Q1 2024 Adobe Inc Earnings Call

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Dan Welcome to the Q1 FY 2020 for Adobe Earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Jonathan <unk> Vice President.

Jonathan Vaas: Good day, and welcome to the QNFY 2024 Adobe Earnings Conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jonathan Vaas, Vice President of Investor Relations. Please go ahead.

Jonathan: <unk> of Investor Relations. Please go ahead.

Jonathan: Good afternoon, and thank you for joining us with me on the call today are Sean noon Orion Adobe as chair and CEO, David Wadhwani President of digital media and I will talk about the president of digital experience and Dan <unk> Executive Vice President and CFO.

Jonathan Vaas: Good afternoon, and thank you for joining us. With me on the call today are Shantanu Narayen, Adobe's Chairman and CEO, David Wadhwani, President of Digital Media, Anil Chakravarthy, President of Digital Experience, and Dan Durn, Executive Vice President and CFO. On this call, which is being recorded, we will discuss Adobe's first quarter fiscal year 2024 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, March 14th, and contains forward-looking statements that involve risk, uncertainty, and assumptions. actual results may differ materially from those set forth in these statements.

Jonathan: On this call, which is being recorded we will discuss adobe's first quarter fiscal year 2024 financial results you can find our press release as well as a PDF of our prepared remarks in financial results on Adobe's Investor Relations website.

Jonathan: The information discussed on this call, including our financial targets and product plans is as of today March 14th and contains forward looking statements that involve risks uncertainties and assumptions.

Jonathan: Actual results may differ materially from those set forth in these statements for more information on those risks. Please review todays earnings release, and Adobe's SEC filings.

Jonathan Vaas: For more information on those risks, please review today's earnings release and Adobe's SEC filing. 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 growth rates unless otherwise stated. Non-GAAP reconciliations are available in our earnings release and on Adobe's Investor Relations website. Summit is just around the corner in Las Vegas at the Venetian Convention and Expo Center beginning on Tuesday, March 26.

Jonathan: On this call, we will discuss GAAP and non-GAAP financial measures are reported results include GAAP growth rates as well as constant currency rates.

Jonathan: During this presentation adobe's executives will refer to constant currency growth rates unless otherwise stated.

Jonathan: non-GAAP reconciliations are available in our earnings release and on Adobe's Investor Relations website.

Jonathan: Adobe Summit is just around the corner in Las Vegas at the Venetian Convention and Expo Center, beginning on Tuesday March 26th.

Jonathan Vaas: Following the day one keynote, we will host an investor meeting at 2 p.m. Pacific Time. The event will be webcast live, and the replay will be available on Adobe's IR website. More details about Summit are available at summit.adobe.com. I will now turn the call over to Shantanu.

Following the day, one keynote we will host an investor meeting at two P. M Pacific time.

Jonathan: The event will be webcast live and a replay will be available on adobe's IR website more.

Jonathan: More details about summit are available at summit Dot Adobe Dot Com I will now turn the call over to Sean to now.

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

Shantanu Narayen: Thanks, Jonathan. Good afternoon, and thank you for joining us. Adobe had a strong first quarter. We achieved $5.18 billion in revenue in Q1, representing 12% year-over-year growth. Gap earnings per share for the quarter were $1.36, and non-gap earnings per share were $4.48, representing 18% year-over-year growth.

Sean Orion: Adobe had a strong first quarter.

Sean Orion: We achieved $518 billion in revenue in Q1, representing 12% year over year growth.

Sean Orion: GAAP earnings per share for the quarter was $1 36, and non-GAAP earnings per share was $4 48.

Sean Orion: Representing 18% year over year growth.

Sean Orion: Our performance reflects the essential role that Adobe products play in driving the global digital economy.

Shantanu Narayen: Our performance reflects the essential role that Adobe products play in driving the global digital economy. We're delivering on our strategy to unleash creativity for all, accelerate document productivity, and empower digital business. Creative Cloud, Document Cloud, and Experience Cloud are more critical than ever to the success of creators, communicators, students, entrepreneurs, and businesses of all sizes, with AI serving as an accelerant for all. We're a leader in delivering generative AI across all our clouds. We're taking a highly differentiated approach across data, models, and interfaces.

Sean Orion: We're delivering on our strategy to unleash creativity for all accelerate document productivity and power digital businesses.

Sean Orion: Adobe Creative cloud document cloud and experience cloud are more critical than ever to the success of creators communicators students entrepreneurs and businesses of all sizes with AI, serving as an accelerant for all.

Sean Orion: We're a leader in delivering generative AI across all of our clouds, we are taking a highly differentiated approach across data models and interfaces.

Sean Orion: Our proprietary data is built on decades of deep domain expertise across creative documents and customer experience management.

Shantanu Narayen: Our proprietary data is built on decades of deep domain expertise across creative documents and customer experience management. We leverage large language models, as well as have invested in building and delivering our proprietary models in the creative document and marketing domain. Our IP-friendly approach is a differentiator for creators and enterprises. In addition, we've innovated by delivering generative AI directly in products, with releases in Adobe Photoshop, Illustrator, and Express across both desktop and mobile. AI Assistant in Acrobat and Reader unlocks the tremendous value of the trillions of PDFs around the world. We're bringing generative AI to Adobe Experience Cloud, and we'll demonstrate our AI assistant for customer experience management at Adobe Summit. Every student, communicator, creative professional, and marketer is now focused on leveraging generative AI to imagine, ideate, create, and deliver content and applications across a plethora of channels.

Sean Orion: We leveraged large language models as well as have invested in building and delivering our proprietary models and the creative document and marketing domains.

Sean Orion: Our IP friendly approach is a differentiator for creators and enterprises.

Sean Orion: In addition, we have innovated by delivering generative AI directly in products with releases in Adobe Photoshop illustrator and express across both desktop and mobile.

Sean Orion: AI assistant and acrobat and reader unlocks tremendous value of the trillions of pdfs around the world.

Sean Orion: We're bringing generative AI to Adobe experience cloud and we will demonstrate our AI assistant for customer experience management at Adobe Summit.

Sean Orion: Every student communicator creative professional and marketer is now focused on leveraging generative AI to imagine ideate create and deliver content and applications across a plethora of channels.

Sean Orion: Adobe is uniquely positioned through the combination of express Firefly creative cloud acrobat and experience cloud to deliver on this immense market opportunity.

Shantanu Narayen: Adobe is uniquely positioned through the combination of Express, Firefly, Creative Cloud, Acrobat, and Experience Cloud to deliver on this immense market opportunity. The success we're already seeing with our GenStudio offering in the enterprise is validation of our leadership, and we expect that success to translate into other segments as we roll out these solutions throughout the year. We're driving strong usage, value, and demand for our AI solutions across all customer segments. We're successfully monetizing our innovations, with particular strength in Q1 in the enterprise segment across our digital media and digital experience businesses. This strength is reflected in our strong RPO growth of 16% year over year.

Sean Orion: The success, we're already seeing with our Gen studio offering in the enterprise is validation of our leadership.

Sean Orion: And we expect that success to translate into other segments as we roll out these solutions throughout the year.

Sean Orion: We're driving strong usage value and demand for our AI solutions across all customer segments.

Sean Orion: We're successfully monetizing our innovations with particular strength in Q1 in the enterprise segment across our digital media and digital experience businesses.

Sean Orion: This trend is reflected in our strong <unk> growth of 16% year over year.

Sean Orion: We were pleased with our strong Q1, we have a phenomenal product roadmap that we're executing against to bring AI innovation across our global customer base and we are just getting started.

David Wadhwani: We're pleased with a strong Q1. We have a phenomenal product roadmap that we're executing against to bring AI innovation across our global customer base, and we are just getting started. I'll now turn it over to David to discuss the momentum in our digital media business. Thanks, Shantanu. Hello, everyone.

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

David Wadhwani: Thanks, Chuck New Hello, everyone. In Q1, we achieved net new digital media <unk> of $432 million and revenue of 382 billion, which grew 13% year over year.

David Wadhwani: In Q1, we achieved a net new digital media ARR of $432 million and revenue of $3.82 billion, which grew 13% year over year. The world's information, whether it's an enterprise legal contract, a small business invoice, or a personal school form, lives in trillions of PDFs. We were thrilled to announce Acrobat AI Assistant, a massive leap forward on our journey to bring intelligence to PDF. With AI Assistant, we're combining the power of generative AI with our unique understanding of the PDF file format to transform the way people interact with and instantly extract additional value from their most important documents. Enabled by a proprietary attribution engine, AI Assistant is deeply integrated into reader and Acrobat workflows. It instantly generates summaries and insights from long documents, answers questions through a conversational interface, and provides an on-ramp for generating emails, reports, and presentations. AI Assistant is governed by secure data protocols so that customers can use the capabilities with confidence.

David Wadhwani: The world's information, whether it's an enterprise legal contract small business invoice or personal school form lives and trillions of Pdfs, we were thrilled to announce the acrobat AI assistant a massive leap forward on our journey to bring intelligence to pdfs.

David Wadhwani: With AI assistant we're combining the power of generative AI with our unique understanding of the PDF file format to transform the way people interact with and instantly extract additional value from their most important documents.

David Wadhwani: Enabled by our proprietary attribution engine AI assistant is deeply integrated into reader and acrobat workflows. It instantly generate summaries and insights from long documents answers questions through a conversational interface and provides an on ramp for generating E mails reports and presentations.

David Wadhwani: AI assistant is governed by secure data protocols, so that customers can use the capabilities with confidence.

David Wadhwani: We're pleased with the initial response to the English language beta and look forward to usage ramping across our customer base as we release other languages later in the year. We will monetize this functionality through a monthly add-on offering to the hundreds of millions of reader users, as well as the Acrobat install base across individuals, teams, and enterprises. In Q1, we achieved document cloud revenue of $750 million, growing 18% year over year. We added $143 million of net new Document Cloud ARR, which was a Q1 record, with year-over-year ending ARR growth of 23% in constant currency. Other business highlights include Acrobat Web continues to be an incredible source of customer acquisition, with monthly active users up over 70% year over year and surpassing 100 million users in Q1. Additionally, Acrobat Extensions for Microsoft Edge and Google Chrome, and our Acrobat Mobile offerings continue to accelerate free-to-paid conversion.

David Wadhwani: We're pleased with the initial response to the English language beta and look forward to usage ramping across our customer base as we release other languages later in the year.

David Wadhwani: We will monetize this functionality through a monthly add on offering to the hundreds of millions of reader users as well as the acrobat installed base across individuals teams and enterprises.

David Wadhwani: In Q1, we achieved document cloud revenue of $750 million growing 18% year over year.

We added $143 million of net new document cloud <unk>, which was a Q1 record with year over year, ending <unk> growth of 23% in constant currency.

David Wadhwani: Other business highlights include acrobat web continues to be an incredible source of customer acquisition with monthly active users up over 70% year over year, and surpassing 100 million users in Q1.

David Wadhwani: Acrobat extensions for Microsoft edge, and Google Chrome and our acrobat mobile offerings continued to accelerate free to paid conversion.

David Wadhwani: Increased viral adoption through link sharing and stakeholder collaboration drove over 300% year-over-year growth in the number of PDF files sent. Key enterprise customer wins include Berkshire Hathaway, Merck Sharp and Dove, Northrop Grumman, Porsche, and the U.S. Navy. On Creative Cloud, creativity is the currency of differentiation in our digital-first world. Every creator and business is focused on building their brand and engaging with their audiences through standout content. Creative Cloud remains the solution of choice for the world's creators, whether their medium is design, photography, video, illustration, or 3D.

Increased viral adoption through linked sharing and stakeholder collaboration drove over 300% year over year growth in the number of PDF file or <unk>.

David Wadhwani: Key enterprise customer wins include Berkshire Hathaway.

David Wadhwani: Merck Sharpe and dome, Northrop Grumman Porsche and the U S Navy.

David Wadhwani: On creative cloud creativity is the currency of differentiation and our digital first world every creator and business is focused on building their brand and engaging with their audiences through standout content creative.

David Wadhwani: Creative cloud remains the solution of choice for the world's creators, whether they're medium as design photography video illustration or <unk> Adobe.

David Wadhwani: Adobe Express is inspiring millions of users of all skill levels to design more quickly and easily than ever before.

David Wadhwani: Express is inspiring millions of users of all skill levels to design more quickly and easily than ever before. In the year since we announced and released Adobe Firefly, our creative generative AI models, we have aggressively integrated this functionality into both our Creative Cloud flagship applications and, more recently, Adobe Express, delighting millions of users who have generated over six and a half billion assets to date. In addition to creating proprietary foundation models, Firefly includes a web-based interface for ideation and rapid prototyping, which has seen tremendous adoption.

David Wadhwani: In the year since we announced and released Adobe Firefly accretive generative AI models, we have aggressively integrated this functionality into both our creative cloud flagship applications and more recently Adobe Express delighting millions of users who have generated over $6 5 billion assets to date in.

In addition to creating proprietary foundation models Firefly includes a web based interface for ideation and rapid prototyping, which has seen tremendous adoption. We also recently introduced Firefly services and AI platform, which enables every enterprise to embed and extend our technology into their creative production and marketing.

David Wadhwani: We also recently introduced Firefly Services, an AI platform that enables every enterprise to embed and extend our technology into their creative production and marketing work. Firefly Services is currently powered by our commercially safe models and includes the ability for enterprises to create their own custom models by providing their proprietary data sets, as well as to embed this functionality through APIs into their email, media placement, social, and web creation processes. Early adopters like IBM are putting Firefly at the center of their content creation processes. IBM used Adobe Firefly to generate 200 campaign assets and over 1,000 marketing variations in moments rather than months. The campaign drove 26x higher engagement than its benchmark and reached more key audiences.

David Wadhwani: Workflows.

David Wadhwani: Firefly services is currently powered by a commercially safe models and includes the ability for enterprises to create their own custom models by providing their proprietary datasets as well as to embed this functionality through Apis into their E Mail media placement, social and web creation process.

David Wadhwani: Early adopters like IBM are putting firefly at the center of their content creation processes.

David Wadhwani: IBM used adobe Firefly to generate 200 campaign assets and over 1000 marketing variations in moments rather than months the.

David Wadhwani: The campaign drove 26 X higher engagement than its benchmark and reached more key audiences.

David Wadhwani: In Q1, we achieved $3 7 billion in revenue, which grew 12% year over year net new creative cloud <unk> was $289 million.

David Wadhwani: In Q1, we achieved $3.07 billion in revenue, which grew 12% year over year. Net new Creative Cloud AR revenue was $289 million. Other business highlights include: The launch of the new Adobe Express mobile app beta brings the magic of Adobe Firefly AI models directly into mobile workflows. The first-of-its-kind integration with TikTok's Creative Assistant makes the creation and optimization of social media content quicker, easier, and more effective than ever before

Other business highlights include.

David Wadhwani: The launch of the New Adobe Express mobile App data brings the magic of Adobe Firefly AI models directly into mobile workflows. The first of its kind integration with Tic Toc creative assistant makes the creation and optimization of social media content quicker easier and more effective than ever before <unk>.

David Wadhwani: Express web usage continues to ramp nicely with total exports more than doubling year over year, and overall Express adoption is expected to accelerate even further given the positive reception we're seeing from the mobile beta. Generative Fill in Photoshop continues to empower creators to create in new ways and accelerate image editing work. Q1 saw the highest adoption of Firefly-powered tools in Photoshop since the release of Generative Fill in May 2023, with customers adopting these features across desktop, web, and most recently iPad, which added Generative Fill and Generative Expand in December. The beta release of AI-powered enhanced speech and new audio workflows drove premiere beta usage to record highs. Adobe Video Tools was the go-to choice at the Sundance Film Festival, with over 80% of this year's entrants using Adobe software.

David Wadhwani: <unk> web usage continues to ramp nicely with total exports more than doubling year over year and overall express adoption is expected to accelerate even further given the positive reception, we're seeing from the mobile beta.

David Wadhwani: Generative fill in Photoshop continues to empower creators to create in new ways and accelerate image editing workflows Q1 saw the highest adoption of Firefly powered tools and photoshop since the release of generative fill in May 2023 with customers adopting these features across desktop web and most recently.

David Wadhwani: IPad, which added generative, Phil and generative expand in December.

David Wadhwani: The beta release of AI powered enhanced speech and new audio workflows drove premier beta usage to record highs.

David Wadhwani: Adobe video tools, where the go to choice at Sundance Film Festival with over 80% of this year's entrants using Adobe software.

David Wadhwani: The introduction of <unk>, a new offering to serve the rapidly growing <unk> community empowers members to build their brand and find opportunities and for businesses to hire talented creators through the <unk> platform.

David Wadhwani: The introduction of Behance Pro, a new offering to serve the rapidly growing Behance community, empowers members to build their brand and find opportunities, and for businesses to hire talented creators through the Behance platform. The unveiling of new research, like the preview of our music generation models and editing tools last month, and our video auto-dubbing models earlier today, inspired our Creative Cloud and Express customers. The introduction of Firefly services for enterprises drove notable wins in the quarter, including Accenture, IPG, and Starbucks. Other key enterprise wins include ACOM, Capital Group, Dentsu, IBM, Nintendo, and RR McDonald.

David Wadhwani: The unveiling of new research like the preview of our music generation models and editing tools last month and our video audio dubbing models earlier today have inspired our creative cloud and express customers.

David Wadhwani: The introduction of Firefly services for enterprises drove notable wins in the quarter, including Accenture IPG and Starbucks.

David Wadhwani: Other key enterprise wins include AECOM capital Group, Dentsu, IBM, Nintendo and RR Donnelley.

David Wadhwani: Given the size of the opportunity we see with generative AI, we continue to focus on driving innovation, adoption, and usage of our AI solutions. In Q1, we saw strength across both clouds, with record new commercial subscriptions in Creative Cloud for Q1, and strong product-led growth in Document Cloud. You can expect to see the product advances in Express with Firefly on mobile, Firefly Services, and AI Assistant in Acrobat drive ARR acceleration in the second half of the year. We're excited about our product roadmap. The $6.5 billion assets generated to date include images, vectors, designs, and text effects, and we can't wait to share the work we're doing on audio, video, and 3D through research sneaks and product announcements in the coming months. I'll now pass this to Anil. Thanks, David. Hello, everyone.

David Wadhwani: Given the size of opportunity, we see regenerative AI, we continue to focus on driving innovation adoption and usage of our AI solutions in Q1, we saw strength across both clouds with record new commercial subscriptions in creative cloud for Q1, and strong product led growth and document cloud <unk>.

David Wadhwani: You can expect to see the product advances and expressed with Firefly on mobile Firefly services, and AI assistant and acrobat drive acceleration in the second half of the year.

David Wadhwani: We're excited about our product roadmap the $6 5 billion assets generated to date include images vectors designs and tax effects and we can't wait to share. The work we're doing on audio video and <unk> through research sneaks and product announcements in the coming months.

David Wadhwani: I'll now pass it to Enel.

Enel: Thanks, David Hello, everyone.

Anil S. Chakravarthy: The Experience cloud business had a great first quarter, achieving $1.29 billion in revenue, and was our strongest Q1 on record for new business. Subscription revenue is $1.16 billion, representing 12% year over year growth. Companies are prioritizing digital investments to improve marketing agility and customer engagement, while driving growth and profitability. Adobe's Holiday Shopping Report, which analyzes trillions of data points, showed strong online spending during the 2023 holiday season, growing 4.9% year-over-year to $222.1 billion, a new record for e-commerce as well as mobile shopping, which surpassed desktop for the first time and drove 51.1% of online sales.

Enel: Experience cloud business had a great first quarter, achieving $1 $29 billion in revenue and was our strongest Q1 on record for new business.

Enel: Subscription revenue was $1 6 billion.

Enel: Representing 12% year over year growth.

Enel: Companies are prioritizing digital investments to improve marketing agility and customer engagement, while driving growth and profitability.

Enel: Adobe's holiday shopping report, which analyzes trillions of data points showed strong online spending during the 2023 holiday season growing four 9% year over year to $222 1 billion.

Enel: A new record for e-commerce, as well as mobile shopping which surpassed desktop for the first time and drove 51, 1% of online sales.

Enel: Our Adobe experience cloud application spanned the entire customer funnel from acquisition to monetization to retention as.

Anil S. Chakravarthy: Our Adobe Experience Cloud applications span the entire customer funnel from acquisition to monetization to retention. As the global leader in the digital experience platform category, Adobe offers businesses a single view of their customers' data across every channel, allowing them to create precise segments and deliver personalized experiences, regardless of when and where a customer interacts with their brand. Over the last five years, our organic innovations in Adobe Experience Platform, Realtime CDP, Journey Optimizer, and Customer Journey Analytics have made us the leading platform for customer experience management, given the scale of the profiles, campaigns, and interactions we process, which now exceed 500 trillion segment evaluations per month. Today, the rollout of personalization at scale has been limited by the number of content variations you can create and the number of journeys you can deploy.

Enel: As the global leader in the digital experience platforms category Adobe offers business as a single view of their customers data across every channel, allowing them to create precise segments and deliver personalized experiences regardless of when and where our customer interacts with their brand.

Enel: Over the last five years, our organic innovations in Adobe experience platform real time, CDP journey, Optimizer and customer journey analytics have made us the leading platform for customer experience management, given the scale of the profiles campaigns and interactions we process, which now exceed 500 trillion segment devaluations per month.

Enel: Today rollout of personalization at scale has been limited by the number of content variations you can create and the number of journeys you can deploy.

Anil S. Chakravarthy: We believe harnessing generative AI will be the next accelerant with Creative Cloud, Firefly Services, and GenStudio, providing a comprehensive solution for the content supply chain and generative experience model, automating the creation of personalized journeys. Adobe GenStudio is a generative AI-first application that allows marketers to quickly plan, create, store, deliver, and measure marketing content in a single intuitive workspace. With state-of-the-art generative AI powered by Firefly services, marketers can create on-brand content with unprecedented scale and agility to deliver personalized experiences. Adobe GenStudio natively integrates with multiple Adobe applications across Creative Cloud and Experience Cloud, including Express, Firefly, Workfront, Experience Manager, Customer Journey Analytics, and Journey Optimizer.

Enel: We believe harnessing generative AI will be the next accelerant with creative cloud firewall services engine studio, providing a comprehensive solution for the current supply chain and generally a experienced model automating the creation of personalized journeys.

Enel: Adobe against today's agenda, they've AI first application that allows marketers to quickly plan create store deliver and measure marketing content in a single intuitive offering.

Enel: With state of the our agenda to be AI powered by Firefly services marketers can create on brand content with unprecedented scale and agility to deliver personalized experiences.

Enel: Let me begin studio natively integrates with multiple adobe applications across creative cloud and experience cloud, including Express Firefly work front experienced manager customer journey analytics and journey optimizer.

Anil S. Chakravarthy: It can be used by brands and their agency partners to unlock new levels of creativity and efficiency in marketing campaigns. Business highlights include Momentum with the Adobe Experience Platform and native applications, with the combined annualized book of business exceeding $800 million in the quarter. Demand for Adobe Experience Manager, Workfront, and GenStudio to address the enterprise content supply chain. Global agencies, including Accenture Song, Avas, IPG, Omnicom, and Publicis, have standardized on Adobe as their technology platform of choice for their own workflows and to optimize creative collaboration with the world's leading brands.

Enel: It can be used by brands and their agency partners to unlock new levels of creativity and efficiency in marketing campaigns.

Enel: Business highlights include momentum with the Adobe experience platform native applications with a combined annualized book of business, surpassing $800 million in the quarter.

Enel: Demand for Adobe experience manager work front engine studio to address the enterprise content supply chain.

Enel: Mobile agencies, including Accenture song of Us IPG Omnicom and Publicis have standardized on Adobe is their technology platform of choice for their own workflows and to optimize creative collaborations with the world's leading brands.

Enel: Strength in Adobe journey, optimizing and Adobe campaign as companies look to deliver more personalized experiences across channels and surfaces.

Anil S. Chakravarthy: Strengthening Adobe Journey Optimizer and Adobe Campaign as companies look to deliver more personalized experiences across channels and surfaces. Adobe was recognized as a leader in the Gartner Magic Quadrant for Digital Experience Platforms for the seventh consecutive year, as well as the Forrester Wave for Digital Experience Platforms. Experience Manager Assets was also named a leader for the fourth consecutive time in the Forrester Wave for Digital Asset Management. Key customer wins include Call Zeiss, Comcast, Home Depot, NASCAR, Nestle, PayPal, Rogers Communications, Santander Group, Starbucks, and Walgreens. Later this month, we are excited to host Adobe Summit, the world's largest digital experience conference, in Las Vegas, where we will be joined by thousands of customers, partners, and developers from around the world.

Enel: Adobe was recognized as a leader in the Gartner Magic quadrant for digital experience platforms for the seventh consecutive year as well as the Forrester wave for digital experience platforms.

Enel: Adobe experience manager of assets was also named a leader for the fourth consecutive time in the Forrester wave for digital asset management.

Key customer wins include Carl Zeiss, Comcast home Depot, NASCAR, Nestle, Paypal Rogers Communications, Santander group, Starbucks and Walgreens.

Enel: Later this month, we are excited to host Adobe summit, the world's largest digital experience conference in Las Vegas, where we will be joined by thousands of customers partners and developers from around the world.

Anil S. Chakravarthy: We look forward to showcasing a number of product innovations, including a new generative experience model, advances in Adobe GenStudio, a new AI assistant in Adobe Experience Platform, new capabilities in RTCDP for first-party data activation, and expanded Firefly services offering. Additionally, we will articulate our vision and playbook for brands to achieve a new level of personalization at scale in the era of generative AI. We look forward to sharing our exciting product roadmap and hearing from our customers on how Adobe is helping them transform their business. We were off to a fast start in Q1 and look forward to continuing the momentum and leadership in Q2 and beyond. I will now pass it to Dan.

Enel: We look forward to showcasing a number of product innovations, including our new generative experienced model advances in Adobe Gen studio, our new AI assistant in Adobe experience platform new capabilities in Rd, CDP for first party data activation and expanded Firefly services offerings we.

Enel: We will articulate our vision and playbook for brands to achieve a new level of personalization at scale in the era of generative AI.

Enel: We look forward to sharing our exciting product roadmap and hearing from our customers on how adobe is helping them transform their business.

Enel: We were off to a fast start in Q1 and look forward to continuing the momentum and leadership in Q2 and beyond.

Enel: I will now pass it to Dan.

Dan: Thanks, and Hal Turner I'll start by summarizing Adobe's performance in Q1 fiscal 2024, highlighting growth drivers across our businesses and I'll finish with financial targets.

Daniel J. Durn: Thanks, Anil. Today, I'll start by summarizing Adobe's performance in Q1 Fiscal 2024, highlighting growth drivers across our businesses, and I'll finish with financial targets. In Q1, Adobe delivered another quarter of double-digit top-line growth with robust margins that result from product leadership, strong execution, and financial discipline. The pace of our product innovation across Document Cloud, Creative Cloud, and Experience Cloud is leading to customers making large multi-year commitments to Adobe, and you see the result of those customer investments in our RPO performance, which accelerated to 16% year-over-year growth. In the quarter, Adobe achieved record revenue of $5.18 billion, which represents 11% year-over-year growth or 12% in constant currency. Business and Financial Highlights included Gap Diluted Earnings per Share $1.36 and Non-Gap Diluted Earnings per Share $4.48.

Dan: In Q1, Adobe delivered another quarter of double digit top line growth with robust margins that result from product leadership strong execution and financial discipline.

Dan: The pace of our product innovation across document cloud creative cloud and experience cloud is leading to customers, making large multiyear commitments to Adobe and you see the result of those customer investments in our Rps performance, which accelerated to 16% year over year growth.

Dan: In the quarter Adobe achieved record revenue of $5, one 8 billion, which represents 11% year over year growth or 12% in constant currency.

Dan: And financial highlights included GAAP diluted earnings per share of $1 36.

Dan: And non-GAAP diluted earnings per share of $4 48.

Daniel J. Durn: Digital Media Revenue of $3.82 billion. Nettnew Digital Media ARR of $432 million. Digital Experience Revenue of $1.29 billion. Cash flows from operations of $1.17 billion. RPO of $17.58 billion exiting the quarter, and repurchasing approximately 3.1 million shares of our stock during the quarter. Gap EPS came in lower due to the billion-dollar payment resulting from the termination of the Figma transaction.

Dan: Digital media revenue of $3 eight 2 billion net new digital media <unk> of $432 million.

Dan: Digital experience revenue of $1 $2 $9 billion cash flows from operations of $1 $1 7 billion.

Dan: Oh, a $17 five 8 billion exiting the quarter.

Dan: And repurchasing approximately $3 1 million shares of our stock during the quarter.

Dan: GAAP EPS came in lower due to the $1 billion payment, resulting from the termination of the Sigma transaction.

Daniel J. Durn: Absent the Determination Payment, our cash flows from operations would have been $1 billion more, and GAAP EPS would have been $2.19 higher. The termination payment impacts both Q1 GAAP EPS and our full year fiscal 2024 GAAP EPS. In our digital media segment, we achieved Q1 revenue of $3.82 billion, which represents 12% year-over-year growth or 13% in constant currency. We exited the quarter with $15.76 billion of digital media ARR, up 14% year-over-year in constant currency. Adobe achieved document cloud revenue of $750 million, which represents 18% year-over-year growth as reported and in constant current.

Absent the termination payment our cash flows from operations would have been $1 billion more and GAAP EPS would have been $2.19 higher.

Dan: The termination payment impacts both Q1, GAAP EPS and our full year fiscal 2020 for GAAP EPS.

Dan: In our digital media segment, we achieved Q1 revenue of $3, eight 2 billion, which represents 12% year over year growth or 13% in constant currency.

Dan: We exited the quarter with $15 76 billion of digital media.

Dan: <unk> up 14% year over year in constant currency.

Dan: Adobe achieved document cloud revenue of $750 million, which represents 18% year over year growth as reported and in constant currency.

Daniel J. Durn: We added $143 million of net new Document Cloud ARR in the quarter. Q1 Document Cloud Growth Drivers Included Demand for Acrobat subscriptions across all customer segments and geographies.

Dan: We added $143 million of net new document cloud <unk> in the quarter.

Dan: Q1 document cloud growth drivers included.

Dan: Demand for acrobat subscriptions across all customer segments and geographies.

Daniel J. Durn: Continued growth of Acrobat Web, demonstrating the success of our flagship products across multiple platforms. Growing monthly active users in our Acrobat Reader Funnel, driving free to paid conversion. New User Acquisition resulting from our Microsoft Edge and Google Chrome partnership. Strengthen our team's business with upselling our new Acrobat offering, which includes integrated sign capability, and strong demand from businesses of all sizes demonstrating the mission criticality of our document solution. We achieved creative revenue of $3.07 billion, which represents 11% year-over-year growth or 12% in constant currency. We added $289 million of net new creative ARR in the quarter, with ending ARR growing 12% year-over-year in constant currency. Overall, CC pricing actions performed as expected in the quarter.

Dan: Continued growth of acrobat web demonstrating the success of our flagship products across multiple surfaces.

Dan: Growing monthly active users in our acrobat reader funnel driving free to paid conversion.

New user acquisition, resulting from our Microsoft edge and Google Chrome partnerships.

Dan: Strengthen our teams business with Upselling, our new acrobat offering which includes integrated signed capabilities.

Dan: And strong demand from businesses of all sizes, demonstrating the mission criticality of our document solutions.

Dan: We achieved creative revenue of $3, <unk>, 7 billion, which represents 11% year over year growth or 12% in constant currency.

Dan: We added 289 million of net new creative IRR in the quarter with ending IRR growing 12% year over year in constant currency.

Dan: Overall cc pricing actions performed as expected in the quarter Q1, net new creative <unk> grew more than 20% year over year, excluding the impact of pricing actions associated with both acrobat cc and all apps in the year ago quarter.

Daniel J. Durn: In Q1, net new creative ARR grew more than 20% year over year, excluding the impact of pricing actions associated with both Acrobat CC and all apps in the year ago quarter and Creative Cloud in Q1 FY24. New subscription growth, including strong adoption of Creative Cloud across geographies and customer segments. Epstein, Josh Feinberg, Tim Lynn, and Michaeliding A donation today, via our Jamf Fund cards. We again saw strength in emerging markets, which we continue to believe is a massive growth opportunity, and outstanding performance of Creative Cloud in the enterprise, including early traction of Firefly services. Turning to our digital experience segment, in Q1, we achieved revenue of $1.29 billion, which represents 10% year-over-year growth, as reported and in constant currency. Digital Experience Subscription revenue is $1.16 billion, growing 12% year-over-year, as reported and in constant currency.

Dan: And creative cloud in Q1, FY 'twenty four.

Dan: Q1 creative growth drivers included new subscription growth, including strong adoption of creative cloud all apps across geographies and customer segments.

Dan: Strong single App customer demand and creative categories, such as imaging and photography and continued growth of stock and frame.

We again saw strength in emerging markets, which we continue to believe is a massive growth opportunity.

Dan: And the outstanding performance of creative cloud and the enterprise, including early traction of Firefly services.

Dan: Turning to our digital experience segment in Q1, we achieved revenue of $1 $2 9 billion, which represents 10% year over year growth as reported and in constant currency.

Dan: Digital experience subscription revenue was $1 6 billion growing 12% year over year as reported and in constant currency.

Daniel J. Durn: Q1 was a tremendous start to the year for our experienced cloud business, with growth drivers including: Success closing transformational deals across geographies and verticals with large enterprises that are choosing Adobe to be their end-to-end customer experience management platform; continued momentum with AEP and native applications, with the annualized book of business growing more than 60% year over year. Strong Customer Adoption of our Content, Campaign, and Workfront Solutions and continued strength with customer retention and expansion across our product. Customer Experience Management remains an enterprise imperative.

Dan: Q1 was a tremendous start to the year for our experience cloud business with growth drivers, including success closing transformational deals across geographies and verticals with large enterprises that are choosing adobe to be their end to end customer experience management platform.

Dan: Continued momentum with AEP and native applications with the annualized book of business growing more than 60% year over year.

Dan: Strong customer adoption of our content campaign and work front solutions.

Dan: And continued strength with customer retention and expansion across our products.

Dan: Customer experience management remains an enterprise imperative.

Daniel J. Durn: And as a leader in the category, we see a robust pipeline as we look into Q2 and beyond. Turning to the income statement and balance sheet, Adobe's effective tax rate in Q1 was 36% on a gap basis and 18.5% on a non-gap basis. The Q1 gap tax rate came in higher than targeted due to the FGMA termination payment.

Dan: And as a leader in the category, we see a robust pipeline as we look into Q2 and beyond.

Speaker Change: Turning to the income statement and balance sheet.

<unk> effective tax rate in Q1 was 36% on a GAAP basis, and 18, 5% on a non-GAAP basis. The Q1 GAAP tax rate came in higher than targeted due to the sigma termination payment or <unk> exiting the quarter was a record $17 five 8 billion growing 16% year over year.

Daniel J. Durn: RPO exiting the quarter was a record $17.58 billion, growing 16% year-over-year as reported and in constant currency. Our ending cash and short-term investment position exiting Q1 was $6.82 billion, and cash flows from operations in the quarter were $1.17 billion. In Q1, we entered into a $2 billion share repurchase agreement, which effectively exhausted our prior $15 billion authority.

Speaker Change: <unk> as reported and in constant currency.

Speaker Change: Our ending cash and short term investment position exiting Q1 was $6 82 billion in cash flows from operations in the quarter were one $1 7 billion.

Speaker Change: In Q1, we entered into a $2 billion share repurchase agreement, which effectively exhausted our prior $15 billion of authority.

Daniel J. Durn: As a result of our strong trajectory of growth and profitability, we are announcing a new $25 billion share repurchase program, which demonstrates Adobe's continued commitment to returning capital to our shareholders. In light of the momentum across our business and factoring in the macroeconomic environment for Q2, we're targeting total Adobe revenue of $5.25 to $5.30 billion. Digital Media Net New ARR of approximately $440 million. Digital Media Segment revenue of $3.87 to $3.90 billion.

Speaker Change: As a result of our strong trajectory of growth and profitability. We are announcing a new $25 billion share repurchase program, which demonstrates adobe's continued commitment to returning capital to our shareholders.

Speaker Change: In light of the momentum across our business and factoring in the macroeconomic environment for Q2, we're targeting total.

Speaker Change: Total Adobe revenue of five to five to 530 billion.

Speaker Change: Digital media net new IRR of approximately $440 million.

Speaker Change: Digital media segment revenue of $3 87 to 390 billion.

Speaker Change: Digital experience segment revenue of 131 to 133 billion.

Daniel J. Durn: Digital Experience Segment revenue of $1.31 to $1.33 billion. Digital Experience Subscription revenue of $1.165 to $1.185 billion, tax rate of approximately 18.5% on a gap and non-gap basis. Gap earnings per share of $3.35 to $3.40, and non-GAAP earnings per share of $4.35 to $4.40.

Speaker Change: Digital experience subscription revenue of $1 165 to $1 185 billion.

Speaker Change: Tax rate of approximately 18, 5% on a GAAP and non-GAAP basis GAAP earnings per share of $3 35 to.

Speaker Change: The $3 40.

Speaker Change: And non-GAAP earnings per share of $4 35 to.

Speaker Change: To $4 40.

Shantanu Narayen: In summary, Fiscal 2024 is off to a strong start. By combining the power of product innovation and executional excellence, Adobe is driving consistent, profitable growth. We're delivering on our product roadmap, and we have the right strategy to monetize these innovations into the back half of the year and beyond. Adobe is incredibly well positioned to capitalize on the secular trends that will shape the next decade. Shantanu, back.

Speaker Change: In summary fiscal 2024 is off to a strong start by combining the power of product innovation and execution excellence Adobe is driving consistent profitable growth.

Speaker Change: We're delivering on our product roadmap and we have the right strategy to monetize these innovations into the back half of the year and beyond.

Speaker Change: Adobe is incredibly well positioned to capitalize on the secular trends that will shape. The next decade shunting back to you.

Dan: Thanks, Dan.

Unknown Executive: Thanks, Dan. We're the leader in three large and growing categories and have delivered groundbreaking innovation across Creative Cloud, Document Cloud, and Experience Cloud. We believe that AI augments human ingenuity and expands our addressable market opportunity. I'm proud of the pace and the responsible manner in which we have embraced and delivered generative AI capabilities across our product portfolio as a result of our strategy and execution. We're confident in our ability to attract new users and deliver value to existing customers to drive growth and profitability. I'd like to thank our 30,000 employees for their continued dedication and unwavering focus on innovation and execution. It is particularly exciting to be named to Glassdoor's Best Places to Work, Fortune's Most Admired Companies, and the Just 100. Thank you. And we will now take questions. Operator. Huffman, Rath, and Farr.

Dan: The leader in three large and growing categories and have delivered groundbreaking innovation across creative cloud document cloud and experience cloud.

Dan: We believe that AI augment human ingenuity and expands our addressable market opportunity.

Dan: I'm proud of the pace and the responsible manner in which we have embraced and delivered generative AI capabilities across our product portfolio.

Dan: As a result of our strategy and execution.

We're confident in our ability to attract new users.

Dan: And deliver value to existing customers to drive growth and profitability.

Dan: I'd like to thank our 30000 employees for their continued dedication and unwavering focus on innovation and execution.

Dan: It is particularly exciting to be named to glass doors best places to work Fortune's, most admired companies and adjust 100.

Speaker Change: Thank you and we will now take questions operator.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Alright.

Via the telephone and we'd like to ask a question. Please. Please note by pressing star one on your telephone keypad.

Speaker Change: You're using a speaker phone. Please make sure your mute function is turned off.

Unknown Executive: Yeah, thanks. Thanks very much for taking the question. I guess maybe this is for David or Dan. You know, obviously, you guys called out that new creative ARR was up 120% year over year when you excluded the pricing increases, which, you know, infers a pretty major pricing headwind that we're seeing right now. Can you all just try to parse out how that's going to play out over the year? I know, David, you mentioned that ARR will go up in the back half of the year, but that, you know, it's just tough, I think, to reconcile what's going on in the business on a normalized basis and when we might see that sort of translate more into the metrics that everybody sees us. Thanks.

Speaker Change: Your signal.

Speaker Change: Again, Please press star one to ask a question please.

Speaker Change: Please limit yourself to one question to ensure that everyone has the opportunity then you May press star one to rejoin the queue.

Speaker Change: Our first question comes from the line of Kirk <unk> with Evercore ISI.

Kirk: Yes. Thanks.

Kirk: Very much for taking the question.

Kirk: I guess, maybe this is for David or Dan, Obviously, you guys called out that create new creative AOR was up 120% year over year. When you exclude the pricing increases, which infers a pretty major pricing headwind that we're seeing right. Now can you all just try to parse out how that's going to play out over the year I know, David you mentioned era.

David Wadhwani: We'll go up in the back half of the year, but that.

David Wadhwani: It's just tough to reconcile what's going on in the business.

Speaker Change: On a normalized basis, and when we might see that sort of translate more into the metrics, thereby solace. Thanks.

Unknown Executive: Yeah, I'll start, and others can go ahead and add on. First of all, you know, as we look at the book of the business, it is a strong start to the year with Q1 coming in at a high watermark with 432 across the entire business. As we look specifically at Creative Cloud, you know, I just want to sort of make sure everyone takes a step back and looks at our strategy to accelerate the business because I think the growth drivers here are very clear. We are focused on expanding access to users with things like Express on mobile. We want to introduce new offers across the business with things like AI Assistant and also existing capabilities for Firefly coming into our core Photoshop and Illustrator and flagship applications. We want to access new budget pools with the introduction of Firefly services and GenStudio, as we have talked about.

Yeah, I'll start and others can go ahead and add on first of all.

Speaker Change: We do as.

Speaker Change: As we look at the book of the business. It is a it is a strong start to Q2 the year with Q1 coming in at a high watermark with the 432 across the entire business.

Speaker Change: As we look specifically at creative cloud.

Speaker Change: Wanted to sort of make sure everyone takes a step back and looked at our strategy to accelerate the business because I think the growth drivers here are very clear we are focused on expanding access to users with things like express on mobile we want to introduce new offers.

Speaker Change: Across the business with things like AI assistant and also existing capabilities for Firefly coming into our core Firefly our core.

Speaker Change: Photoshop and illustrator and flagship applications, we want to.

Speaker Change: Access new budget pools with the introduction of Firefly services and Jen studio as we as we talked about and the early signs as you as you point out in Q1 results are really suggesting that those those growth drivers are taking hold as you talked about normalizing for FY 'twenty through FY 'twenty four pricing actions, we grew the cc.

Unknown Executive: And the early signs, as you point out, in Q1 results are really suggesting that those growth drivers are taking hold. As you talked about normalizing for FY23 and FY24 pricing actions, we grew the CC business about 20% year over year. Other key things to look at are that we set another record for new commercial subscriptions in Q1. And business growth remains stable at, if you look back at revenue, 12%. If you look forward at ARR, 12%.

Speaker Change: <unk> business about 20% year over year.

Speaker Change: Key things to look at is that we set another record for new commercial subscriptions in Q1 and the business growth remained stable at if you look back at revenue, 12%. If you look forward at <unk>, 12%, so the stability and the diversity of the business is strong and as we enter the back half of the year we have.

Unknown Executive: So the stability and the diversity of the business is strong. And as we enter the back half of the year, we have capabilities for Creative Cloud pricing with Firefly that have already started rolling out late last year, as we talked about, and we'll be gradually rolling out throughout the year. We're ramping up Firefly services and Express and Enterprise. As we talked about, we saw a very good beginning to that rollout and toward the end of Q1. We also expect to see the second half ramping with Express Mobile and AI Assistant coming through. So we have a lot of the back-end capabilities set up so that we can start monetizing these new features, which are still largely in beta, starting in Q3 and beyond.

Speaker Change: <unk> capabilities for creative cloud pricing with Firefly that have already started rolling out late last year as we talked about and will be incrementally rolling out throughout the year, we're ramping Firefly services and expressed in enterprise as we talked about we saw a very good beginning of.

Speaker Change: Of that rollout and at the towards the end of Q1, we also expect to see the second half ramping with express mobile and AI assistant coming through so we have a lot of the back end.

Speaker Change: Capabilities setup. So that we can start monetizing these new features which are still largely in beta.

Speaker Change: <unk> in Q3 and beyond and as it relates to pricing. It's what we've talked about in the past we had two pretty significant pricing actions that benefited.

Unknown Executive: And as it relates to pricing, it's what we've talked about in the past. We had two pretty significant pricing actions that benefited FY23, the first one being the Acrobat price increases that we had put out with the new value that we had introduced with sign capabilities, and also a CC price increase that we introduced in FY22 that was rolling into FY23. Both of those are rolling off as we have now introduced the new pricing for CC with Firefly. And overall, the roll-off of the prior pricing is more significant than the new pricing that we've introduced. Banks

Speaker Change: Slide 23, the first one being <unk>.

Speaker Change: Acrobat price increases that we had put out with the new value that we had introduced with <unk> capabilities and and also ACC price increase that we introduced in FY 'twenty two that was rolling into FY2023 both of those are rolling off as we have now introduced the new pricing for CEC with fire.

Speaker Change: Fly and <unk>.

Speaker Change: Overall, the roll off of the prior pricing is more significant than the new pricing that we've introduced.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: And we will take our next question from Brent Thill with Jefferies.

Brent John Thill: Please go ahead.

Brent John Thill: Thanks, Sean you the magnitude of the beat this quarter was rough.

Unknown Executive: Thanks, Shantanu. The magnitude of the beat this quarter was, you know, roughly half the absolute beat you've had in past quarters, and then the guide was obviously lower for next quarter. I think everyone's asking, Is this some type of AI headwind? Is this macro?

Brent John Thill: Roughly half the absolute <unk> had in past quarters, and then the guide obviously lower for next quarter I think everyone is asking.

Brent John Thill: Is there some type of AI headwind is this macro is this execution can you just comment on and maybe it's none of these things, but can you just comment on what you think you are seeing.

Unknown Executive: Is this execution? Can you just comment on, And maybe it's none of these things, but can you just comment on what you think you're seeing? in the current quarter. Yeah, happy to Brent. And again, I'll reiterate that, you know, as it relates to us taking our targets pretty seriously. I mean, when we guided to 1.9 billion for the year, we had factored in both, as David mentioned, what was likely to happen in pricing and how that rolls off, as well as the product roadmap. And you know when AI Assistant and Acrobat would be available, when, you know, Express, which is now in beta, would be available. So I think it factored in all of those. I mean, you know, I guess if you are looking at it from the accomplishment point of view, we look at it and say, hey, we did 410. I think last year, we did 432.

Brent John Thill: In the current quarter.

Yes happy to Brandon again.

Speaker Change: Reiterate that as it relates to us taking our <unk>.

Speaker Change: Targets pretty seriously when we guided to $1 9 billion for the year I mean, we had factored in both as.

Speaker Change: As David mentioned, what was likely to happen in the pricing and how that rolls off as well as the product roadmap and when AI assistant and acrobat would be available when express which is now in beta would be available. So I think it factored in all of those I mean, I guess, if you are looking.

Speaker Change: At it from a accomplishment we look at it and say Hey, we did for 10.

Speaker Change: I think last year, we did 432, if you look at the guide and you know we're on track as it relates to the one nine and hopefully exceed that guidance. So from our perspective, it's playing out maybe the other color brand that I would provide is given the desktop products are still in beta and.

Unknown Executive: If you look at the guide, and you know, we're on track as it relates to the 1.9 and to, you know, hopefully, exceed that guide. And so, from our perspective, it's playing out. Maybe the other color Brent that I would provide is, given the desktop products are still in beta, and, you know, there we look at value, and there we look at utilization. And so I think we gave you some numbers on the 6.5 billion generations, that we're seeing the really positive feedback that we're getting in Acrobat, that continues to give us optimism associated with how that is. I think where there's tremendous interest and where, if you look at it from an AI monetization perspective, the two places that we're monetizing extremely well in line with our expectations. The first is as it relates to the creative cloud and the creative cloud pricing that we've rolled out.

Speaker Change: There, we look at value and they will look at utilization and so I think we gave you some numbers on the $6 5 billion generations that we're seeing the really positive feedback that we're getting in acrobat that continue to give us optimism associated with how that is I think where there is tremendous interest in where if you look at it from.

Speaker Change: AI monetization the two places that we're monetizing extremely in line with our expectations. The first is as it relates to the creative cloud creative cloud pricing that we've rolled out and as you know the generative backs are included for the most part in how people know by creative cloud that is rolling out as expected in the second place where we are.

Unknown Executive: And as you know, the generative packs are included for the most part in how people now buy creative cloud, which is rolling out as expected. And the second place where we are monetizing it is in the entire enterprise, as it relates to content and GenStudio. And, you know, I'm really happy about how that's monetizing it. And that's a combination, Brent, of when we go into an enterprise for creation, whether we provide creative cloud or a combination of Express, what we're doing with asset management and AEM workflow, as well as Firefly services, to enable people to do custom models, as well as APIs. You know, we're seeing way more monetization earlier than expected, but again, very much in line with expected.

Speaker Change: Monetizing it is in the entire enterprise as it relates to content and Jen studio in.

Speaker Change: Really happy about how that's monetizing it and that's a combination brand of when we go into an enterprise for creation, whether we provide creative cloud or a combination of express what we're doing with asset management and.

Speaker Change: Workflow as well as Firefly services to enable people to do custom models as well as Apis, we're seeing way more monetization earlier, but again very much in line with expected. So again I look at the quarter and I I feel really good both about the product delivery as well as the way of monetization turning out I mean, it's clear.

Unknown Executive: So again, I look at the quarter, and I feel really good, both about the product delivery, as well as the way monetization's turning out. I mean, it's clear, I guess, a little bit from, you know, sort of what we've seen that expectations were perhaps a little higher both in terms of, you know, what we would guide for Q2. But, you know, I'm really optimistic about what we've done. Thanks, Sean. Holt, http://TheBusinessProfessor.com, Great

Speaker Change: I guess, a little bit from <unk>.

Speaker Change: Sort of what we have seen that expectations.

Speaker Change: Perhaps a little higher both in terms of what we would guide for Q2, but.

Speaker Change: I'm really optimistic about what we have done.

Speaker Change: Thanks Shannon.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Brad Zelnick with Deutsche Bank.

Brad Alan Zelnick: Great. Thanks, so much for taking my question.

Unknown Executive: Thanks so much for taking my question. My question is for Dan. You're not raising the full-year guide, and I appreciate it's still early in the year, but I think we're all hoping you can at least affirm it for us, but you also pushed out the enforcement of generative credit limits. Roberts, Matt Leatherman, Dan Nielsen, Margaret Brewster, Sarah Quillan, Sho Grandpa, Michael Jantzi, Michael Ruskin, Scott Lignant, Andres Martins, David I'll jump in on the first part and toss it over to David for the second. So we're not updating the targets. The targets we provided for the full year are as of the December call. What we did share on the call was the material change that we saw in Q1 as a result of the FGMA termination payment. We talked about the GAP EPS impact. It rolls through Q1, and it'll certainly have an effect for the full year. And it's $2.19 as a result of the billion-dollar payment.

Brad Alan Zelnick: My question is for Dan you're not raising the full year guide and I. Appreciate it's still early in the year, but I think we're all hoping you can at least the permit for US but you also you pushed out the informant and enforcement of generative credit limits for some products beyond April that were originally expected sooner what's the thinking behind this decision and what are you.

Dan: Seen thus far in terms of credit consumption and purchasing patterns patterns of those credit tax. Thanks.

Dan: Yeah, Thanks, Brad I'll jump in on the first part and pass it over to David for the the second so we're not updating the targets.

Dan: And what the targets we provided for the full year there as of the December call. What we did share on the call was the material change that we saw in Q1 as a result of the Sigma termination payment, we talked about the GAAP EPS impact it rolls through Q1, and it will certainly have an effect for the full year and it's $2 19.

Dan: As a result of the $1 billion payment and I think.

Unknown Executive: And I think with that, I think you have everything you need relative to where we set our targets, but we're not going to be updating them on that. Yeah, and I'm happy to add a little bit. Yeah, in terms of the timing of when we start enforcing credits, don't read anything into that other than, you know, right now, we are still very much in an acquisition mode; we want to bring a lot of users in, we want to get them using the products as much as possible, we want them coming back and using them. One thing I do want to state, because I know there's a lot of energy around how these credits Last month, we snuck in a music composition where you can take any music track, you can give it a music type like hip hop or orchestral or whatever, and it will transform that initial track into this new type of music.

Dan: With that I think you have everything you need relative to where we set our targets, but we're not going to be updating them on this call.

Speaker Change: Yes, and I'm happy to add a little bit in terms of the timing of when we start enforcing credits don't read anything into that other than right. Now we are still very much in an acquisition mode. We want to bring a lot of users and we wanted to get them using the products as much as possible, we want them coming back and using it.

Speaker Change: One thing I do want to state because I know theres a lot of energy around how do these credits play out over time.

Speaker Change: The last few weeks, we've done a couple of sneaks that could also be instructive last month with nuc.

Speaker Change: Music composition, where you can take any music track you can give it a music type like hip hop or orchestral or whatever and it will transform that that initial track into this new type of music.

Unknown Executive: Just this morning, we snuck in our ability to do auto dubbing and lip syncing where you give it a video of someone talking and say English, and then it can translate it automatically to French or Spanish or Portuguese or whatever. As you can imagine, those actions will not take, you know, one credit; those actions will be much more significant in terms of what they cost. So right now, you know, Alex, the primary point is about proliferation and usage; we're going to be bringing in a lot more new capabilities throughout the tools that will drive more usage. And we're going to be bringing in more expensive capabilities as well. And as we've talked about, you should start to see that ramp throughout the year.

Speaker Change: Just this morning, we we snuck our ability to do auto dubbing and lip syncing, where you give it is.

Speaker Change: Give it a video of someone talking in say English and then you can translate it automatically to venture.

Speaker Change: Spanish or Portuguese or whatever as you can imagine.

Speaker Change: Those actions will not take one credit those actions will be much more significant in terms of what they cost so right now.

Speaker Change: Alex the primary pointed about proliferation and usage, we're going to be bringing in a lot more new capabilities throughout the tools that will drive more usage and we're going to be bringing in more expensive capabilities as well as we've talked about you should start to see that ramp through the year.

Unknown Executive: And we feel very comfortable with the adoption, we're seeing just one last thing to call out, as we mentioned on the call, the highest number of users using generative AI in Q1 ever. So we're very excited about the trajectory. And maybe just to add a little bit more about how we're thinking about it as it relates to the monetization of AI. You know, I think we're in the early stages as it relates to experimentation.

Speaker Change: And we feel very comfortable with the adoption. We are seeing just one last thing to call out as we mentioned on the call.

Speaker Change: The highest number of users using generative AI in Q1 ever. So we're very excited about the trajectory and maybe just to add a little bit more of how we're thinking about it as it relates to the monetization of AI.

Speaker Change: I think we are in early stages as it relates to experimentation. So we're looking at both.

Unknown Executive: So we're looking at both, you know, what the value utilization is, as well as experimentation. The value utilization is actually really positive for us. I think as it relates to monetization and experimentation, we have the generative packs, as you know, in Creative Cloud. I think you will see us more and more have that as part of the normal pricing and look at pricing, because that's the way in which we want to continue to see people use it. I think in Acrobat, as you've seen, we are not actually using the generative packs; we're going to be using more of an AI assistant model, which is a monthly model.

Speaker Change: What the value utilization is as well as experimentation the value utilization is actually really positive for us I think as it relates to the monetization and the experimentation we have the generative facts as you know in creative cloud I think you will see us more and more have that as part of the normal pricing and look at pricing because.

Thats the way in which we want to continue to see people use it I think in acrobat as you've seen we are not actually using the generative backs, we're going to be using more of an AI assistant model, which is a monthly model as it relates to the enterprise we have both the ability to do custom models, which depends on how much content that we're creating as well as an API.

Unknown Executive: As it relates to the enterprise, we have both the ability to do custom models, which depends on how much content they're creating, as well as an API and metering. And we've rolled that out. And we started to sell that as part of our GenStudio solution. I think it's fair to say, and I certainly monitor what everybody else in the industry is saying, the good news about this is the interface integration that we've done in all our apps and the usage. And I think, you know, the experimentation will enable us to determine how we best attract the largest number of customers that we can who are new to Creative Cloud. We've talked about that as it relates to Firefly attracting new customers. Certainly, I think the number of Q1 commercial subscriptions was another record. So we're absolutely doing everything that we intended to experiment as we roll these out, Brad. So I wanted to emphasize that as well. Thank you so much.

Speaker Change: And metering and we've rolled that out and we started to sell that as part of our agenda studio solution. So I think it's fair to say and.

Speaker Change: Certainly monitor what everybody else in the industry is saying the good news about this is the interface integration that we've done in all our apps and the utilization and I think the experimentation will enable us to determine how we best attract the largest number of customers that we can who are new to creative cloud.

Speaker Change: We've talked about that as it relates to Firefly, attracting new customers certainly I think the number of Q1 commercial subscriptions was another record. So we're absolutely doing everything that we intended to experiment as we roll these out Brad So I wanted to.

Speaker Change: Accentuate that as well.

Brad Alan Zelnick: Thank you so much very helpful.

Unknown Executive: Very helpful. Schultz, http://TheBusinessProfessor.com Hey, great. Thanks. I appreciate you taking the time to answer the question. David, I couldn't help but notice you left off your prepared remarks section with the document cloud. Can you speak to the enthusiasm you're seeing on the document side? And when we think about the mix of digital media growth for the year, should we expect it will continue to trend towards the document side? Or is it more of the second half, where some of the creative enhancements start to layer on more meaningfully? We will start to see that shift back a bit. Thanks.

Brad Alan Zelnick: Yes.

Brad Alan Zelnick: Your next question comes from the line of Michael <unk> with Wells Fargo Securities.

Michael: Go ahead.

Michael: Hey, great. Thanks, I appreciate you taking the question David couldn't.

Couldn't help but notice you led off your prepared remarks section with the document cloud.

Michael: Can you speak to the enthusiasm you're seeing on the document side and when we think about the mix of digital media growth for the year should we expect that will continue to trend towards that document side or is it more of a second half where some of the creative enhancements start to layer on more meaningfully we could start to see that shift back a bit.

Speaker Change: Yes happy to talk about that we were very and continuing to be very happy with the performance of document cloud. If you really look at trying to understand sort of how that plays out.

Unknown Executive: Yeah, happy to talk about that. We were very and continue to be very happy with the performance of Document Cloud. You know, if you really look at trying to understand sort of how that plays out, Document Cloud's growth is a combination of both our go-to-market efforts and our product innovation on the go-to-market side. Think about the fact that, you know, Reader continues to be a top of the funnel for us, and we continue to see Reader monthly active user growth. So the potential of people we can convert over to paid subscribers can continue to grow. We also talked about the fact that Acrobat Web has been a major contributor to our growth. So we're seeing 70% year over year growth in terms of the web model, and we crossed 100 million monthly active users for the first time on the website.

Speaker Change: Document cloud is the growth is a combination of both our go to market efforts and our product innovation on the go to market effort side.

Speaker Change: Think about the fact that reader continues to be a top of funnel for us and we continue to see.

Speaker Change: Reader monthly active user growth so the potential of people, we can convert over to paid subscribers continues to grow.

Speaker Change: We also.

Speaker Change: Talked about the fact that acrobat web has been a major contributor to our growth. So we are seeing 70% year over year growth in terms of web MAU and we crossed 100 million monthly active users for the first time on the website and of course, we're doing a lot of work with product led growth to drive journey a journey.

Unknown Executive: And of course, we're doing a lot of work with product-led growth to drive journey to journey users to some of that value that drives conversion. So that's all we're doing on the go-to-market side. On the side of product innovation, our strategy over the last couple years has been to make PDF the starting point of a work, Wright, and so that's why we integrated sign directly into that so that people could use their PDFs and start a transaction for their business, and that continues to grow very nicely, and it's a great selling point for an integrated service. We also introduced link sharing a few years ago for commenting and reviewing with groups and teams.

Speaker Change: Users to some of that value that drives conversion. So that's all we're doing on the go to market side on the side of product innovation in our strategy over the last couple of years has been to make PDF. The starting point of a workflow right and so that's why we integrated sign directly into that so that people could use their pdfs and start a.

Speaker Change: <unk> for their business and that continues to grow very nicely and it's a great selling point for an integrated service.

We also introduced linked sharing a few years ago.

Speaker Change: We're commenting and reviewing with with groups and teams we solve that link sharing grew 300% year over year, So thats a huge.

Unknown Executive: We saw that link sharing grow 300% year over year, so that's a huge point of value, but it's also a huge point of viral growth. And when someone receives that, it's another opportunity for us to bring them into the value of the broader offering, and you can expect to see that with AI Assistant as well. So obviously, everyone's looking at AI Assistant in Acrobat. I certainly hope all of you are using it.

Speaker Change: Point of value, but it's also a huge point of viral growth. That's also what when someone receives that it's another opportunity for us to bring them into the value of the broader offering and you can expect to see that with AI assistance as well. So obviously everyone's looking at AI assistant.

Speaker Change: In acrobat I certainly hope all of you are using it should make your lives more and more effective.

Unknown Executive: It should make your lives more effective. Not just for insight, but we think that there's a lot of opportunity for monetization of insight for AI Assistant on our core base of Acrobat users, but also for the first time, with consumption-based value. So the hundreds of millions of monthly active users of Reader will also be able to get access to AI Assistant and purchase an add-on pack there too, so it's a really broad base to look at how we monetize that, but it's also the start of the ability to take your conversation and generate emails and presentations and continue that process. So the combination of all of that is a really potent combination of go-to-market efforts and product innovation. So we continue to be bullish about this.

Speaker Change: Not just for insight, we think that Theres a lot of opportunity for monetization of insight for AI assistant on our core base of acrobat users, but also for the first time doing consumption based value. So the hundreds of millions of.

Speaker Change: Of monthly active users a reader will also be able to get access to AI assistant and purchase and add on pack there too. So it's a really broad base to look at how we monetize that but it's also the start of the ability to take your conversation and generate E mails and presentations and continue that process. So the <unk>.

Speaker Change: Combination of all of that is a really potent combination of go to market efforts in product innovation. So we are we continue to be bullish about this and the second part of your question we are.

Unknown Executive: So the second part of your question, we are, as we've said multiple times on the call, we are very excited about all the innovation that's coming out that's just starting to ramp in terms of monetization and is still in beta on the Creative Cloud side. We expect that to come out in Q3, and we'll start monetizing there. So we continue to feel very confident about the second half acceleration of Creative Cloud. I appreciate all the details there. Okay, great.

Speaker Change: We've said multiple times on the call.

Speaker Change: We are very excited about all the innovation that's coming out.

Speaker Change: Just starting to ramp in terms of monetization <unk> still in beta for on the creative cloud side, we expect that to come out in Q3, and we'll start our monetization. There. So we continue to feel very confident about the second half acceleration of creative cloud.

Speaker Change: I appreciate all the details there thank you.

Speaker Change: Your next question comes from the line of with.

Speaker Change: Yes.

Speaker Change: Okay, Great Hey, guys. Thanks for Hey, guys. Thanks for taking my question here.

Unknown Executive: Hey guys, thanks for taking my question. Maybe for both David and Shantanu, there was clearly a lot of news around video creation using generative AI during the quarter, of course, with the announcement of Sora. Maybe the question for you folks is, can we just talk a little bit about what you think about the market impact that generative AI can have in the video editing market and how, maybe, Firefly can participate in that trend? Sure, Saket.

Speaker Change: Maybe maybe for both David and short new.

Speaker Change: Clearly a lot of news around video creation using general generative AI during the quarter of course with the announcement of Sora maybe the question for you folks is can we just talk a little bit about how you think about the market impact that generative AI can have in the video editing market.

Speaker Change: And how may be Firefly can participate in that in that trend.

Unknown Executive: I mean, I'll start and then David can add. First of all, I think the advances, whether it's in open AI or our own models, which David and I have the pleasure of looking at, you know, on a weekly basis, are amazing. Because you have to, when you're thinking about video, solve some other fundamental problems like physics, right? I mean, if you have somebody walking on the street, how do you make sure that they don't go into a building or go through the floor?

Speaker Change: Sure I'll start and then David can add I mean, firstly I think the advances whether it's an open AI at our own models.

Speaker Change: Certainly David and I have the pleasure of looking at on a weekly basis. The advances are amazing because you have to when youre thinking about video solve some of the fundamental problems like physics right. I mean, if you have somebody walking on a street, how do you make sure that they don't go through a building or go through the floor and so.

Unknown Executive: And so I think, you know, some of those video advancements that we have seen within Adobe have really addressed some of those hard problems. In the bigger picture, though, video, I think will be even more of an accelerant for editing applications. I mean, I think this notion that, you know, the next Oppenheimer will be done using, you know, a text to video prompt is just, you know, it's not going to happen, you know, for decades.

Speaker Change: I think some of those video advancements that we have seen within Adobe have really address some of those hard problems are big picture, though video I think will be even more of an accelerant for editing applications I think this notion that the.

Next Oppenheimer will be done using a text.

Speaker Change: Two video prompt is just it's not going to happen.

Speaker Change: For decades, and so I think actually more so than video there's going to be an accelerant for people, saying, how do I get an on ramp as it relates to using text to video and then Ed.

Unknown Executive: And so I think actually, more so in video, there's going to be an accelerant for people saying, how do I get an on-ramp as it relates to, you know, using text to video, and then, you know, editing that using our applications. And so I think I'm really particularly excited about what we can do with Premiere as well as with, you know, After Effects as it relates to video. So, net-net, I would say, Saket, the technology is impressive.

<unk> added that using our applications and so I think I'm really are particularly excited about what we can do with premier as well as with.

Speaker Change: After effects as it relates to video so net net I would say socket. The technology is impressive we have our models we have integrated into our interfaces. We're also partnering.

Unknown Executive: We have our models, and we have integrated them into our interfaces. We're also partnering. I had a really great conversation with Jensen recently about, you know, what we can do as they are investing in video. Certainly, you know, he would love to partner with us.

Speaker Change: Really great conversation with Jenson recently about what we can do as they are investing in video certainly he would love to partner with us and we.

Unknown Executive: And, you know, we're looking together to see how we can push the envelope on video as well, using, you know, their models, whether it's Edify or Nemo. And so I think, in these early days, we're seeing a whole bunch. I hope, and David mentioned this, you look at some of the lip-sync stuff that we've done as well, which allows you to, you know, auto-dub and translate into languages.

Speaker Change: We're looking together to see how we can push the envelope on on video as well using their models, whether it's edify on Nemo and so I think really early days is early days, we're seeing a whole bunch of I hope.

Speaker Change: And David mentioned this look at some of the lifting stuff that we've done as well, which allows you to you know auto dob, Ben and translate into languages.

Unknown Executive: You know, so we intentionally released a little bit of that demo. So really great advances, but net-net video is going to be even more of a need for editing applications in order to truly take advantage of generative AI. Yeah, and maybe I'll just add a few things. First of all, as Shantanu mentioned, the research in the industry, and certainly with Sora, is very impressive and exciting. It's also very consistent with the models that we're developing. So we think that there will be, as there was with video, sorry, imaging, there will be multiple models that come out, including the Adobe model, and later this year, and we should start to see a lot of innovation there, like we've seen in imaging. You know, we've already started to sneak a couple things that Shantanu talked about, but you will see text-to-video capabilities from us later this year. But you'll also see it with transparency around the training data that we have.

Speaker Change: So we intentionally released a little bit of that demo so really great advances, but net net video is going to be even more of a need for editing applications in order to truly take advantage of general <unk>.

Speaker Change: And maybe I'll just add a few things first of all as Chuck you mentioned the research in the industry and certainly the store is very impressive and exciting.

It is also very consistent with the models that we're developing so we think that there is.

Speaker Change: There will be as there was with video imaging there'll be multiple models that come out including the Adobe model.

Speaker Change: Later, this year and we should start to see a lot of innovation there like we've seen in imaging.

Speaker Change: We've already started to sneak a couple of things is shot and you talked about but you will see text video capabilities from US later this year, but you'll also see it with transparency around the training data that we have youll see it with more.

Unknown Executive: You'll see it with more, you know, toolability and controllability. You'll see it integrated into our tools as well. Now, all of that said, I do want to be very clear about what Shantanu said, which is that we see the proliferation of video models as a very good thing for Adobe. We're going to work with open AI around Sora.

Speaker Change: Tool ability and controllability youll see it integrated into our tools as well now all of that said I do want to be very clear with what <unk> said, which is that we see the proliferation of video models to be a very good thing for Adobe.

Speaker Change: We're going to work with open AI.

<unk> youre going to see us, obviously, developing our own model youre going to see others developing model all of that creates a tailwind because the more people generate video clips the more they need to edit that content right. So whether its premier or after a factor expressed they have to assemble those clips they have to color correct. Those clips they have to tone match, they often enabled transitions.

Unknown Executive: You're going to see us obviously developing our own models. You're going to see others developing models. All of that creates a tailwind because the more people generate video clips, the more they need to edit that content, right? So, whether it's Premiere or After Effects or Express, they have to assemble those clips, they have to color correct those clips, they have to tone match, they have to enable transitions.

Speaker Change: So we're excited about what we're building, but we're just as excited about the partnerships that we see with open AI and others coming down this path and if you take a step back.

Unknown Executive: So, we're excited about what we're building, but we're just as excited about the partnerships that we see with Open AI and others, you know, coming down this path. And, you know, if you take a step back, you should expect to see more from us in the weeks ahead with imaging and vector and design, text effects, and in the months ahead with audio and video and 3D. We're very excited about what all of this means, not just for the models but also for our APIs and our... Very helpful. Thanks.

Speaker Change: You should expect to see more from us in the weeks ahead with imaging and vector and design text effects and in the months ahead with audio and video and <unk>. We're very excited about what all of this means not just for the models, but also for our Apis and our tools.

Speaker Change: Super helpful. Thanks.

Speaker Change: Your next question comes from the line of Alex Zukin with Wolfe Research.

Unknown Executive: Smith, Wiley, Guys, thanks for taking the question and I just. My question is going to be more of a clarifying question because it's clear that, from a number of comments, whether it's outperforming digital media ARR in the quarter to accelerating creative ARR in the second half to maybe doing better than 1.9 in the full year for digital media ARR, my question is very simple. Can you reiterate, not update, but reiterate the guide that you gave in December for digital media ARR in net news specifically for this year and maybe put some takes around how we should think about the question earlier, the second half versus first half tailwind headwind around. Yeah, so we take our guide seriously. Q1 played out as expected.

Aleksandr J. Zukin: Please go ahead, hey, guys. Thanks.

Aleksandr J. Zukin: Hey, guys. Thanks for taking the question and I just mine is going to be more of a clarifying question because it's clear that.

Aleksandr J. Zukin: From a number of comments whether it's.

Aleksandr J. Zukin: Outperforming digital media <unk> in the quarter to accelerating creative <unk> in the second half to maybe doing better than one nine in the full year for digital media <unk>. My question is very simple can you reiterate not.

Aleksandr J. Zukin: Update but reiterate the guide that you gave.

Aleksandr J. Zukin: In December for digital media <unk>.

Aleksandr J. Zukin: Net new specifically for for this year and maybe puts and takes around.

Aleksandr J. Zukin: How we should think about to the question earlier.

Aleksandr J. Zukin: <unk>.

Aleksandr J. Zukin: Second half versus first half tailwind headwind around pricing.

Speaker Change: Yeah, So we take our guidance seriously.

Speaker Change: Q1 played out as expected. It was ahead of where we were last year. Our Q2 guide is ahead of where the guide was in Q2, we're talking about acceleration into the back half of the year. If I didn't feel like our full year guide was achievable, we would have a different conversation.

Unknown Executive: It was ahead of where we were last year. Our Q2 guide was ahead of where the guide was in Q2. We're talking about acceleration to the back half of the year. If I didn't feel like our full-year guide was achievable, we would have a different conversation. We're confident in the targets that we put out there and our ability to meet them. If there's an opportunity to do better, we certainly will. So we feel good about where we sit in the first half. And as we look forward into the second half, the momentum we see from an innovation standpoint, integrating into our products, what we see going from beta to GA, we feel good about the momentum into the second half. Perfect. Thank you. Oh, thank you. Dan, maybe I'll maybe I'll continue with this subject that Aleks was getting at. I think what's tough about modeling, Arr of late. It's very difficult to see the impact of price actions.

Speaker Change: We're confident in the targets that we put out their ability to meet them. If there is an opportunity to do better. We certainly will so we feel good about where we sit in the first half and as we look forward into the second half the momentum we see from an innovation standpoint integrating into our products, what we see going from beta two <unk> we feel.

Speaker Change: Good about the momentum into the second half.

Speaker Change: Perfect. Thank you guys.

Speaker Change: And your next question comes from the line of Karl Keirstead with UBS.

Karl Emil Keirstead: Go ahead.

Karl Emil Keirstead: Dan maybe I'll, maybe I'll continue with this subject that Alex was getting at so.

Karl Emil Keirstead: I think what's what's tough about modeling.

Karl Emil Keirstead: Of late.

Karl Emil Keirstead: It's very difficult to see the impact of the price actions that feels like.

Unknown Executive: It feels like a black box to us. So I'm wondering if you could help us get aligned for the second half and offer some qualitative color on Witt, John D. The extent to which the prior period price actions roll off. Is that more of a 3Q or 4Q phenomenon? Is there any way you could help size that impact?

Dan: A black box to us so I'm wondering if you could help us get aligned for the second half and offer some qualitative color on.

Dan: The extent to which the prior period price actions.

Dan: Roll off is that more of a <unk> or <unk> phenomenon and is there any way you can help size that impact just to feel good about David's earlier comment about that roll off being a big part of the second half.

Unknown Executive: Just to feel good about David's earlier comment about that roll-off being a big part of the second half ARR acceleration. Thank you. Yes, so there were two pricing actions that we took in 2022. In May of 2022, we pushed forward one pricing action. And then in October of 2022, we pushed forward the doc cloud line optimization where we integrated sign. The one year anniversary of those pricing actions from May of 2022 and October of 2023, or I'm sorry, October of 2022 will be behind us on the one year anniversary. So you will still see some Q3 impact from pricing actions in the year-ago period, but Q4 will be a clean look for the company. At least two months in Q4 will be a clean look.

Speaker Change: Our acceleration thank you.

Speaker Change: Yes. So there was two pricing actions that we had taken in 2022.

Speaker Change: In may of 2022.

Speaker Change: We pushed forward.

Speaker Change: Our pricing action and then.

Speaker Change: October.

Speaker Change: <unk> 2022, we pushed forward the dark cloud line optimization, where we integrated sign the one year anniversary of those pricing actions from May of 2022 and October of 2023.

Speaker Change: I'm, sorry October of 2022, well behind us will be behind us on the one year anniversary. So you will still see some.

Speaker Change: Q3 impact from pricing actions in the year ago period, Q4 will be a clean look.

For the company.

Speaker Change: At least two months in Q4 will be a clean look the actions that we're taking right now from both a pricing and a product standpoint on the creative side will be more apparent in the back half of the year into the end of the year.

Unknown Executive: The actions that we're taking right now from both a pricing and a product standpoint on the creative side will be more apparent in the back half of the year and into the end of the year. Okay, I think the other way I would look at it. Sorry, go ahead.

Speaker Change: Okay. So I think the other way I would look at it honestly.

Speaker Change: Sorry go ahead go ahead David.

Unknown Executive: Go ahead, David. Well, the way I would look at it in terms of the rhythm of the numbers and how you've seen sort of what transpired in 2023 and how we look at 2024 and the path to, you know, 1.9 and beyond, the way I would look at it is that we're ahead in Q1. We're ahead in Q1, and we're giving you all the reasons why we think there's more product coming and more monetization coming in the rest of the year. And, you know, that's what gives us the confidence associated with the targets. I guess there's this question of at every quarter: do we reiterate targets? Do we update targets? You know, what does that mean?

David Wadhwani: Well the way I would look at it in terms of the rhythm of the numbers and how you've seen sort of what transpired in 2023, and how we look at 2024 in the path to you know one nine and beyond the way I would look at it is we're ahead in Q1 were ahead in Q1, we're giving you all the reasons.

David Wadhwani: Why we think there is more product coming in more monetization coming in the rest of the year and that's what gives us the confidence associated with the targets.

David Wadhwani: There's this question of at every quarter do we reiterate targets do we updated target what does that mean in the way we've always thought of it as if there was a way if we didn't have confidence we would give you that we have confidence associated with the numbers, but we're not in the business of every quarter looking at every number.

Unknown Executive: And the way we've always thought of it is if there was a way, if we didn't have confidence, we would give you that. We have confidence associated with the numbers, but we're not in the business of every quarter looking at every number. And let's go down one other number, which was the gap EPS.

David Wadhwani: And let's go down one other number which was the GAAP EPS certainly there is an impact as you know in the GAAP EPS associated with what we did as it related to the figment.

Unknown Executive: Certainly, as you know, in the gap EPS associated with, you know, what we did as it related to the Figma, you know, sort of transaction and therefore the impact on gap EPS in Q1. So, you know, from my perspective, the quarter and the year are playing out just as we did. And, you know, I feel more confident now than I did when we gave you our annual targets. I'll leave it at that. Yep, you got it. Thank you. Smith.

David Wadhwani: Sort of transaction and therefore, the impact to GAAP EPS in Q1, So I think from my perspective.

David Wadhwani: Quarter end the year is playing out just as we did in <unk>.

David Wadhwani: Feel more confident now than I did when we gave you our annual targets I'll leave it at that.

Speaker Change: Yes, you got it thank you.

Yes.

Speaker Change: And we will take our next question from the line of Jay <unk> with Griffin Securities.

Unknown Executive: Thank you. Thank you. Thank you. Good evening.

Jay: Thank you good evening.

Unknown Executive: With respect to Firefly, it's obvious that you are significantly ramping up your investments there, at least judging by the number of relevant open positions you're looking to fill for Firefly development, many of which are seemingly fairly senior. Could you comment on your pipeline for being able to bring in the requisite amount of developmental capacity to support everything you're doing with Firefly and everything else that David in particular talked about? And relatedly on go-to-market, in the last few months, you've been opening up the aperture for sales positions globally. Could you comment on what the thinking is behind that? And again, whether the population is there for you to bring in to meet your sales headcount needs? Thank you.

Jay: With respect to Firefly.

Jay: It's obvious that you are significantly ramping up your.

Jay: Investments there at least judging by the number of relevant.

Jay: <unk> positioned youre looking to fill for Firefly development, many of which are seemingly fairly senior.

Jay: Could you comment on your pipeline of bringing able to bring in the requisite amount of.

Jay: Developed mental capacity to support everything Youre doing with Firefly and everything else that David in particular talked about and Relatedly on go to market in the last few months you've been opening up the aperture for sale.

Jay: Sales positions globally could you comment on what the thinking is behind that.

Jay: And again, whether the.

Jay: The population is there for you to bring in to meet your sales head count needs. Thank you.

Unknown Executive: Yeah, let me take the first one and then Anil can answer the question on sales. As it relates to the momentum we're seeing with Firefly, I think there are multiple layers to it. One is, obviously, we're seeing the quality of the models; we're seeing a differentiated approach as it relates to the training data as it approaches, you know, contribution of assets from our community and how we compensate those folks. And so that's not just an Adobe perspective, but it's playing out, obviously, in enterprises as they look at what are the models that they can consider using for production workflows. We're the only one, you know, with the full suite of capabilities that they can do. It's a really unique position to be in. But it's also being noticed by the research community, right? And as the community starts looking at places as if I'm a PhD student that wants to go work in a particular environment, I start to ask myself the question of which environment I want to pick.

Speaker Change: Yes, let me take the first one and then Anil can answer the question on sales.

Anil: As it relates to.

Anil: The momentum we're seeing with Firefly I think there are multiple layers of it one is <unk>.

Anil: Obviously, we're seeing the quality of the models, we're seeing a differentiated approach as it relates to the.

Anil: The training data as it puts as it approaches contribution of.

Anil: Of assets from our community and how we compensate those folks and so that's not just an adobe perspective, but it's playing out obviously in the enterprises as they look at what are the models that they can consider using for production workflows. We are the only one.

Anil: With the full suite of capabilities that they can do it is a really unique position to be in but it's also being noticed by the research community and as the community starts looking at places is if I'm a Phd that wants to go work in a particular environment I start to ask Microsoft question of which environment, what do I want to pick in a lot of people want to do.

Unknown Executive: And a lot of people want to do AI in a responsible way. And that has been a very, very good opportunity for us to bring in amazing talent. So we are investing. We do believe that we have the best, one of the best, if not the best research labs around imaging, around video, around audio, around 3D. And we're going to continue to attract that talent very quickly.

Anil: AI in a responsible way and that has been a very very good opportunity for us to bring an amazing talent. So we are investing we do believe that we have the best one of the best if not the best.

Anil: Our research labs around imaging around video around.

Anil: <unk> around <unk>, and we're going to continue to attract that talent very quickly. We've already talked about we have the broadest set of creative models for imaging for vector for design for audio for <unk> for video.

Unknown Executive: We've already talked about how we have the broadest set of creative models for imaging, for vector, for design, for audio, for 3D, for video, for fonts, and text effects. And so this gives us a broad surface area to bring people in. And that momentum that starts with people coming in has been great.

Anil: Our advance and text effects and so this gives us a broad surface area to bring people in and that momentum that starts with people coming in has been great. The second part of this too is managing.

Unknown Executive: The second part of this, too, is managing access to GPUs while maintaining our margins. We've been able to sort of manage our cost structure in a way that brings in this talent and gives them the necessary GPUs to do their best work. And regarding sales positions in enterprises, in an enterprise, we're in a strong position because what we, I mean, this area of customer experience management remains a clear imperative for enterprise customers. Everybody is investing in this personalization at scale and content supply chain. These help drive both growth and profitability. So when you look at these areas, from an enterprise perspective, these are a must have; this is not a need to have. And that's helping us really attract the right kind of talent.

Anil: Access to Gpus.

Anil: While maintaining our margins, we've been able to sort of manage our cost structure in a way that brings and this talent and gives them the necessary Gpus to do their best work.

And regarding the sales positions in enterprises.

Anil: And in enterprise, but in a strong position because what we have in.

Anil: This area of customer experience management, it remains a clear imperative for enterprise customers.

Anil: Body is investing in this personalization at scale and supply chain.

Anil: This helped drive both growth and profitability. So when you look at these areas. This put an enterprise perspective. These are a must have this is not a need to have and thats, helping us really attract the right kind of talent. We just on boarded this week, our VP of sales who have prior experience a lot of experience at Cisco and Salesforce did rubbery. So that's an example of really bringing on.

Unknown Executive: We just onboarded this week a VP of sales who had prior experience, a lot of experience at Cisco and Salesforce, et cetera. So that's an example of how we're really bringing on some excellent enterprise sales. And I don't know if Jay, you were asking about building your own model or if you were looking for a job, but if you're interested in any of these positions, let us know. More the former.

Speaker Change: The excellent enterprise sales talent.

Speaker Change: I don't know if Jay you were asking for building your model or if you were looking for a job, but if youre interested in any of the statistics, let us know.

Speaker Change: More of the former.

Unknown Executive: Hey, operator, we're coming up on the hour. Let's try to squeeze in two more questions. Thanks. Thank you very much.

Speaker Change: Okay.

Speaker Change: Hey, operator, we're coming up on the hour, let's try to squeeze in two more questions.

Speaker Change: Yeah.

Operator: Thank you we will take our next question from Kash Rangan with Goldman Sachs.

Kasthuri Gopalan Rangan: Hey, Thank you very much looks like Theres more trust in AI and external models then.

Unknown Executive: Looks like there's more trust in AI and Excel models than what you're actually saying qualitatively on this call. I just wanted to give you an opportunity to debunk this hypothesis that is going around that AI is generating videos and pictures, but the next step is it's going to do the actual editing and put Premiere Pro to use or whatnot. That is probably the existential threat that people are debating.

Kasthuri Gopalan Rangan: We're actually seeing qualitatively on this call just wanted to give you an opportunity to debunk. This this hypothesis that is going around that.

Speaker Change: It is it is generating video sudden.

Kasthuri Gopalan Rangan: Pictures, but the next step is it's going to do the actual editing and put out premier pro user or whatnot. So that is probably the existential threat that people are debating. So wanted you to see if you could take a shot at why that scenario is.

Unknown Executive: So why don't you see if we could take a shot at why that scenario is very unlikely, that right now, it's about the generation of images, and then your tools pick up where the generation stops, and you do the processing, right? So help us understand why this can coexist with AI. That's a philosophical question. And Dan, one for you.

Kasthuri Gopalan Rangan: It's very unlikely that.

Kasthuri Gopalan Rangan: Right now it's about generation of images and then.

Kasthuri Gopalan Rangan: To pick up the other generation stops and due to the processing rate to help us understand why this can coexist with AI. That's a philosophical question and Dan one for you <unk>.

Unknown Executive: Besides the net new error that you've already reported on creative and DM, what are the other indicators, such as new business bookings that you don't necessarily quantify necessarily that you qualitatively saw in Q1 that makes you feel good about the year? Thank you. Great. So maybe I'll take your first part. Dan, obviously, can take the second.

Kasthuri Gopalan Rangan: The net new era that you've already reported on creative and DM what are the other indicators such as new business bookings that you don't quantify necessarily that.

Speaker Change: You qualitatively saw in Q1 that makes you feel good about the year. Thank you so much.

Speaker Change: Great. So maybe I'll take your first part Dan obviously can take the second so as it relates to generated content.

Unknown Executive: So as it relates to generated content, I'm going to sort of break it up into two parts. One is around the tooling and how you create the content. And the second is around automation associated with content. I think if you take a step back, before we even get into either one of those, there is no question that there is a huge appetite for personalization at scale, the need to engage users, the need to build your personal brand online, and that content is going to explode in terms of the amount of content being created. And it's going to explode because of one of two things.

Speaker Change: Sort of break it up into two parts.

Speaker Change: One is around the tooling and how you create the content and the second is around automation associated with the content I think if you take a step back before we even get into either one of those there is no question that there is a huge appetite because of personalization at scale the need to engage users they need to build your personal brand online.

Speaker Change: That content is going to explode in terms of the.

Speaker Change: The amount of content being created and it's going to explode because of one of two things. The first is around.

Unknown Executive: The first is around, you know, the ability to create audio clips, video clips, images, and vectors. These are things that get users started. It's great for ideation. You'll see in a few weeks some of the incredible work the team has been doing around ideation on firefly.com. And once those things are created, they do flow into our tools for the production work and process. We're clearly seeing a huge benefit from that because the more content that gets created, the more editing that's required. And that's what's driving more commercial CC subscribers this quarter than any other Q1 before. So that's the foundation of it. The second part of this, though, from an editing perspective, is the controllability and the editability of not just pixels and vectors and timelines but also the editability of the latent space itself, the latent space being the core model capabilities that actually generate the output.

Speaker Change: The ability to create audio clips video clips images vectors. These are things that get user started it's a great for ideation youll see in a few weeks some of the incredible work. The team has been doing around ideation on Firefly Dot com.

Speaker Change: And once those things are created they do flow into our tools.

Speaker Change: For the production work in process.

Speaker Change: <unk> seeing a huge.

Speaker Change: Benefit from that because the more content that creates gets created the more editing thats required and that's what's driving more commercial cc subscribers this quarter than any other Q1 before so that's the foundation of it the second part of this though from an editing perspective is the controllability of.

Speaker Change: And the added ability of not just pixels and and vectors and timelines, but also the added ability of the latent space itself the latest space being the core.

Speaker Change: Capability core model capabilities and actually generate the output we have a lot of research that we've already started releasing the first of which was style match.

Unknown Executive: We have a lot of research that we've already started releasing, the first of which was style match. And you'll start to see more and more of that actually coming out at summit and beyond. But we are, in my mind, very, very clearly the leader in terms of creating models that can also be tooled on top of. So that combination of the models getting better and the controllability of those models, we're in a remarkable position for that. So we can benefit from that.

Speaker Change: And youll start to see more and more of that actually coming out at summit and beyond but we are in my mind very very clearly the leader in terms of creating models that can also be.

Speaker Change: Tooled on top of so that combination of the model is getting better and the controllability of those models, where in a remarkable position for that so we benefit from that the second part cash.

Unknown Executive: The second part... Cash is around automation. So as people are generating more content, you clearly need to be able to automate that content and how it's created. And that's really where Firefly services come in.

Speaker Change: Cash is around automation, so as as people are generating more content, you clearly need to be able to automate that content and how it's created and thats really where firefly surfaces come in first it's built on the strength of our flying Firefly models safer commercial use integrated into our tools, but it also adds the ability to have custom models to.

Unknown Executive: First, it's built on the strength of our Firefly models, say for commercial use, integrated into our tools, but it also adds the ability to have custom models to control what kinds of information or brand and content is stressed on for both brand styles and product replica. And it's also part of an ecosystem of API services, not just to generate something, which is a core part of it, like text to image or generative fill or generative expand, but also to process. So once you generate some images through APIs and automation, you want to be able to remove the background, you want to be able to blur the depth, you want to auto-tone, you want to apply actions to that image.

Speaker Change: What kinds of information of our brand and content. It's trained on for both <unk> thousand product replica.

And it's also part of an ecosystem of API services, not just generate something which is a core part of it like text or image or generative, Phil or generative expand but also process. So once you generate some images through Apis and automation you want to be able to remove the background you wanted to be able to blur. The depth you want an auto Tony you want to apply actions to that.

Unknown Executive: And then the last thing you want to be able to assemble that for delivery. Firefly services don't just generate something, but they let you have that entire ecosystem. And then you can embed that using low code, no code environments into your flows.

Speaker Change: Image and then the last is you want to be able to assemble that for delivery.

Speaker Change: Firefly services don't just generate something but that you have that entire ecosystem and then you can embed that using low code no code environment into your flows and we are already embedding it into Gen studio and all of the capabilities that were shipping. So I think the core part of this is that as more of this content creates you need more tool ability the <unk>.

Unknown Executive: And we are already embedding it into GenStudio and all of the capabilities that we're shipping. So I think the core part of this is that as more of this content is created, you need more tool ability. The best models are going to be the models that are safe to use and have control built in from the ground up.

Speaker Change: First models are going to be the models that are safe to use and have control built in from the ground up and I think we have the best controls of anyone in the industry and they need to be able to be done in an automated fashion that can embed into your workflows. So I think all three of those vectors 0.2 benefits for Adobe.

Unknown Executive: And I think we have the best controls of anyone in the industry. And they need to be able to be done in an automated fashion that can be integrated into your workflow. So I think all three of those vectors point to benefits for Adobe. And then, as we think about the future, there are a couple points I would turn to. Just think about cash flow in Q1, the strength of our cash flow once you normalize for the billion-dollar termination payment. That's up 20% year over year.

Speaker Change: And then as.

Speaker Change: As we think about the forward looking.

Speaker Change: A couple of points I would.

Speaker Change: Turn to you just think about cash flow in Q1 strength of our cash flow once you normalize for the $1 billion termination payment.

Speaker Change: That's up 28% year over year.

Unknown Executive: When you think about RPO, three-point acceleration, sequentially, and when I break that up on deferred revenue and unbilled backlog, you see that acceleration in each of those subcomponents. Which, as you look through that acceleration, the near term underscores the strength of the business, and it underscores the longer term strength we have around the momentum of the business. When I think about individual product commentary, we talked about it a lot on this call. You see, record commercial subscriptions in the creative business in Q1. You see engagement going up on the products. Usage of Firefly capabilities in Photoshop was at an all-time high in Q1. Express exports are more than doubling with the introduction of Express Mobile in beta now going to GA in the coming months. AI Assistant, Acrobat, same fact pattern.

Speaker Change: When you think about.

Speaker Change: <unk> three point acceleration sequentially.

Speaker Change: And I break that up on deferred revenue Unbilled backlog, you saw that acceleration in each of those sub components.

Speaker Change: As you look through that acceleration in the near term underscores the strength of the business and it underscores the longer term strength.

Speaker Change: Have around the momentum of the business when I think about individual product commentary, we talked about it a lot on this call you see record commercial subscriptions in the creative business.

Speaker Change: In in Q1.

Speaker Change: You see engagement going up on the products.

Speaker Change: Usage of Firefly capabilities in Photoshop was at an all time high in Q1 express exports more than doubling.

Speaker Change: With the introduction of express mobile.

Speaker Change: In beta now going to <unk> in the coming months AI assistant Acrobat same fact pattern.

Unknown Executive: You can see that momentum as we look into the back half of the year. And from an enterprise standpoint, the performance in the business was really, really superb in Q1. The strongest Q1 ever in the enterprise. So there are a lot of fundamental components that we're seeing around the performance of the business that give us confidence as we look into the back half of the year. Thank you so much.

Speaker Change: You can see that momentum as we look into the back half of the year.

Speaker Change: And from an enterprise standpoint.

Speaker Change: The performance in the business was really really superb in Q1 strongest Q1 ever in the enterprise. So there's a lot of fundamental components that we're seeing around performance of the business that give us confidence as we look into the back half of the year.

Speaker Change: Super Thank you so much.

Speaker Change: Mhm.

Speaker Change: We'll take our next question.

Morgan Stanley: With Morgan Stanley.

Morgan Stanley: Please go ahead.

Morgan Stanley: Excellent. Thank you guys and I appreciate you squeezing me in.

Unknown Executive: Thank you, guys, and I appreciate you squeezing me in. I'm going to take one last crack at this. Shantanu and team, like, we definitely hear your confidence in the business, but obviously, the stock market reactions reflect investors are worried about something. And the two things that worry investors more so than anything are uncertainty, number one, and number two is the back half ramps, right? And so I think what investors would really love to hear Dan Durn actually say, we still expect to do 1.9 billion in net new digital media ARR and get some certainty there, and then also have a little bit more certainty or a little bit more explanation of what are the building blocks of that second half ramp.

Morgan Stanley: I'm going to take one last crack at this.

Morgan Stanley: Sean and team.

Speaker Change: We definitely hear your confidence in the business, but obviously the stock market reactions, reflecting.

Speaker Change: Investors.

Speaker Change: Are worried about something in the two things that worry investors more so than anything is.

Speaker Change: Uncertainty number one and number two is back half ramps right.

Speaker Change: And so I think what investors would really love to hear in Danvers, and actually say you still expect to do $1 9 billion in net new.

Speaker Change: Digital media <unk> and get some certainty there and then also have a little bit more.

Speaker Change: Certainty or a little bit more explanation of what are the building blocks of that second half ramp.

Unknown Executive: Like, which products are expected to go GA? Are we including stuff like document intelligence? Is there new monetization avenues that we're putting into the back half? Or is there just a mechanism within sort of the Decorative Cloud pricing that's going to turn on in the back half? Like, any further specification in there, I think would help sort of close the gap between your confidence and sort of the lack of confidence exhibited by the after hours. And let me tackle that, Keith, and maybe I'll just tackle it by taking a couple of the other questions as well, summarizing that and ending with your question associated with the financial results. I mean, I think the first question that I hear across many folks is, hey, with the advent of AI and the increase in the number of models that people are seeing, whether they be image models or video models, does that mean that the number of seats, both for Adobe and in the world, do they increase or do they decrease?

Which products are expected to <unk>, including stuff like document intelligence.

Speaker Change: Intelligence is there new monetization avenues that we're putting into the back half or is it just a mechanism within sort of the creative cloud pricing thats going to turn on in the back half of the year like any further specification in there I think would help sort of close the gap between your confidence in sort of the lack of confidence exhibited by the after hour reaction.

Speaker Change: And let me tackle that Keith and maybe I'll just tackle it by taking a couple of the other questions as well summarizing that and ending with your question associated with the financial results.

Speaker Change: I think the first question that I hear across many folks is hey, with the advent of AI and the increase in the number of models that people are seeing whether they be image models of video models does that mean that the number of seats.

Both for Adobe in the World do they increase or do they decrease to me. There is no question in my mind that when you talk about the models and interfaces that people will used.

Unknown Executive: To me, there's no question in my mind that when you talk about the models and interfaces that people will use to create creative content, the number of interfaces will increase. So Adobe has to leverage that massive opportunity, but big picture models will only cause more opportunities for interfaces. And I think we're uniquely qualified to engage in that. So that's the first one.

Speaker Change: Do you know do creative content that the number of interfaces will increase so.

Speaker Change: Adobe has to go leverage that massive opportunity, but big picture models will only cause more opportunity for interfaces and I think we're uniquely qualified to engage in that so that's the first one the second one I would say is that does adobe innovate and when we do that do we only leverage the <unk>.

Unknown Executive: The second one I would say is that, you know, does Adobe innovate? And when we do that, do we only leverage the Adobe model, or is there a way in which we can leverage every other model that exists out there? Much like we did with plugins, with all of our creative applications; any other model that's out there, we will certainly provide ways to integrate that into our applications.

Speaker Change: Obi model or is there a way in which we can leverage every other model that exists out there much like we did with plug ins with all of our creative applications any other model. That's out there we will certainly provide ways to integrate that into our application. So anybody who's using our application benefits not just from our model creation, but.

Unknown Executive: So anybody who's using our application benefits not just from our model creation but from any other model creation that's out there. The way we first started to execute against that was in the enterprise, because for us, the enterprise and the ability to create custom models so people can tweak their models to be able to do things within Photoshop that are specific to a retailer or a financial service were where we focused. But long term, certainly, as I've said, with our partnerships, we will have the ability for Adobe in our interfaces to leverage any other model that's out there, which again further expands our opportunity. I think as we play out the year, when we gave our targets for the $1.9 billion in ARR and the $410 million in digital media ARR for Q1, we factored in both our product roadmap and how things, you know, would evolve in the year.

Speaker Change: From any other module creation that's out there the way we first started to execute against that is in the enterprise because for us the enterprise and the ability to create custom models. So people can tweak their models to be able to do things within photoshop that are specific to a retailer or a financial service was where we focus.

Speaker Change: But.

Speaker Change: Long term certainly as I've said with our partnerships, we will have the ability for adobe in our interfaces to leverage any other model that's out there, which again further expands our opportunity I think as we play out the year. When we gave our targets for the $1 9 billion an IRR in the fall.

Speaker Change: Wondered 10 million in digital media IRR for Q1, it factored in both our product roadmap and how things.

Speaker Change: It would evolve in the year all of the product Roadmaps, we knew whether it was acrobat whether it was express whether it was Firefly, where there was creative cloud or whether it's gen studio that brings all of these together we knew the product roadmap, which we are executing against in the first half of the year a lot of that was beta and in the second half of the year a lot of that.

Unknown Executive: All of the product roadmaps, we knew whether it was Acrobat, whether it was Express, whether it was Firefly, whether it was Creative Cloud, or whether it was Gen Studio that brings all of these together. We knew the product roadmap that we're executing against in the first half of the year, a lot of that was beta. And in the second half of the year, a lot of that is monetization, playing out as expected. If anything, I would say the excitement around that, and in particular, the enterprise, is faster than expected. And so I think our ability to monetize it, not just through new seats but also through these new Firefly services, is expanded as it relates to, you know, what we are doing.

Monetization, it's playing out as expected if anything I would say the excitement around that and in particular, the enterprise is faster than expected and so I think our ability to monetize it just not just through new seats, but also through these new Firefly services is expanded as it relates to what we're doing and then is it.

Unknown Executive: And then as it relates to your question around financial results and the go-forward execution, we gave ourselves a Q1 target, and we beat that Q1 target. And you know, that gives us confidence that, you know, the financial targets that we gave at the beginning of the year, we're ahead of that. And that's how I'll play it out. You're right, you have to model it.

Speaker Change: Relates to your question around financial results in the go forward execution.

Speaker Change: We gave our Q1 target we beat the Q1 target and that gives us confidence that the financial target that we gave at the beginning of the year. We're ahead of that and that's how we'll play it out Youre right you have to model. It you can look at last year's model and look at last year's model and say Hey, They got to $1 91 3 billion is there.

Unknown Executive: You can look at last year's model and look at last year's model and say, hey, they got to 1.913 billion. If they're ahead, you know, does that fundamentally change Adobe's thesis on why we get to 1.9 and beyond? And in my mind, it doesn't. And so that's the way I would answer that question. We have to go execute against the opportunity that we have. I look forward to those who are at the summit; I'm sure we'll have a little bit more conversation. But Q1 was a strong start. It was a strong start against product execution, and it was a strong start against the financial metrics that we outlined.

Speaker Change: Ahead does that fundamentally change adobe's thesis on why we get to $1 nine and beyond and in my mind It doesn't.

Speaker Change: And so that's the way I would answer that question, we have to go execute against the opportunity that we have and look forward to those who are at summit I'm sure. We'll have a little bit more conversation, but Q1 was a strong start there was a strong start against product execution. It was a strong start against the financial metrics that we are.

Unknown Executive: And we're going to do it again, Keith. So that's how I'd answer your question. But thank you all for joining. All right. Thanks, everybody. I look forward to speaking with many of you soon. And this concludes the call. We look forward to seeing you at Summit.

Speaker Change: Outline and we're going to go do it again, Keith So that's how I would answer your question, but thank you all for joining us and with that I'll hand, it back to Jonathan.

Jonathan: Alright, thanks, everybody I look forward to speaking with many of you soon and this this concludes the call. We look forward to seeing you at summit.

Jonathan: Okay.

Jonathan: Yeah.

Jonathan: [music].

Jonathan: Okay.

Jonathan: Okay.

Jonathan: Okay.

Jonathan: Yeah.