about the momentum exiting this year and as you think about the guide into Q1 and you can see that.

Dan Dern: If you could just give us your top line view, do you feel like the environment's improving? Do you think it's just stabilizing? Just any thoughts in terms of a high level of what you think is happening as we go into next. Yeah, so thanks for the question, Brent. When we take a look at the guide, if we think about where we are at, at this point in time, as we're looking forward into FY 24, clearly, we see a lot of momentum in the business. The company's engine of innovation has been incredibly strong, and you see the strong financial performance of the company that's both from a top line standpoint, as well as profitability and cash flow. So clearly, there is a lot of momentum around the business. As I think about where we sit today, we have printed a 46.4% operating margin. As we look forward into next year, we take into account everything we can see. As Shantanu said, we take the guidance seriously, and we set expectations in a prudent way.

as you think about the momentum exiting this year. And as you think about the guide into Q1, you can see that momentum continuing.

Speaker Change: Momentum continuing.

got operating margin up a little bit. And then throughout the year, as we said at our FA day, and the last year's earnings call, you can see a mid-40s expectation around operating margin for the company as we drive this investment cycle, as we drive leadership in our core markets and our key catalyst in the trends that are shaping those markets.

Speaker Change: That operating margin up a little bit and then throughout the year as we said it RFA day and the last year's earnings call. You can see a mid forties expectation around operating margin for the company as we drive this investment cycle as we drive leadership in our core.

Markets and are a key catalyst in the trends that are shaping those markets. So again, taking a step back it nets into account the macro that enel talked about everything we see from a core business standpoint, and the investment profile that we're going to drive to lead if theres an opportunity to do better than where we saw.

So again, taking a step back, it nets into account the macro that Anil talked about everything we see from a core business standpoint and the investment profile that we're going to drive to lead. There's an opportunity to do better than where we set those expectations were certain.

Speaker Change: Those expectations, we're certainly going to do it.

And maybe just to add to that, Brett, since you asked first, let me clarify, there's nothing as it relates to the economic indicators that we saw, you know, anything that would give us possible concerns. So let me start off by saying that. I think at our investor meeting, we told you that, you know, we would expect a strong quarter. I think you would acknowledge we posted some really strong numbers and the momentum continues. And I think as it relates to a creative cloud, it's going to be driven by a new customer acquisition, which is the engine that's driven the business. And, you know, maybe...

Speaker Change: And maybe just to add to that Brett since you asked first let me clarify theres nothing as it relates to the economic indicators that we saw.

Dan Dern: There's an opportunity to do better than the expectations that we set, and clearly, the company's going to be driving towards that. As we think about the engine of innovation, we think the pipeline is strong, and we're going to continue to invest in the drivers of growth. This company is going to orient itself towards growth. When I think about the investment profile, not only are we going to be disciplined, but we're going to continue to invest in those drivers of growth. On the DX side, Anil talked about AEP and apps, a strong book of business, and strong growth.

Speaker Change: Anything that would give us pause for concern. So let me start off by saying that I think at our Investor meeting. We told you that we would expect a strong quarter I think you would acknowledge we posted some really strong.

Speaker Change: <unk> and the momentum continues and I think as it relates to.

Speaker Change: Creative cloud, it's going to be driven by new customer acquisition, which is the engine.

Speaker Change: What's driven the business and maybe.

Perhaps the sell side looked at some of the pricing and put more of that in 24 than in 24 and 25 and that'll spread out and perhaps they put a little bit more in what percentage of the base that impact. So from my perspective, the good news about creative is it's being driven by massive new adoption into the platform. On document cloud, really strong results, I think is...

Perhaps the sell side looked at some of the pricing and put more of that in 'twenty. Four then in 'twenty four 'twenty, five and that will spread out and perhaps they put a little bit more in what percentage of the base that impact. So from my perspective, the good news about creative as it's being driven by massive new adoption.

Dan Dern: We're laying the groundwork and content supply chain with the GenStudio solution, scaling that motion and engaging with customers to go from ideation to creation to activation, delivering new technologies, products, and AEM sites that incorporate intelligence into those products. On the DME side, you can see it across the portfolio AI assistant acrobat. It's in private beta.

Speaker Change: The platform.

On document cloud really strong results. So I think as Dan said as we pulled back on there as well that should help.

Dan said as we put the AI pack on there as well, that should help fuel more adoption and digital experience. You know, I mean, I know that Brad also asked that question.

Speaker Change: Fuel more adoption and digital experience.

Dan Dern: It's going to be in public beta in the coming months. You look at Firefly Express natively and deeply integrating these technologies throughout the product portfolio there is going to be continual investment as it relates to that innovation. As you think about the momentum exiting this year, and as you think about the guide into Q1, you can see that momentum continuing, got operating margin up a little bit, and then throughout the year, as we said at our FAA day, and the last year's earnings call, you can see a mid-40s expectation around operating margin for the company as we drive this investment cycle, as we drive leadership in our core markets, and are a key catalyst in the trends that are shaping those markets.

Speaker Change: I know that Brad also asked that question I'm going to ask.

I'm at great to see the adoption of AP and apps. I mean, that is clearly the future of digital experiences, you know, driving 100 million quarter, the 700 in the annualized Book of Business, which I think will reflect, you know, the next generation customer experience architecture. So we're feeling positive and we're going to go execute against that, Brett. So nothing that we see, you know.

Speaker Change: Great to see the adoption of AEP and apps I mean that is clearly the future of digital experiences are driving $100 million quarter. The 700 in the annualized book of business, which I think will reflect the next generation customer experience architecture. So we're feeling positive and we're going to go execute against that.

Speaker Change: Brett so nothing that we see.

on the horizon would tell us either from the economic or competition that we're not poised to have another great year and profitability as well. I mean look at the numbers that we posted both in terms of...

Speaker Change: Sure.

Speaker Change: On the horizon would tell us either from the economic or competition that we're not poised to have another great year.

Speaker Change: And profitability as well I mean look at the numbers that we posted both in terms of.

Dan Dern: So again, taking a step back, it nets into account the macro that Anil talked about, everything we see from a core business standpoint, and the investment profile that we're going to drive to lead. If there's an opportunity to do better than where we set those expectations, we're certain. And maybe just to add to that, Brett, since you asked first, let me clarify: there's nothing as it relates to the economic indicators that we saw, you know, anything that would give us possible concern.

Q4 as well as for fiscal 24 and that is you know that does not in any way mean They were not going to invest in all of the cloud and the foundation models. So I I feel I feel really good

Speaker Change: Q4, as well as for fiscal 'twenty, four and that is.

Speaker Change: That does not in any way mean that we're not going to invest in all of the cloud and the foundation model. So I'm feeling I feel really good.

And then just one thing to add Brent, if we were here a year ago, the expectations going into the year where FX was gonna be a pretty decent headwind to the performance. You see that in the way we've reported our results and then compare it to a constant currency base.

Brent Thill: And then just one thing to add Brent if we were here a year ago, the expectations going into the year, where FX was going to be a pretty decent headwind.

Brent Thill: Two the performance you see that in the way we've ripped.

Shantanu Narayen: So let me start off by saying that, at our investor meeting, we told you that, you know, we would expect a strong quarter. I think you would acknowledge that we posted some really strong numbers and the momentum continues. And I think, as it relates to Creative Cloud, it's going to be driven by new customer acquisition, which is the engine that's driving the business. And, you know, maybe perhaps the sell side looked at some of the pricing and put more of that in 24, then in 24 and 25, and that'll spread out, and perhaps they put a little bit more in what percentage of the base that impact would be.

Brent Thill: We reported our results and compare it to a constant currency basis, we started with a pretty decent spread between the as reported numbers in constant currency in Q1 by the time, we got to Q4, you saw that spread compress as I look forward into FY 'twenty four it's more of a neutral.

started with a pretty decent spread between the as reported numbers and constant currency and Q1. By the time we got the Q4 you saw that spread compress. As I look forward into FY24 it's more of a neutral...

to maybe a slight headwind. Too early to really call it with precision, but I see that set up being slightly different and maybe just a slight headwind versus what we were seeing a year ago.

Brent Thill: Footing to may be a slight headwind too early too early to really call it with precision, but I see that set up being slightly different and maybe just a slight headwind versus what we were seeing a year ago.

Speaker Change: Thanks for the car.

Speaker Change: Hmm.

We'll take our next question from Jay Lee, Lee Chowr with Griffin Securities. Please go ahead.

Speaker Change: We will take our next question from David Li Shower with Griffin Securities. Please go ahead.

Shantanu Narayen: So, you know, from my perspective, the good news about Creative is it's being driven by, you know, massive new adoption into the platform. On Document Cloud, really strong results. I think, as Dan said, as we put the AI pack on there as well, that should help fuel more adoption and the digital experience. You know, I mean, I know that Brad also asked that question.

Thank you. You noted the strength in RPO in the quarter, including the records sequential increase. Could you talk about how you're thinking about RPO for fiscal 24? Would you expect it to continue to be able to outgrow, as you grow by several points as you did in fiscal 23? Perhaps talk about the ingredients that will continue to drive RPO either by segment or any other considerations that you'd like to talk about.

Speaker Change: Thank you you noted the strength in <unk> in the quarter, including the record sequential increase could.

Speaker Change: Could you talk about how youre thinking about <unk> for fiscal 'twenty. Four would you expect it to continue to be able to outgrow revenue growth by several points as you did in fiscal 'twenty three.

Speaker Change: And perhaps talk about the ingredients that will continue to drive.

Shantanu Narayen: I mean, it's great to see the adoption of AEP and apps. I mean, that is clearly the future of digital experiences, driving 100 million a quarter, the 700 in the annualized book of business, which I think will reflect, you know, the next generation customer experience architecture. So we're feeling positive, and we're going to go execute against that, Brad.

RPI either by segment or any other considerations that you'd like to talk about in that.

Yeah, thanks, Jay. As I pull some of the threads together that we've heard on this call, and they'll talk about large transformational deals being the platform of choice with customer experience management.

Speaker Change: Yes, thanks, Jay as I pull some of the threads together that we've heard on this call.

Speaker Change: Anil talked about large transformational deals being the platform of choice with customer experience management simultaneously driving topline and bottom line productivity and the investments around driving those are an imperative in the market, we see a similar dynamic.

simultaneously driving top line and bottom line productivity.

Shantanu Narayen: So nothing that we see, you know, on the horizon would tell us either from the economic or competition that we're not poised to have another great year, you know, and profitability as well. I mean, look at the numbers that we posted, both in terms of Q4, as well as for fiscal 24. And that, you know, that does not, in any way, mean that we're not going to invest in all of the cloud and the foundation models. So I feel really good.

and the investments around driving those are an imperative in the market.

We see a similar dynamic with the new technologies that we're bringing to market on the DME side of the business. We're stringing seeing strong pull from the enterprise. And so as I net out.

Speaker Change: With the new technologies that we're bringing to market on the <unk> side of the business, we're screening seeing strong pull from the enterprise and so as I net out that environment and our performance against that opportunity. It goes to produce the type of sequential RP O.

that environment and our performance against that opportunity, it goes to produce the type of sequential RPO progression that we saw Q3 to Q4. Every quarter won't be

Speaker Change: Progression that we saw Q3 to Q4 every quarter won't be that that large, but the backdrop around that dynamic for the company given the setup, we see it should be another strong year for rps throughout the year.

that large, but the backdrop around that dynamic for the company given the setup we see, it should be another strong year for RPO throughout.

Dan Dern: And then just one thing to add, Brent, if we were here a year ago, the expectations going into the year where FX was going to be a pretty decent headwind to the performance, you see that in the way we reported our results and then compared them to a constant currency base. We started with a pretty decent spread between the as-reported numbers and constant currency in Q1. By the time we got to Q4, you saw that spread compress.

Speaker Change: Thank you.

Hey operator, we're getting close to the top of the hour. We'll take two more questions and then we'll wrap up.

Speaker Change: Okay. Operator, we are getting close to the top of the hour, we'll take two more questions and then we'll wrap up thanks.

We'll take our next question from Ciccacalia with Mark Lays. Please go ahead.

Speaker Change: We will take our next question from Scott <unk> with Barclays. Please go ahead.

Okay, great. Hey guys, thanks for taking my question and congrats on a nice quarter.

Scott <unk>: Okay, Great Hey, guys. Thanks for taking my question and congrats on a nice quarter.

Scott <unk>: David maybe for you I had a question just on Firefly and the subscription packets.

David, maybe for you, I had a question just on Firefly and the subscription packets. I know that the commercial model for Firefly credit packets really just started about six weeks ago. But are there any early observations that you've seen just on customers willingness to add those packets, or maybe how they're consuming the initial credit allocation that they get with the creative cloud subscription?

Scott <unk>: I know that the commercial model for our commercial for I'm, sorry for Firefly credit packets really just started about six weeks ago, but are there any early observations that you've seen just on customers' willingness to add those packets or maybe how they're consuming the the initial credit allocation that they get with.

Dan Dern: As I look forward into FY24, it's more of a neutral... and several others. Thanks for the call. Hmm. We will take our next question from Jay Vleeschhouwer with Griffin Securities. Please go ahead.

Jay Vleeschhouwer: Thank you. You noted the strength in RPO in the quarter, including the record sequential increase. Could you talk about how you're thinking about RPO for fiscal 24? Would you expect it to continue to be able to outgrow revenue growth by several points, as it did in fiscal 23? And perhaps talk about the ingredients that will continue to drive RPO, either by segment or any other considerations that you'd like to talk about. Yeah, thanks, Jay.

Scott <unk>: With with the creative cloud subscription.

Yeah.

yeah happy to take that uh... you know first of all i think philosophically you know going back to what we said at the uh... at the investor meeting in at max you know our primary focus here is to drive usage of uh... of the generative capabilities and you see that with the four and a half billion uh... images generated that that strategy is working secondly we price the generative uh... yeah

Speaker Change: Yes happy to take that.

Speaker Change: First of all I think philosophically going back to what we said at the at.

Speaker Change: At the Investor meeting and at Max.

Speaker Change: Our primary focus here is to drive usage of.

Speaker Change: The generative capabilities and you see that with the $4 5 billion.

Speaker Change: Images generated that strategy is working secondly, we priced the generative.

Dan Dern: As I pull some of the threads together that we've heard on this call, Anil talked about large transformational deals being the platform of choice for customer experience management, simultaneously driving top line and bottom line productivity. And the investments around driving those are an imperative in the market. We see a similar dynamic with the new technologies that we're bringing to market on the DME side of the business. We're seeing strong pull from the enterprise. And so as I net out that environment and our performance against that opportunity, it goes to produce the type of sequential RPO progression that we saw from Q3 to Q4. But every quarter won't be that large.

sorry we we integrated the generative capabilities and credits directly into our paid plans with the with the express intent of driving adoption of the paid subscription plans and getting broad proliferation of the ability to use those

Speaker Change: <unk> that's right.

Speaker Change: We integrated the generative capabilities and credits directly into our paid plans with the with the express intent of driving adoption of the paid subscription plans and getting broad proliferation of of the ability to use those.

Speaker Change: What we're seeing is heavy usage within within those those paid plans as I think as we've mentioned in the past I think I mentioned earlier today as well.

Speaker Change: <unk>.

Speaker Change: Generative fill for example in Photoshop is the fastest growing feature that we've put into photoshop in recent memory. So the usage is great. The utilization is great.

feature that we've put into Photoshop in recent memories. So the usage is great, the utilization is great. I don't personally expect generative packs to have a large impact in the short term, other than to drive more customers to our paid existing subscription plans. But what will happen over the course of the year and the next few years is that we will be integrating more and more generative capabilities into the existing product workflows. And that will drive and will be integrating capabilities like video generation, which will cost more than one generation. And that will drive a natural inflation in that market. And that will become a driver for growth, you know, subsequently. But this year is really primarily focused on getting people into the right paid plans of our flagship applications or Adobe Express and then drive usage in that sense. And then as that happens, the rest will take care of itself in the years ahead. Thanks, Gus. We will take our final question from Mark Mordler with Bernstein Research. Please go ahead.

Dan Dern: But the backdrop around that dynamic for the company, given the setup we see, it should be another strong year for RPO. Thank you. Hey operator, we're getting close to the top of the hour. We'll take two more questions and then we'll wrap up. We will take our next question from Saket Kalia with Barclays. Please go ahead. Okay, great.

Speaker Change: Personally expect generative paths to have a large impact in the short term other than to drive more usage more customers to our.

Speaker Change: Existing subscription plans, but what will happen over the course of the.

Speaker Change: The year in the next few years is that we will be integrating more and more generative capabilities into the existing product workflows and that will drive and we will be integrating capabilities like video generation, which will cost more than one generation and that will drive a natural inflation in that market and that will become a driver for growth.

Saket Kalia: Hey guys, thanks for taking my question and congrats on a nice quarter. David, maybe, maybe for you, I had a question just about Firefly and the subscription packets. You know, I know that the commercial model for commercial for, sorry, for Firefly credit packets really just started about six weeks ago. But are there any early observations that you've seen just on customers' willingness to add those packets or maybe how they're consuming the initial credit allocation that they get with a Creative Cloud subscription? Yeah, happy to take that.

Speaker Change: Subsequently, but this year is really primarily focused on getting people into the right paid plans of our flagship applications or Adobe Express and then drive usage in that sense and then as that happens the rest will take care of itself in the years ahead.

and then drive usage in that sense. And then as that happens, the rest will take care of itself in the years ahead.

Speaker Change: Makes sense thanks, guys.

We will take our final question from Mark Mordler with Bernstein Research. Please go ahead.

Speaker Change: We will take our final question from Mark <unk> with Bernstein Research. Please go ahead.

Thank you for squeezing me in. I really do appreciate it. Dan, I'd like to look a little bit, at that max we discussed how excited you were.

Thank you for squeezing me in I really do appreciate it Dan.

David Wadwani: You know, first of all, I think philosophically, going back to what we said at the investor meeting and at Max, our primary focus here is to drive usage of the generative capabilities. And you see that with the four and a half billion images generated, that that strategy is working. Secondly, we price the generative packs, sorry, we, we, integrated the generative capabilities and credits directly into our paid plans with the express intent of driving adoption of the paid subscription plans and getting broad proliferation of the ability to use those. And what we are seeing is, you know, heavy usage within, within those paid plans, as I think, as we've mentioned in the past, I think I mentioned earlier today as well, generative fill, for example, in So the usage is great; the utilization is great.

Speaker Change: I'd like to look a little bit.

Speaker Change: At Max we discussed how excited you were on Firefly and how it drives creative cloud seat and paid seat adoption now that <unk> had a bit of time in market can you explain how you think about how this will drive the pace of growth.

on firefly and how it drives creative cloud cloud seat and paid seat adoption. Now that you have had a bit of time in market, can you explain how you think about how this will drive the paid

how strong it could be. And should we expect those seats to be lower unit price because they're going to be entry level, what do you think that'll get offset by these higher priced, firefight driven sales into the enterprise?

Speaker Change: Our strong it could be and should we expect those seats are going to be.

Speaker Change: Lower unit price, because theyre going to be entry level. What do you think that will get offset by these higher priced.

Speaker Change: Firefly driven sales into the enterprise. Thank you.

Yeah, thanks, Mark. I think at the core of bringing this technology to life, as a standalone application to drive an ideation part of the process.

Speaker Change: Yes, Thanks, Marc I think at the core of.

Speaker Change: Bringing this technology to life.

Speaker Change: As a standalone application to drive an ideation part of the process.

but value in deeply integrating these capabilities into the flagship applications and the workflows that define the creation process. It gives us a lot of surface area with customers and meeting them where they are in their particular needs and use case specific needs.

Speaker Change: But value and deeply integrating these capabilities into the flagship applications and the workflows that define.

Speaker Change: The creation process. It gives us a lot of surface area.

With customers and meeting them, where they are in their particular needs and use case specific needs and so bringing people efficiently pop a final establishing the segmentation across that product portfolio driving efficiency into the creation process and allowing the.

David Wadwani: I don't personally expect generative packs to have a large impact in the short term other than to drive more usage and more customers to our paid existing subscription plans. But what will happen over the course of the year and the next few years is that we will be integrating more and more generative capabilities into the existing product workloads. And that will drive, and we'll be integrating capabilities like video generation, which will cost more than one generation. And that will drive natural, you know, inflation in that market, and that will become a driver for growth, you know, subsequently. But this year is really primarily focused on getting people into the right paid plans of our flagship applications or Adobe Express, and then driving usage in that sense. And then, as that happens, the rest will take care of itself in the year. It makes sense.

And so bringing people efficiently top of funnel.

establishing the segmentation across that product portfolio, driving efficiency into the creation process, and allowing the velocity.

Speaker Change: City to enter the ideation creation activation and then instrumentation of that to really refine how companies engage with customers. So it lays the groundwork for us to touch more customers, where they are in the ecosystem bring them onboard in use cases.

So it lays the groundwork for us to touch more customers where they are in the ecosystem, bring them on board in use case specific way, and then take them on digital journeys, which something the company is very skilled at with our D-DOM to cross sell and up and sell over the life of their engagement with our ecosystem. From a product perspective, you know, when you think about it, Mark, for us, the biggest thing that we want to do is how do we...

Speaker Change: Specific.

Speaker Change: And then take them on digital journeys, which is something the company is very skilled that with our <unk> to cross sell and up sell over the life of their engagement with our ecosystem.

From a product perspective, you know, when you think about it, Mark, for us, the biggest thing that we want to do is how do we further make our products accessible for, you know, fun and affordable for an increasing set of customers. And I think Firefly is one of those...

Speaker Change: From a product perspective.

Speaker Change: When you think about it mark for US the biggest thing that we want to do is how do we further make our products accessible front.

Speaker Change: Fun and affordable for increasing set of customers and I think Firefly is one of those inflection points that will help everybody get over the blank screen fear that they have and so.

David Wadwani: Thanks, guys. We will take our final question from Mark Moerdler with Bernstein Research. Please go ahead.

inflection points that will help everybody get over the blank screen fear that they have. And so first, as you think about Firefly as an ideation and people just coming and want to have creative inspiration, this is whether you're an individual user, whether you're agencies, we're seeing a lot of adoption of Firefly to just start the entire creative process. And that, you know, sort of brings them as an on-gram into express.

Mark L. Moerdler: Thank you for squeezing me in. I really do appreciate it. Dan, I'd like to look a little bit at the max. We discussed how excited you were about Firefly and how it drives creative cloud seed and paid seed adoption. Now that you've had a bit of time in the market, can you explain how you think this will drive paid seed growth? Is it as strong as you think it could be?

Speaker Change: First as you think about Firefly is an ideation and people just coming in Warner have creative inspiration. This is whether you're an individual user where they are agencies. We're seeing a lot of adoption of Firefly to just start the entire creative process and that sort of brings them as an on ramp into express which.

Dan Dern: And should we expect those seeds are going to be a lower unit price because they're going to be entry level? Or do you think that'll get offset by these higher priced Firefly driven sales into the enterprise? Thank you.

which would be the other part expresses certainly you know the introductory pricing the ability to get you know uh... millions more into the fold and you know the ability right now it used to be that express

Speaker Change: It would be the other part expresses thirdly, the introductory pricing the ability to get.

Speaker Change: Millions more into the fall and the ability right now it used to be that express and other offerings in the Delek us to all worry about do I have the right templates well AI is going to completely change that we have our own models and so firefly will allow anybody to take whatever creative idea that they have and make that a.

Dan Dern: Yeah, thanks, Mark. I think the core of, you know, bringing this technology to life as a standalone application to drive the ideation part of the process, but there is value in deeply integrating these capabilities into the flagship applications and the workflows that define the creation process. It gives us a lot of surface area with customers and meets them where they are in their particular needs and use case-specific needs. And so bringing people efficiently top of funnel, establishing the segmentation across that product portfolio, driving efficiency into the creation process, and allowing velocity to enter the ideation, creation, activation, and then instrumentation of that to really refine how companies engage with customers.

and other offerings in that elk is to all worry about

do I have the right templates? Well AI is going to completely change that we have our own models and so Firefly will allow anybody to take whatever creative idea that they have and make that available. So I think you know Firefly really helps with the express offering.

Speaker Change: Available. So I think Firefly really helps with the express offering on the creative cloud David mentioned this I mean, if you look at the adoption of that functionality and usage, that's being driven whether it's in Photoshop right now illustrate as we add video both in terms of providing.

On the creative cloud, David mentioned this. I mean, if you look at the adoption.

of that functionality and usage that's being driven whether it's in Photoshop right now, Illustrator as we add video. Both in terms of providing greater value and we certainly will therefore have the uplift in pricing as well as the attentive ability for Firefly. That's where I think you're gonna see a lot of the really interesting

Speaker Change: Greater value and we certainly will therefore have the uplift in pricing as well as you know the retentive ability for Firefly, that's where I think youre going to see a lot of the really interesting.

Shantanu Narayen: So it lays the groundwork for us to touch more customers where they are in the ecosystem, bring them on board and use case-specific ways, and then take them on digital journeys, which is something the company is very skilled at with our D-DOM, to cross-sell and up-sell over the life of their engagement with us. From a product perspective, you know, when you think about it, Mark, for us, the biggest thing that we want to do is further make our products accessible, you know, fun, and affordable for an increasing set of customers. And I think Firefly is one of those inflection points that will help everybody get over the blank screen fear that they have. And so, first, as you think about Firefly as an ideation platform and people just coming in and want to have creative inspiration, this is whether you're an individual user, whether you're an agency; we're seeing a lot of adoption of Firefly to just start the entire creative process.

aspects of how Firefly will drive both adoption as well as monetization. And then if you go at the other end of the spectrum to the

Speaker Change: Aspects of how Firefly will drive both adoption as well as monetization and then if you go at the other end of the spectrum to the enterprise.

You know, Gen Studio, every single marketer that I know and CFO and CMO are all watered about How much am I spending on data? How do I get agility in my campaigns?

Speaker Change: Jen studio every single market that I know and CFO and CMO are all worried about how much I am I spending on data, how do I get agility and my campaigns and the fact that Firefly is integrated into both.

And you know, the fact that Firefly is integrated into both Express as well as when we do the custom models for them. So they can upload their own models and then have the brand consistency that they want.

Speaker Change: Express as well as when we do the custom models for them. So they can upload their own models and then have the brand consistency that they want so firefly really is the fact that we have our own models.

So, FIFI really is the fact that we have our own models.

a great catalyst for business all across

Speaker Change: A great catalyst for our business.

Speaker Change: All across the spectrum and the usage and the adoption shows that in emerging markets as people. There in emerging markets are increasingly used to create variance of content and localization of content, that's where we're also seeing a tremendous usage.

the spectrum and you know the usage and the adoption shows that.

in emerging markets, as people there, in emerging markets are increasingly used to create variance of content and localization of content. That's where we are also seeing a tremendous usage of these particular technologies. So really exciting. And then you take the same technology that we have in creative and think about its impact in both document cloud when we do that and the ability to have.

Shantanu Narayen: And that, you know, sort of brings them as an on-ramp into Express, which would be the other part. Express is certainly, you know, the introductory pricing, the ability to get, you know, millions more into the fold. And you know, the ability right now. It used to be that Express and other offerings in that ilk used to all worry about, do I have the right templates? Well, AI is going to completely change that. We have our own models.

Of these particular technologies, so really exciting and then you take the same technology that we have in creative and think about its impact in both.

Speaker Change: Document cloud when we do that and the ability to have summaries and have conversational interfaces with PDF, thereby making every single PDF as David again said, both for communication collaboration and creation far more compelling I think youre going to see that same kind of uplift in usage and there.

summaries and have conversational interfaces with PDF.

Shantanu Narayen: And so, Firefly will allow anybody to take whatever creative idea that they have and make that available. So, I think, you know, Firefly really helps with the Express offering. On the Creative Cloud, David mentioned this.

thereby making every single PDF as David again said, both for communication, collaboration, and creation, far more compelling. Now, I think you're gonna see that same kind of uplift in usage.

Shantanu Narayen: I mean, if you look at the adoption of that functionality and usage that's being driven, whether it's in Photoshop right now, Illustrator, as we add video, both in terms of, you know, providing greater value, and, you know, we certainly will therefore have an uplift in pricing as well as, you know, the retention ability for Firefly. That's where I think you're going to see a lot of the really interesting aspects of how Firefly will drive both adoption as well as monetization. And then if you go on the other end of the spectrum to the enterprise, you know, Gen Studio, every single marketer that I know, and CFO and CMO are all worried about how much are they spending on data. How do I get agility in my campaigns?

and therefore monetization on the acrobat site.

Speaker Change: Monetization on the acrobat side.

And since it was the last question, I mean, you know, for us, we look at FI-23 and we're really proud of what we were able to accomplish, you know, across all spectrum, stop line revenue, RPO and driving book of business.

Speaker Change: And since it was the last question.

Speaker Change: For us we look at FY 'twenty, three and we're really proud of what we were able to accomplish across all spectrums topline revenue arpaio in driving book of business Creative cloud document cloud and experience cloud and profitability and we think 'twenty four is going to be exactly more of the same.

Creative Cloud, Document Cloud, and Experience Cloud, and profitability. And we think 24 is going to be exactly more of the same, which is continuing to drive great innovation, great product growth, great profitability.

Speaker Change: Which is.

Continuing to drive great innovation, great product growth.

Speaker Change: <unk> profitability.

Clearly, I think there's been a set of questions around the digital media, ARR, and what our take is on that. And we're extremely confident about how that continues to be a growth business. And perhaps the pricing impact was overestimated. And as we said, this is again a new growth business. And it'll be a multi-year pricing benefit for us as we think about the uplift that we have.

Speaker Change: Clearly I think there's been a set of questions around the digital media <unk> and you know what our take is on that.

Shantanu Narayen: And you know, the fact that Firefly is integrated into both Express as well as when we do the custom models for them so they can upload their own models and then have the brand consistency that they want. So Firefly really is the fact that we have our own models, a great catalyst for business, you know, all across the spectrum. And you know, the usage and the adoption shows that in emerging markets, as people there in emerging markets are increasingly used to create variants of content and localization of content.

Speaker Change: Were extremely confident about how that continues to be a growth business and.

Speaker Change: Perhaps the pricing impact was overestimated and as we said you know this is again, a new growth business and it will be a multiyear pricing.

Speaker Change: Benefit for us as we think about the uplift that we have.

So, we're really pleased. We appreciate your being on the call and like many of you wished us happy holidays and we hope to see you soon. Thank you for joining us. Thanks everyone. Happy holidays, this.

Speaker Change: So we're really pleased we appreciate your being on the call and like many of you wished us happy holidays, and we hope to see you soon thank you for joining us.

Shantanu Narayen: That's where we're also seeing a tremendous usage, you know, of these particular technologies. So really exciting. And then, you know, you take the same technology that we have in creative and think about its impact on both document cloud when we do that and, you know, the ability to have summaries and have conversational interfaces with PDF, thereby making every single PDF, as David again said, both for communication, collaboration, and creation, far more compelling.

Speaker Change: Thanks, everyone happy holidays. This concludes the call.

Once again, this concludes today's call. Thank you for your participation. You may now disconnect.

Speaker Change: Once again this concludes today's call. Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Shantanu Narayen: I think you're going to see that same kind of uplift in usage and, therefore, monetization on the Acrobat side. And since it was the last question, I mean, you know, for us, we look at FY23, and we're really proud of what we were able to accomplish across all spectrums, top line revenue, RPO, and driving book of business, creative cloud, document cloud, and experience cloud and profitability. And you know, we think 24 is going to be exactly more of the same, which is, you know, continuing to drive great innovation, great product growth, and great profitability. Clearly, I think, you know, there's been a set of questions around the digital media ARR and, you know, what our take is on that. And, you know, we're extremely confident about how that continues to be a growth business. And, you know, perhaps the pricing impact was overestimated.

Shantanu Narayen: And as we said, you know, this is, again, a new growth business, and it'll be a multi-year pricing benefit for us as we think about the uplift that we have. So we're really pleased. We appreciate your being on the call. And, like many of you have wished us, happy holidays, and, you know, we hope to see you soon. Thank you for joining us. Thank you, everyone. Happy Holidays. This concludes the call. Once again, this concludes today's call. Thank you for your participation. You may do so now.