Q4 2024 Adobe Inc Earnings Call

December 11, 2024

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Good day and welcome to the Q4.

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Speaker Change: And welcome to the Q4 FY 'twenty for Adobe Earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Steve de S. V. P. D ex CFO and corporate finance interim head of IR. Please go ahead Sir.

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Good afternoon, and thank you for joining us with me on the call today are <unk>, Ryan Davis Chair and CEO, David Wadhwani President of digital media.

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And they will check Rodolphe president of digital experience, and then executive Vice President and CFO.

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Speaker Change: On this call, which is being recorded we will discuss adobe's fourth quarter and fiscal year 2024 financial results.

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

Speaker Change: The information discussed on this call, including our financial targets and product plans is as of today December 11th and contains forward looking statements that involve risks uncertainties and assumptions.

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.

Speaker Change: Good day and welcome to the Q4 FY 'twenty for Adobe Earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Steve Day, SVP, Dx CFO and corporate finance.

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

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

Interim head of IR. Please go ahead Sir.

Speaker Change: During this presentation adobe's executives, we refer to constant currency growth rates unless otherwise stated.

Speaker Change: Good afternoon, and thank you for joining us with me on the call today are sheltering in Orion Adobe's Chair and CEO, David Wadhwani President of digital media and.

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

Speaker Change: A nail check resort fee President of digital experience, and then Dan Executive Vice President and CFO.

Sean: I will now turn the call over to Sean today.

Speaker Change: Thanks, Steve Good afternoon, and thank you for joining us in Q4, we achieved revenue of $5 six $1 billion, representing 11% year over year growth.

Speaker Change: On this call, which is being recorded we will discuss adobe's fourth quarter and fiscal year 2024 financial results you can find our press release as well as pdfs of our prepared remarks and financial results on a Davis Investor Relations website.

Speaker Change: In our digital media business, we delivered record net new IRR of $578 million and our digital experience business achieved subscription revenue of $1 7 billion, representing 12% year over year growth.

Speaker Change: 2024, it was a year of records for Adobe, We achieved record revenue of 20, 151 billion, representing 11% year over year growth.

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

Speaker Change: GAAP earnings per share was $12 36, and non-GAAP earnings per share was $18 42, representing 5% and 15% year over year growth respectively.

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

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

Speaker Change: We had several new milestones with our AI innovations, enabling us to add more than $2 billion in digital media net new anr and surpass $1 billion in the ending book of business for Adobe experience platform and native apps.

Speaker Change: During this presentation Davis executives, we refer to constant currency growth rates unless otherwise stated non.

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

Speaker Change: I'll now turn the call over to Sean today.

Sean: Thanks, Steve Good afternoon, and thank you for joining us in Q4, we achieved revenue of $5.61 billion, representing 11% year over year growth.

Speaker Change: The digital experience business crossed $5 billion in revenue, making us one of the mission critical providers of marketing technology in the world.

We exited the year with 1990 6 billion in <unk> and cash and short term investments of 789 billion.

Sean: In our digital media business, we delivered record net new a IRR of $578 million and our digital experience business achieved subscription revenue of 1.27 billion, representing 12% year over year growth.

Speaker Change: 2024 was also a transformative year of product innovation, where we delivered foundational technology platforms.

Sean: 2024 was a year of records for Adobe achieved record revenue of 20, 151 billion, representing 11% year over year growth.

Speaker Change: We introduced multiple generative AI models in the Adobe Firefly family, including imaging vector design and most recently video <unk>.

Speaker Change: Adobe now has a comprehensive set of generative AI models designed to be commercially safe for creative content offering unprecedented levels of output quality and user control in our applications.

Sean: GAAP earnings per share was 12, 36, and non-GAAP earnings per share was $18 42, representing 5% and 15% year over year growth respectively.

Sean: We had several new milestones with our AI innovations, enabling us to add more than $2 billion in digital media net new anr and surpass $1 billion in the ending book of business for Adobe experience platform and native apps.

Speaker Change: We re imagine creativity and productivity for a broader set of customers with Adobe Express the quick and easy create anything app.

The deep integration of Firefly across our flagship applications in creative cloud document cloud and experience cloud is driving record customer adoption and usage.

Sean: The digital experience business crossed $5 billion in revenue, making us one of the mission critical providers of marketing technology in the world.

Speaker Change: Firefly power generations across our tools surpassed $16 billion with every month this past quarter setting a new record.

Sean: We exited the year with 1990 6 billion in our appeal and cash and short term investments of 789 billion.

Speaker Change: We enhanced document productivity with AI assistant in Adobe Acrobat and reader.

Sean: 2024 was also a transformative year of product innovation, where we delivered foundational technology platforms.

Speaker Change: Unlocking even greater value from the trillions of pdfs around the world.

Sean: We introduced multiple generative AI models in the Adobe Firefly family, including imaging vector design and most recently video <unk>.

Speaker Change: We have successfully scaled adobe experience platform of native apps to deliver the fundamental infrastructure required for customer engagement.

Adobe now has a comprehensive set of generative AI models designed to be commercially safe for creative content offering unprecedented levels of output quality and user control in our applications.

Speaker Change: We're accelerating automated decisioning and powering audiences journeys and channels to deliver truly personalized experiences at scale.

Speaker Change: We set the stage to drive an AI content revolution by bringing content and data together in Adobe Gen studio integrating high velocity creative expression with enterprise activation.

Sean: Where do you imagine creativity and productivity for a broader set of customers with Adobe Express the quick and easy create anything app.

Speaker Change: The release of Adobe Gen studio for performance marketing integrates creative cloud Xpress and experience cloud and extends our end to end content supply chain solution empowering freelancers agencies and enterprises to accelerate the delivery of content advertising and marketing campaign.

Sean: The deep integration of Firefly across our flagship applications in creative cloud document cloud and experience cloud is driving record customer adoption and usage.

Sean: Firefly power generations across our twos surpassed $16 billion with every month this past quarter setting a new record.

Speaker Change: <unk>.

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

Sean: We enhanced document productivity with AI assistant in Adobe Acrobat and reader.

David: Thank you <unk> Hello, everyone. In Q4, we achieved net new digital media <unk> of $578 million and revenue of $4 $1 5 billion, which grew 12% year over year fueled by innovation in both our creative and document businesses. We ended the year with just over $2 billion of net new digital media <unk> for the firm.

Sean: Unlocking even greater value from the trillions of pdfs around the world.

Sean: We have successfully scaled adobe experience platform and native apps to deliver the fundamental infrastructure required for customer engagement.

Sean: We're accelerating automated decisioning and powering audiences journeys and channels to deliver truly personalized experiences at scale.

David: Time ever as a result of accelerated product innovation record traffic to Adobe Dot com and engagement on social and mobile as well as increasing value for enterprise customers through Firefly services, and Jen studio, which bring together, our creative and experienced clouds.

Sean: We set the stage to drive an AI content revolution by bringing content and data together in Adobe Gen studio integrating high velocity creative expression with enterprise activation.

David: On the document cloud side PDF continues to be the global standard for digital documents and Adobe Acrobat is revolutionizing the way people engage with them across mobile web and desktop.

Sean: The release of Adobe Gen studio for performance marketing integrates creative cloud Express and experience cloud and extends our end to end content supply chain solution empowering freelancers agencies and enterprises to accelerate the delivery of content advertising and marketing campaign.

We took a major step forward in FY 'twenty four with the introduction of AI assistant and acrobat and reader AI assistant and other AI features like liquid mode, and Firefly are accelerating productivity through faster insights smarter document editing and integrated image generation.

Sean: <unk>.

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

David: Our recent productivity study found that users leveraging AI assistant completed their document related tasks four times faster on average.

David Wadhwani: Thank you <unk> Hello, everyone. In Q4, we achieved net new digital media <unk> of $578 million and revenue of 4.15 billion, which grew 12% year over year fueled by innovation in both our creative and document businesses.

David: AI assistant is now available in acrobat across desktop web and mobile and integrated into our edge chrome and Microsoft teams extensions and.

David: In Q4, we continued to extend its value with specialized AI for contracts and scanned documents support for additional languages and the ability to analyze larger documents and.

David Wadhwani: We ended the year with just over $2 billion of net new digital media <unk> for the first time ever as a result of accelerated product innovation.

David Wadhwani: <unk> traffic to Adobe Dot com and engagement on social and mobile as well as increasing value for enterprise customers through Firefly services, and Jen studio, which bring together, our creative and experienced clouds.

David: In acrobat web our integrations with Adobe express allow users to generate images and quickly satellites content.

We saw AI assistant conversations double quarter over quarter driving deeper customer value.

David Wadhwani: On the document cloud side PDF continues to be the global standard for digital documents and Adobe Acrobat is revolutionizing the way people engage with them across mobile web and desktop.

David: In Q4, we achieved document cloud revenue of 843 million growing 17% year over year, we set a record for net new document cloud <unk> of $173 million with ending <unk> of $3 $4 8 billion growing 23% year over year.

David Wadhwani: We took a major step forward in FY 'twenty four with the introduction of AI assistant and acrobat and reader.

David Wadhwani: AI assistant and other AI features like liquid mode, and Firefly are accelerating productivity through faster insights smarter document editing and integrated image generation.

David: Other highlights include continued growth of monthly active users, which grew over 25% year over year, surpassing 650 million paid and free users.

David Wadhwani: A recent productivity study found that users leveraging AI assistant completed their document related tasks four times faster on average.

David: Strong top of funnel momentum through acrobat web with monthly active users up nearly 50% year over year.

David Wadhwani: AI assistant is now available in acrobat across desktop web and mobile and integrated into our edge chrome and Microsoft teams extensions and.

David: Strength in acrobat pro single App in both document cloud and creative cloud offerings.

David: A great back to school season, with a new AI assistant offering an education for students.

David Wadhwani: In Q4, we continued to extend its value with specialized AI for contracts and scan documents support for additional languages and the ability to analyze larger documents.

David: Key enterprise customer wins include Abbott laboratories, BWI Gmbh's defense information systems Agency, Kaiser Permanente Novo Nordisk.

David Wadhwani: In acrobat web our integrations with Adobe express allow users to generate images and quickly stylized content.

David: U S cellular and the U S Department of state.

David Wadhwani: We saw AI assistant conversations double quarter over quarter driving deeper customer value.

Creative cloud also had a strong year as demand for content continues to grow across mobile desktop and streaming platforms Adobe Max the Premier Creativity conference showcased our FY 'twenty for innovation and drove over half a billion video views across all channels.

In Q4, we achieved document cloud revenue of 843 million growing 17% year over year, we set a record for net new document cloud <unk> of $173 million with ending <unk> of 3.48 billion growing 23% year over year.

David: We have made major strides with our generative AI models with the introduction of Firefly image model III enhancements to our Vectra models, Richard design models, and the all new Firefly video model.

David Wadhwani: Other highlights include continued growth of monthly active users, which grew over 25% year over year, surpassing 650 million paid and free users.

David: These models are incredibly powerful on their own and their deep integration into our tools like lightroom and Photoshop premiere in design and express have brought incredible value to millions of creative professionals around the world.

David Wadhwani: Strong top of funnel momentum through acrobat web with monthly active users up nearly 50% year over year.

Strength in acrobat pro single App in both document cloud and creative cloud offerings.

David: We have brought our creative and experienced clouds together through the introduction of Firefly services and Jen studio addressing the growing need for scale content production and enterprises Firefly generations continue to accelerate and have now crossed 16 billion cumulative generations.

David Wadhwani: A great back to school season, with a new AI assistant offering an education for students.

David Wadhwani: Key enterprise customer wins include Abbott laboratories, BWI G M. BH defense information systems Agency Kaiser Permanente.

David: In Q4, we achieved three 3 billion in revenue, which grew 11% year over year net new creative cloud <unk> was $405 million.

David Wadhwani: Over Nordisk.

David Wadhwani: <unk> U S cellular and the U S Department of state.

David Wadhwani: Creative cloud also had a strong year as demand for content continues to grow across mobile desktop and streaming platforms Adobe Max the Premier Creativity conference showcased our FY 'twenty for innovation and drove over half a billion video views across all channels.

David: Other highlights include adoption of Adobe expressed by approximately 4000 businesses in the quarter and an 84% year over year increase in the number of students with access to express premium as part of this year's back to school season.

David Wadhwani: We have made major strides with our generative AI models with the introduction of Firefly image model III enhancements to our vector models, Richard design models and the all new Firefly video model.

David: Adobe Express saw strong ecosystem growth with over 180 plug ins available in the express marketplace and integrations with leading social productivity and collaboration apps like chat GPT, Google Slack Wix box hub spot and web flow significantly increasing our customer reach.

David Wadhwani: These models are incredibly powerful on their own and their deep integration into our tools like lightroom and Photoshop premiere in design and express have brought incredible value to millions of creative professionals around the world.

David: The launch of the Firefly video model and its unique integration and premiere pro and limited public beta garnered massive customer interest and we look forward to making it more broadly available in early 2025.

David Wadhwani: We have brought our creative and experienced clouds together through the introduction of Firefly services and Jen studio addressing the growing need for scaled content production and enterprises.

David: This feature drove a 70% increase in the number of Premier Pro beta users since it was introduced at Max.

David Wadhwani: Phi generations continue to accelerate and have now crossed 16 billion cumulative generations.

David: Enhancements to Firefly image vector and design models include four times faster image generation and new capabilities integrated into Photoshop illustrator premiere pro and Adobe Express.

David Wadhwani: In Q4, we achieved $3 3 billion in revenue, which grew 11% year over year.

David Wadhwani: Net new creative cloud <unk> was $405 million.

David Wadhwani: Other highlights include adoption of Adobe Express by approximately 4000 businesses in the quarter and an 84% year over year increase in the number of students with access to express premium as part of this year's back to school season.

David: Strong adoption of lightroom mobile with customers embracing innovations like generative remove and lens blur as well as quick actions, which streamlines editing and increases discovery and adoption of premium features.

David: Just this morning, Adobe Lightroom was recognized as the Mac app of the year and Apple's annual App store Awards.

David Wadhwani: Adobe Express saw strong ecosystem growth with over 180 plug ins available in the express marketplace and integrations with leading social productivity and collaboration apps like chat GPT, Google Slack Wix box hub spot and web flow significantly increasing our customer reach.

David: The launch of the new frame <unk> streamlines creative management for video projects to enable end to end editing capabilities and seamless collaboration between editors and their stakeholders.

David: Firefly services adoption continued to ramp as enterprises, such as Pepsi and tapestry use it to scale content production, given the robust Apis and ease of creating custom models that are designed to be commercially safe.

David Wadhwani: The launch of the Firefly video model and its unique integration and premiere pro and limited public beta garnered massive customer interest and we look forward to making it more broadly available in early 2025.

David: Key enterprise customer wins include alphabet American Express Coca Cola, Johnson, and Johnson, <unk>, Nestle, Procter and Gamble T mobile in the U S Department of defense.

David Wadhwani: This feature drove a 70% increase in the number of Premier Pro beta users since it was introduced at Max.

David Wadhwani: Enhancements to Firefly image vector and design models include four times faster image generation and new capabilities integrated into Photoshop illustrator premiere pro and Adobe Express.

David: Our AI product releases and business evolution in FY 'twenty four has set the stage for another strong year ahead, as we expand to new audiences deliver more value to existing users and increasingly integrate our digital media and digital experience cloud to create differentiated business solutions.

David Wadhwani: Strong adoption of lightroom mobile with customers embracing innovations like generative remove and lens blur as well as quick actions, which streamlines editing and increases discovery and adoption of premium features.

David: We will do this by accelerating the adoption of premium offers including express Lite room, and acrobat on web and mobile as well as expanding access to acrobat AI assistant, which delivered strong financial performance in FY 'twenty four.

David Wadhwani: Just this morning, Adobe Lightroom was recognized as the Mac app of the year and Apple's annual App store Awards.

David Wadhwani: The launch of the new frame I O V for streamlines creative management for video projects to enable end to end editing capabilities and seamless collaboration between editors and their stakeholders.

David: Growing our core creative business by continuing to expand our AI innovations and our flagship applications as well as bringing them to web and mobile. In addition, we will soon introduce a new higher priced firefight offering that includes our video models as a comprehensive AI solution for creative professionals.

David Wadhwani: Firefly services adoption continued to ramp as enterprises, such as Pepsi and tapestry use it to scale content production, given the robust Apis and ease of creating custom models that are designed to be commercially safe.

David: This will allow us to monetize new users provide additional value to existing customers and increased <unk>.

Key enterprise customer wins include alphabet American Express Coca Cola, Johnson, and Johnson, Lv, MH, Nestle, Procter and Gamble T mobile in the U S Department of defense.

David: And further accelerating Firefly services, which saw significant demand in FY 'twenty four by integrating it into Gen studio to provide enterprises with solutions to exponentially scale their content production capabilities with AI.

David Wadhwani: Our AI product releases and business evolution in FY 'twenty four has set the stage for another strong year ahead, as we expand to new audiences deliver more value to existing users and increasingly integrate our digital media and digital experience clouds to create differentiated business solutions.

David: We're thrilled with the response to our innovations in FY 'twenty four excited to release, new capabilities and look forward to delighting customers in the year ahead.

Aneel: Now pass it to Aneel.

Aneel: Thanks, David Hello, everyone.

Aneel: The experience cloud business had a strong close to the year achieving revenue of $1 $4 billion for the quarter and a record 5.3 dollars $7 billion in revenue in fiscal 2024.

We will do this by accelerating the adoption of freemium offers including express Lite room, and acrobat on web and mobile as well as expanding access to acrobat AI assistant, which delivered strong financial performance in FY 'twenty four.

Aneel: Subscription revenue in the quarter was $1 two 7 billion.

David Wadhwani: Growing our core creative business by continuing to expand our AI innovations and our flagship applications as well as bringing them to web and mobile. In addition, we will soon introduce a new higher priced Firefly offering that includes our video models as a comprehensive AI solution for creative professionals.

Aneel: Representing 12% year over year growth.

Aneel: The book of business for Adobe experience platform and native apps real time, CDP customer journey analytics and journey optimizer surpassed $1 billion in the quarter with 48 of the Fortune 100 companies now leveraging these solutions.

David Wadhwani: This will allow us to monetize new users provide additional value to existing customers and increase our booth.

Aneel: The market opportunity for customer experience management is large and growing.

Aneel: Both <unk> and <unk> companies are selecting adobe as the strategic technology partner to accelerate customer acquisition engagement and retention.

David Wadhwani: And further accelerating Firefly services, which saw significant demand in FY 'twenty four by integrating it into Gen studio to provide enterprises with solutions to exponentially scale their content production capabilities with AI.

Aneel: Our leading solutions spanning content data and customer journeys empower businesses to drive topline growth, while simultaneously delivering productivity gains.

David Wadhwani: We're thrilled with the response to our innovations in FY 'twenty four excited to release, new capabilities and look forward to delighting customers in the year ahead.

Aneel: The AI innovations, we have delivered enable our customers to accelerate the delivery of personalized experiences at scale and have been built to satisfy enterprise governance requirements.

Now pass it to Aneel.

Aneel: Thanks, David Hello, everyone.

The experience cloud business had a strong close to the year achieving revenue of $1 $4 billion for the quarter and a record 5.3 dollars $7 billion in revenue in fiscal 2024.

Aneel: Adobe experience platform AI assistant empowers marketers to automate tasks and generate new audiences in journeys.

Aneel: Adobe experience manager generate variations provides dynamic and personalized content creation natively to Aes <unk>.

Subscription revenue in the quarter was 1.27 billion.

Aneel: Enabling customers to deliver more compelling and engaging experiences on their websites.

Representing 12% year over year growth.

Aneel: We are transforming the content supply chain for enterprises, with Adobe <unk> studio, which natively integrates multiple adobe applications across creative cloud and experience cloud, including Express Firefly work front experienced manager customer journey analytics and journey optimizer.

Aneel: The market opportunity for customer experience management is large and growing.

Aneel: Jen studio enables agencies and enterprises to unlock new levels of creativity and efficiency across content creation and production workflow and planning asset management delivery and activation and reporting and insights.

Aneel: Both <unk> and <unk> companies are selecting adobe as the strategic technology partner to accelerate customer acquisition engagement and retention.

Aneel: Our leading solutions spanning content data and customer journeys empower businesses to drive topline growth, while simultaneously delivering productivity gains.

Aneel: I don't begin studio for performance marketing is a great addition to the gin studio portfolio offering an integrated application to create paid social ads display ads banners and marketing E mails by leveraging preapproved on brand content.

The AI innovations, we have delivered enable our customers to accelerate the delivery of personalized experiences at scale and have been built to satisfy enterprise governance requirements.

Aneel: It brings together the creative teams that defined the foundational requirements of our brand, including guidelines around brand voice channels and images with marketing teams that need to deliver numerous content variations with speed and agility.

Aneel: Adobe experience platform AI assistant empowers marketers to automate tasks and generate new audiences in journeys.

Aneel: Adobe experience manager generates variations provides dynamic and personalized content creation natively through <unk> <unk>.

Aneel: We are seeing strong customer demand for Adobe Gen studio for performance marketing since its general availability at Max.

Aneel: Enabling customers to deliver more compelling and engaging experiences on their website.

Aneel: Jen studio is the answer to address how marketing is going to transform in the era of AI for Cmo's CIO and CFO.

Aneel: We are transforming the content supply chain for enterprises, with Adobe <unk> studio, which natively integrates multiple adobe applications across creative cloud and experience cloud, including express Firefly Warfront experienced manager customer journey analytics and journey optimizer.

Aneel: Other highlights include expanded partnership with Amazon to make Adobe experience platform available on Amazon Web services and external leadership across public clouds.

Aneel: Enterprises will soon be able to access the full power of AEP and native apps on AWS.

Aneel: Integration partnerships with Google's campaign managers, $2, 60, meta Microsoft advertising snap and Tic Toc offering marketing teams a holistic view of campaign performance directly in Adobe Gen studio to optimize the ROI of their ad spend.

Aneel: I don't begin studio for performance marketing is a great addition to the Gen studio portfolio offering an integrated application to create paid social ads display ads banners and marketing E mails by leveraging preapproved on brand content.

Strong industry analyst recognition in major endless reports, including the Gartner Magic quadrant for digital Commerce, and the Forrester wave for cross channel marketing hubs.

Aneel: It brings together creative teams that defined the foundational requirements of our brand, including guidelines around brand voice channels and images with marketing teams that need to deliver numerous content variations with speed and agility.

In particular, Gartner recognized Adobe as critical capabilities for multichannel marketing such as our differentiated ability to adapt customer journeys in real time based on customer behavior.

Aneel: We are seeing strong customer demand for Adobe Gen studio for performance marketing since its general availability at Max.

Aneel: AI innovations delivered in the premium tiers and add ons helped us close our largest bookings quarter ever with key global customer wins, including Canada Ali Ads American Express Bank of America, BMW Centene CIBC Cisco Disney.

Aneel: Jen studio is the answer to address how marketing is going to transform in the era of AI for Cmos <unk> and Cfos.

Aneel: Other highlights include expanded partnership with Amazon to make Adobe experience platform available on Amazon Web services and external leadership across public clouds.

Aneel: Kinetics gap GM, JP, Morgan Chase, Paypal, Samsung Tesco and Wells Fargo.

Enterprises will soon be able to access the full power of AEP and native apps on AWS.

Aneel: Digital remains a critical growth imperative for businesses around the world.

Aneel: Integration partnerships with Google's campaign managers through 60, meta Microsoft advertising snap and Tic Toc offering marketing teams a holistic view of campaign performance directly in Adobe Gen studio to optimize the ROI of their ad spend.

Aneel: Adobe digital insights, which analyzes trillions of data points reported that both black Friday, and cyber Monday sales hit record highs of $10 8 billion in.

Aneel: And $13 3 billion.

Aneel: Jumping 10, 2% and seven 3% from last year, respectively.

Aneel: Strong industry analyst recognition in major analyst reports, including the Gartner Magic quadrant for digital Commerce, and the Forrester wave for cross channel marketing hubs.

Aneel: We expect the full holiday season to hit $248 billion.

Aneel: Up eight 4% year over year.

Aneel: In particular, Gartner recognized Adobe as critical capabilities for multichannel marketing such as our differentiated ability to adapt customer journeys in real time based on customer behavior.

Aneel: With the availability of our new offerings in FY 'twenty five Adobe has a unique opportunity to capitalize on the breadth of the solutions to further optimize our integrated go to market field organization.

Aneel: AI innovations delivered in the premium tiers and add ons helped us close our largest bookings quarter ever with key global customer wins, including at Canada Ali Ads American Express Bank of America, BMW Centene CIBC Cisco Disney.

Aneel: We are expanding our enterprise go to market teams to sell these integrated solutions that cut across digital media and digital experience globally under the new Gen studio umbrella.

Aneel: We have seen early success with this strategy that included express and <unk> services in Q4.

Aneel: As we enable our worldwide field organization in Q1, we anticipate acceleration of this pipeline throughout the rest of the year and beyond.

Aneel: Kinetics gap GM, JP, Morgan Chase, Paypal, Samsung Tesco and Wells Fargo.

We are confident of continuing our leadership and momentum into 2025.

Aneel: Digital remains a critical growth imperative for businesses around the world.

Aneel: I will now pass it to that.

Aneel: Adobe digital insights, which analyzes trillions of data points reported that both black Friday, and cyber Monday sales hit record highs of $10 8 billion and $13 3 billion.

Thanks Chanel.

Our earnings report today covers both Q4 and FY 'twenty four results highlighting growth drivers across our businesses and I'll finish with financial targets.

Aneel: Jumping 10, 2% and seven 3% from last year, respectively.

Aneel: We are proud of the performance, we have driven in FY 'twenty for delivering record revenue EPS and operating cash flows while aggressively investing in AI product innovation.

We expect the full holiday season to hit $248 billion.

Aneel: Up eight 4% year over year.

Aneel: New AI releases, including express acrobat AI assistant Firefly services, Dx premium tiers, and Jen studio for performance marketing have expanded the portfolio of products driving proliferation and meaningful Gen AI monetization.

Expanding our enterprise go to market teams to sell these integrated solutions that cut across digital media and digital experience globally under the new Gen studio umbrella.

Aneel: We had a strong finish to the year with records in digital media net new <unk> and digital experience bookings.

Aneel: We have seen early success for this strategy that included express and Firefly services in Q4.

Aneel: In FY 'twenty for Adobe achieved record revenue of 20, 151 billion, which represents 11% year over year growth as reported and in constant currency.

As we enable our worldwide field organization in Q1, we anticipate acceleration of this pipeline throughout the rest of the year and beyond.

Aneel: We are confident of continuing our leadership and momentum into 2025.

Aneel: GAAP EPS for the year was $12 36.

Aneel: And non-GAAP EPS was $18 42.

Speaker Change: I will now pass it to that.

Aneel: Growing 5% and 15% year over year, respectively.

Speaker Change: Thanks Danielle.

Speaker Change: Our earnings report today covers both Q4 and FY 'twenty four results highlighting growth drivers across our businesses and I'll finish with financial targets.

Aneel: FY 'twenty for business and financial highlights included.

Aneel: Digital media revenue of $15 86 billion.

Speaker Change: We are proud of the performance, we have driven in FY 'twenty for delivering record revenue <unk>.

Aneel: Net new digital media <unk> of 2.00 billion.

Speaker Change: And operating cash flows while aggressively investing in AI product innovation.

Aneel: Digital experience revenue of $5 $3 7 billion.

Aneel: Cash flows from operations of 8.06 billion.

Speaker Change: New AI releases, including express acrobat AI assistant Firefly services, Dx premium tiers, and Jen studio for performance marketing have expanded the portfolio of products driving proliferation and meaningful Gen AI monetization.

Aneel: Our Poe of $19 96 billion exiting the year.

And repurchasing approximately $17 5 million shares of our stock during the year.

Aneel: In the fourth quarter of FY 'twenty for Adobe achieved revenue of $5, six 1 billion, which represents 11% year over year growth as reported and in constant currency.

Speaker Change: We had a strong finish to the year with records in digital media net new <unk> and digital experience bookings.

Aneel: GAAP diluted earnings per share in Q4 was $3 79.

Speaker Change: In FY 'twenty for Adobe achieved record revenue of 20, 151 billion, which represents 11% year over year growth as reported and in constant currency.

Aneel: And non-GAAP diluted earnings per share was a record $4 81.

Aneel: Growing 17% and 13% year over year, respectively.

Speaker Change: GAAP EPS for the year was $12 36.

Aneel: Q4 business and financial highlights included digital media revenue of $4. One 5 billion net new digital media <unk> of $578 million.

Speaker Change: And non-GAAP EPS was $18.42 growing 5% and 15% year over year, respectively.

Speaker Change: FY 'twenty for business and financial highlights included.

Aneel: Digital experience revenue of 140 billion.

Aneel: Cash flows from operations of $2 92 billion and.

Digital media revenue of $15 86 billion.

Aneel: And added 182 billion to <unk> in the quarter.

Net new digital media <unk> of 2.00 billion.

Aneel: In our digital media segment, we achieved Q4 revenue of $4 5 billion, which represents 12% year over year growth as reported and in constant currency.

Speaker Change: Digital experience revenue of $5 three 7 billion.

Speaker Change: Cash flows from operations of 8.06 billion.

Speaker Change: RP O of $19 96 billion exiting the year.

Aneel: We exited the quarter with $17 three 3 billion of digital media <unk> growing our ending <unk> book of business, 13% year over year in constant currency.

Speaker Change: And repurchasing approximately $17 5 million shares of our stock during the year.

Speaker Change: In the fourth quarter of FY 'twenty for Adobe achieved revenue of $5, six 1 billion, which represents 11% year over year growth as reported and in constant currency.

Aneel: Adobe achieved document cloud revenue of 843 million, which represents 17% year over year growth as reported and in constant currency.

Speaker Change: GAAP diluted earnings per share in Q4 was $3 79.

Aneel: In the quarter, we added $173 million of net new document cloud <unk>.

And non-GAAP diluted earnings per share was a record $4 81 growing.

Aneel: Growing our ending <unk> book of business, 23% year over year in constant currency.

Speaker Change: Growing 17% and 13% year over year, respectively.

Aneel: Fourth quarter document cloud growth drivers included <unk>.

Speaker Change: Q4 business and financial highlights included digital media revenue of $4. One 5 billion net new digital media <unk> of 578 million.

Aneel: Strong growth across reader and acrobat on web and mobile and extension such as edge and chrome.

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

Speaker Change: Digital experience revenue of 1.40 billion.

Speaker Change: Cash flows from operations of $2 92 billion.

Aneel: Accelerated adoption and monetization of AI assistant driven by product enhancements and delivery of French and German language support and.

And added 182 billion to <unk> in the quarter.

Speaker Change: In our digital media segment, we achieved Q4 revenue of $4 5 billion, which represents 12% year over year growth as reported and in constant currency.

Aneel: And year end seasonal strength in the enterprise.

Aneel: We achieved creative revenue of $3, three zero billion, which represents 10% year over year growth or 11% in constant currency.

Speaker Change: We exited the quarter with $17 three 3 billion of digital media are are growing our ending <unk> book of business, 13% year over year in constant currency.

Aneel: In the quarter, we added $405 million of net new creative IRR growing our ending <unk> book of business, 11% year over year in constant currency.

Speaker Change: Adobe achieved document cloud revenue of 843 million, which represents 17% year over year growth as reported and in constant currency.

Fourth quarter creative cloud growth drivers included strong demand for new subscriptions for creative cloud all apps across individuals' teams enterprise and education.

Speaker Change: In the quarter, we added $173 million of net new document cloud <unk> growing.

Aneel: Strength in creative cloud single apps for acrobat Pro Lightroom and Photoshop.

Growing our ending <unk> book of business, 23% year over year in constant currency.

Aneel: Momentum with new subscriptions in emerging markets.

Speaker Change: Fourth quarter document cloud growth drivers included <unk>.

Aneel: Demand for Adobe expressed across education, SMB and enterprises.

Speaker Change: Strong growth across reader and acrobat on web and mobile and extension such as edge and chrome.

Aneel: And adoption of Firefly services in the enterprise.

Speaker Change: Acrobat subscription demand across all customer segments routes to market and geographies.

Aneel: Turning to our digital experience segment in Q4, we achieved revenue of 140 billion, which represents 10% year over year growth as reported and in constant currency.

Speaker Change: Accelerated adoption and monetization of AI assistant driven by product enhancements and delivery of French and German language support and.

Aneel: Digital experience subscription revenue was $1 $2 7 billion growing 13% year over year or 12% in constant currency.

Speaker Change: And year end seasonal strength in the enterprise.

Speaker Change: We achieved creative revenue of $3, three zero billion, which represents 10% year over year growth or 11% in constant currency.

Aneel: Fourth quarter digital experienced growth drivers included strong finish to the year with the largest ever bookings quarter and robust performance across geographies, including the U S and EMEA.

Speaker Change: In the quarter, we added $405 million of net new creative <unk> growing our ending <unk> book of business, 11% year over year in constant currency.

Aneel: And multiple verticals, including financial services.

Speaker Change: Fourth quarter creative cloud growth drivers included strong demand for new subscriptions for creative cloud all apps across individuals' teams enterprise and education.

Aneel: Strong subscription revenue growth led by Adobe experience manager Adobe journey, Optimizer real time customer data platform customer journey analytics and work front.

Speaker Change: Strength in creative cloud single apps for acrobat Pro Lightroom and Photoshop.

Aneel: Continued strength in retention and expansion across our enterprise customers with digital experience solutions being leveraged by 85 of the Fortune 100 companies.

Speaker Change: Momentum with new subscriptions in emerging markets.

Speaker Change: Demand for Adobe expressed across education, SMB and enterprises.

Aneel: Momentum with AEP and native apps with FY 'twenty, four ending book of business surpassed 1.0 billion and growing greater than 40% year over year.

Speaker Change: And adoption of Firefly services in the enterprise.

Speaker Change: Turning to our digital experience segment in Q4, we achieved revenue of $1 four zero billion, which represents 10% year over year growth as reported and in constant currency.

Aneel: And strong bookings for our umbrella Gen studio solution with interest and momentum for our new Gen studio for performance marketing offering.

Aneel: Adobe's effective tax rate in Q4 was 15, 5% on a GAAP basis, and 18, 5% on a non-GAAP basis.

Speaker Change: Digital experience subscription revenue was $1 $2 7 billion growing 13% year over year or 12% in constant currency.

Speaker Change: Fourth quarter digital experience growth drivers included strong finish to the year with the largest ever bookings quarter and robust performance across geographies, including the U S and EMEA.

Aneel: <unk> exiting the quarter was $19 96 billion growing 16% and <unk> growing 13% year over year as reported.

Aneel: Our cash flows from operations in the quarter were a record $2 92 billion.

Speaker Change: In multiple verticals, including financial services.

Speaker Change: Strong subscription revenue growth led by Adobe experience manager Adobe journey, Optimizer real time customer data platform customer journey analytics and work front.

Aneel: And ending cash and short term investment position exiting Q4 was 789 billion.

Aneel: In Q4, we entered into a $2 $5 billion share repurchase agreement and we currently have $17 65 billion remaining of our $25 billion authorization granted in March 2024.

Continued strength in retention and expansion across our enterprise customers with digital experience solutions being leveraged by 85 of the Fortune 100 companies.

Aneel: Now turning to our FY 2025 financial targets, we measure <unk> on a constant currency basis during the fiscal year and revalue ending <unk> at year end.

Speaker Change: Momentum with AEP and native apps with FY 'twenty, four ending book of business surpassed 1.0 billion and growing greater than 40% year over year.

Speaker Change: And strong bookings for our umbrella Gen studio solution with interest and momentum for our new Gen studio for performance marketing offering.

Aneel: FX rate changes between the end of FY 'twenty, three and the end of FY 'twenty four have resulted in a $117 million decrease to the digital media <unk> balance entering FY 'twenty five from.

Speaker Change: Adobe's effective tax rate in Q4 was 15, 5% on a GAAP basis, and 18, 5% on a non-GAAP basis.

Aneel: <unk> from $17 three three to $17 2 billion and is reflected in our investor data sheet.

Speaker Change: Arpaio exiting the quarter was $19 96 billion.

We expect an approximate 200 million headwind to FY 'twenty five revenue as a result of the effect of foreign exchange and a smaller impact of the continued move to subscriptions from perpetual offerings.

Growing 16% and <unk> growing 13% year over year as reported.

Speaker Change: Our cash flows from operations in the quarter were a record $2 92 billion.

Speaker Change: And ending cash and short term investment position exiting Q4 was 789 billion.

Aneel: Factored into our financial targets as an ongoing strategy to introduce new tiered subscription offerings and add ons.

Speaker Change: In Q4, we entered into a $2 $5 billion share repurchase agreement and we currently have 17, six 5 billion remaining of our 25 billion dollar authorization granted in March 2024.

Aneel: For FY 'twenty five we are targeting total Adobe revenue of 20 330 to 20 355 billion.

Aneel: Digital media segment revenue of $17 25 to $17 four zero billion.

Speaker Change: Now turning to our FY 2025 financial targets, we measure <unk> on a constant currency basis during the fiscal year and revalue ending here are at year end.

Aneel: Digital media, ending <unk> book of business growth of 11.0% year over year.

Aneel: Digital experience segment revenue of 580 to five.

Speaker Change: FX rate changes between the end of FY 'twenty, three and the end of FY 'twenty four have resulted in a $117 million decrease to the digital media <unk> balance entering FY 'twenty five from.

Aneel: 590 billion.

Aneel: Digital experience subscription revenue of five 375 to five $4 billion to $5 billion.

GAAP earnings per share of $15 80.

Speaker Change: <unk> from $17 three three to $17 two 2 billion and is reflected in our investor data sheet.

Aneel: To $16.10 and non-GAAP earnings per share of $20 20.

Speaker Change: We expect an approximate 200 million headwind to FY 'twenty five revenue as a result of the effect of foreign exchange and a smaller impact of the continued move to subscriptions from perpetual offerings.

Aneel: To $20 50.

Aneel: We expect non-GAAP operating margin of approximately 46% and a non-GAAP tax rate of approximately 18, 5%.

Aneel: For Q1 fiscal 'twenty five or targeting.

Speaker Change: Factored into our financial targets as an ongoing strategy to introduce new tiered subscription offerings and add ons.

Aneel: Total Adobe revenue of $5 63 to 568 billion.

Speaker Change: For FY 'twenty five we're targeting total Adobe revenue of 20 330 to 20 355 billion.

Aneel: Digital media segment revenue of $4, one seven to 420 billion.

Aneel: Digital experience segment revenue of 1.38 to 140 billion.

Speaker Change: Digital media segment revenue of $17, two five to $17 four zero billion.

Aneel: Digital experience subscription revenue of $1, two seven to $1 $2 9 billion.

Speaker Change: Digital media, ending <unk> book of business growth of 11.0% year over year.

Aneel: GAAP earnings per share of $3 85.

Aneel: To $3 90.

Speaker Change: Digital experience segment revenue of 580 to 590 billion.

Aneel: And non-GAAP earnings per share of $4 95.

Aneel: To $5.

Aneel: For Q1, we expect non-GAAP operating margin of approximately 47% and non-GAAP tax rate of approximately 18, 5%.

Speaker Change: Digital experience subscription revenue of $5 $3 75 to $5 425 billion.

Speaker Change: GAAP earnings per share of $15 80.

Aneel: In summary, I'm proud of our outstanding performance, which combines robust product leadership velocity of innovation and financial discipline positioning us to achieve strong revenue and EPS growth in the year ahead.

To $16.10 and non-GAAP earnings per share of $20 22.

Speaker Change: The $20 50.

We expect non-GAAP operating margin of approximately 46% and a non-GAAP tax rate of approximately 18, 5%.

Aneel: <unk> back to you.

Speaker Change: Thanks, Dan.

Speaker Change: This quarter Adobe was once again recognized for our exceptional culture and industry leadership, including on Forbes' world's best employers Fortune's 50, AI innovators and Fortune's best workplaces in technology and the Wall Street Journal's best managed companies list.

Speaker Change: For Q1 fiscal 'twenty five or targeting.

Speaker Change: Total Adobe revenue of $5 63 to 568 billion.

Speaker Change: Digital media segment revenue of $4, one seven to 420 billion.

Speaker Change: Digital experience segment revenue of 1.38 to 140 billion.

Speaker Change: At Max we announced a new global initiative aimed at helping 30 million next generation learners develop AI literacy content creation and digital marketing skills using Adobe express to thrive in the modern workforce working with education partners in schools nonprofits and all.

Speaker Change: Digital experience subscription revenue of $1, two seven to $1 $2 9 billion.

Speaker Change: GAAP earnings per share of $3 85 to $3 90.

And non-GAAP earnings per share of $4 95.

Speaker Change: To $5.

Speaker Change: When learning platforms to provide training certifications and career pathways.

Speaker Change: For Q1, we expect non-GAAP operating margin of approximately 47% and non-GAAP tax rate of approximately 18, 5%.

Speaker Change: Our strategy to unleash creativity for all accelerate document productivity and power digital businesses represents a massive addressable market opportunity.

Speaker Change: In summary, I'm proud of our outstanding performance, which combines robust product leadership velocity of innovation and financial discipline positioning us to achieve strong revenue and EPS growth in the year ahead.

Speaker Change: Adobe continues to build on its strong foundation of transformative innovation category and brand leadership financial performance and profitable growth.

Speaker Change: <unk> back to you.

Speaker Change: We are delivering Adobe magic to an expanding set of global customers and executing on the massive market opportunity ahead.

Speaker Change: Thanks, Dan.

Speaker Change: Adobe Couldnt be better positioned for 2025 and beyond.

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

Speaker Change: Operator.

Speaker Change: Thank you if you would like to signal with questions. Please press star.

Speaker Change: One on your Touchtone telephone if you are joining us today, you say speaker phone. Please make sure. Your mute function is turned off to why your signal to reach our equipment again that is star. One if you would like to signal what questions and the first question will come from Kash Rangan with Goldman Sachs.

Speaker Change: When learning platforms to provide training certifications and career pathways.

Speaker Change: Our strategy to unleash creativity for all accelerate document productivity and power digital businesses represents a massive addressable market opportunity.

Speaker Change: Again cash if you can press star one on your Touchtone telephone.

Speaker Change: Again star one of your Touchtone telephone.

Speaker Change: Adobe continues to build on its strong foundation of transformative innovation category and brand leadership financial performance and profitable growth.

We'll go next to Michael <unk> with Wells Fargo.

Michael: Hey, Thanks, very much appreciate you taking the questions.

Speaker Change: David You mentioned in your prepared remarks, a few things focusing on expanding innovation.

Speaker Change: We are delivering Adobe magic to an expanding set of global customers and executing on the massive market opportunity ahead.

Michael: Including newer higher priced Firefly offerings.

Speaker Change: Adobe Couldnt be better positioned for 2025 and beyond.

Speaker Change: It's actually accelerating firefly by integrating further into Gen studio I was hoping you could just maybe expand on how youre thinking about the adoption curves of those efforts and as a second part Dan. If you can just add any commentary on how you are incorporating some of these newer efforts and to forecast. If there is conservatism just given their newer or just how to think.

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

Speaker Change: Operator.

Speaker Change: Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone. If you are joining US today, you say speaker phone. Please make sure. Your mute function is turned off to why your signal to reach our equipment again that is star one if you would like to signal with questions.

Speaker Change: That also useful thank you.

Speaker Change: Sure Yeah, I'll go ahead and get started.

Speaker Change: AI, obviously has been a huge area of focus for us and frankly, our community has been.

Speaker Change: And the first question will come from Kash Rangan with Goldman Sachs.

Using it at amazing rates. So we're very excited you heard $16 billion.

Speaker Change: Again cash if you can press star one on your Touchtone telephone.

Speaker Change: Sorry, not dollars 16 billion.

Speaker Change: Generation that we've talked about on the in the prepared remarks, and that's really a function of the investments we've made in creating the broadest set of models, we've talked about imaging vector design in the past, we now have video and audio.

Speaker Change: Again star one of your Touchtone telephone.

Speaker Change: We'll go next to Michael <unk> with Wells Fargo.

Speaker Change: Hey, Thanks, very much appreciate you taking the questions.

Speaker Change: In beta form as well.

Speaker Change: And the foundational difference between what we do and what everyone else does the market really comes down to three things one is commercial commercially safe the way we train the models too is the incredible control we baked into the model three is the integration that we make with these models into our products increasingly.

David Wadhwani: David You mentioned in your prepared remarks, a few things focusing on expanding innovation.

David Wadhwani: Including newer higher priced firefly offerings in.

Speaker Change: Potentially accelerating firefly by integrating further into Gen studio I was hoping you could just maybe expand on how youre thinking about the adoption curves of those efforts and as a second part Dan. If you can just add any commentary on how you're incorporating some of these newer efforts and to forecast that there's conservatism just given their newer or just how to think.

Speaker Change: For us in our <unk>.

<unk> flagship applications, but also in express and light room in these kinds of applications, but also in <unk> Dx products as well so that set of things is a critical part of the foundation and a durable differentiator for US as we go forward now as we introduced the video model.

Speaker Change: That also useful thank you.

Speaker Change: Sure Yeah, I'll go ahead and get started.

Speaker Change: Which we expect to have in market early next year, that's going to create an opportunity to further tier our creative cloud offerings as you.

Speaker Change: <unk> AI, obviously has been a huge area of focus for us and frankly, our community has been.

Speaker Change: Using it at amazing rates. So we're very excited you heard the $16 billion.

Speaker Change: Im sure I understand video generation has a much higher value activity than image generation and as a result, it gives us the ability to start to tier creative cloud.

Speaker Change: Sorry, not dollars 16 billion.

More actively there in.

Speaker Change: In addition to that we introduced this year, we introduced Firefly services. That's been that's off to a great start we have a lot of customers that are using that a couple of we've talked about on the call include tap.

Speaker Change: In beta form as well.

Speaker Change: And the foundational difference between what we do and what everyone else. It doesn't the market really comes down to three things one is commercial commercially safe the way we train the the models too is the incredible control we bake into the model three is the integration that we make with these models into our products increasingly.

Speaker Change: Tapestry, they're using it for scaled content production Pepsi for their gateway brand is an enabling their customers to personalize any merchandise that theyre buying in particular, starting with Gatorade bottles and these have been very very productive for them and we are seeing this leveraged by a host of other companies for everything.

Speaker Change: Course in our <unk>.

Speaker Change: <unk> flagship applications, but also in express and light room in these kinds of applications, but also in <unk> Dx products as well so that set of things is a critical part of the foundation and adorable differentiator for US as we go forward now as we introduced the video model, which.

Speaker Change: Localization is scale to personalization at scale to user engagement or just raw content production at scale as well and then last not to get missed in all of this is everything we're doing with AI assistant AI assistant for acrobat is off to an incredibly strong start.

Speaker Change: Which we expect to have in market early next year, that's going to create an opportunity to further tier our creative cloud offerings as you.

Speaker Change: And we see it continuing to accelerate so all of this has built a great foundation for us in FY 'twenty four it's given US a lot of signal from our customer base and it's really we've learned a lot that we intend to apply as we optimize the value and.

Speaker Change: I'm sure I understand video generation has a much higher value activity than image generation and as a result, it gives us the ability to start to tier creative cloud.

Speaker Change: The hearing for our customers going forward.

Speaker Change: And just building on David's comments as it.

Speaker Change: More actively there.

Speaker Change: Related to the FY 'twenty five guide.

Speaker Change: Talk about all of the great innovation, that's in flight and flight I would say the velocity of innovation is greater today than it's ever been.

Speaker Change: We called out.

Speaker Change: Products like express AI assistant Firefly.

Speaker Change: Premium tiers in Dx Gen studio. The good thing is is there meaningful contributors today to the financial performance and extrapolating the momentum that we see in those products, taking a point of view on the future pipeline of innovation how we.

Speaker Change: Bring that to life deeply natively integrated into our products and further extend the value we offer to customers as well as the additional segments. We can access all of this comes together to take a perspective of what 2025 looks like based on the strong start that we <unk>.

Speaker Change: And the meaningful contribution in FY 'twenty four.

Speaker Change: Thanks very much.

Speaker Change: The hearing for our customers going forward.

Speaker Change: And we'll take our next question from Alex Zukin with Wolfe Research.

Speaker Change: Yeah, and just building on David's comment says it.

Speaker Change: Related to the FY 'twenty five guide we talk about all of the great innovation, that's in flight and flight I would say the velocity of innovation is greater today than it's ever been.

Alex Zukin: Hey, guys. Thanks for taking my question.

Speaker Change: Maybe.

Speaker Change: You just alluded to in terms of the AI.

Speaker Change: We called out.

Speaker Change: Meaningful as part of a broad.

Speaker Change: Products like express AI assistant Firefly.

Growth narrative.

Speaker Change: Business can you maybe talk about how.

Speaker Change: Ill.

Speaker Change: Youre thinking about the growth driver.

<unk> Firefly from Gen studio in win kind of how we see that percolate through the year in terms of.

Speaker Change: Net new digital media here or is that something that you think is morgan would be showing up in the Dx business would be great to get some color. There and then anything that we should think through given the new guidance methodology around seasonality linearity.

Sure.

Speaker Change: <unk>.

Speaker Change: Digital media business.

Speaker Change: Sure I'm happy to take that in.

Speaker Change: So first of all as we mentioned, we're really excited about the FY 'twenty four.

Speaker Change: And the meaningful contribution in FY 'twenty four.

Speaker Change: <unk> that we're seeing that we're carrying into it and we've had this conversation in the past around how we think about the growth algorithm for the digital media business. So maybe kind of let me reiterate a little bit of that.

Speaker Change: Thanks very much.

Speaker Change: And we will take our next question from Alex Zukin with Wolfe Research.

Speaker Change: We've talked about this in the context of P times Q plus V in the past.

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

Speaker Change: Maybe.

Speaker Change: You just alluded to in terms of the AI.

Speaker Change: As new users, bringing more people into the into the franchise, we're continuing to do that obviously with with.

Speaker Change: Meaningful is the harder rock.

Speaker Change: Growth narrative.

Speaker Change: Business can you maybe talk about.

Speaker Change: The introduction of express we are seeing a lot of great growth there, whether it's through our phones channel reaching out to SMB, whether it's corporate reaching out to the mid market or whether it's working more closely with aneel and the Dx business and the integrations, we have between express on the Dx business.

Speaker Change: Ill.

Speaker Change: Youre thinking about that.

Growth driver from Firefly.

Speaker Change: Jen studio and win.

Speaker Change: We see that percolate through the year in terms of.

Speaker Change: The net new digital media or is that something that you think is more going to be showing up in the dx business it'd be great to get some color there and then anything that we should think through.

Speaker Change: Reaching into large companies, we're doing a lot in terms of proliferation of express into education.

Speaker Change: The new guidance methodology around seasonality with linearity.

Speaker Change: A number of partnerships that we talked about with box checked GPT hub spot and others, but also our own products like acrobat workflows from acrobat and reader into express so really pushing to drive more new customers into into the franchise. In addition to the continuous continued growth that we're getting in our core creative.

Speaker Change: Sure.

Speaker Change: And then to IRR.

Speaker Change: The digital media business.

Speaker Change: Sure I'm happy to take that and.

Speaker Change: So first of all yes, as we mentioned, we're really excited about the FY 'twenty four <unk>.

Speaker Change: Momentum that we're seeing that we're carrying into it.

Speaker Change: Products second in terms of the core creative products. This is where the queue there.

Speaker Change: We've had this conversation in the past around how we think about the growth algorithm for the digital media business. So maybe kind of let me reiterate a little bit of that.

Speaker Change: Sorry, I said it backwards.

Speaker Change: Price actually increases with core value because when we are introducing firefly models.

Speaker Change: We've talked about this in the context of P times Q plus V in the past where P. As new users, bringing in more people into the into the franchise, we're continuing to do that obviously with with.

Speaker Change: Into the mixed we get the opportunity to integrate them more into the flagship applications and as I mentioned earlier with the Firefly web application, we have the opportunity to create more tiers across the creative products. So that we can we can get people in the right plan for their needs and we're very bullish about <unk>.

Speaker Change: The introduction of express we're seeing a lot of great growth there, whether it's through our phones channel reaching out to SMB, whether it's corporate reaching out to the mid market or whether it's working more closely with aneel and the Dx business and the integrations, we have between express on the Dx business.

Speaker Change: <unk> and the breadth of our customer base that are going to need access to these video models again remember they are integrated deeply into our applications, including premier. So we're very excited about what that could mean for us.

Speaker Change: Reaching into large companies, we're doing a lot in terms of proliferation of express into education. We're done a number of partnerships that we talked about with box check GPT hub spot and others, but also our own products like acrobat workflows from acrobat reader into express so really pushing to drive more new customers into.

Speaker Change: And then lastly, the business value for.

Speaker Change: Customers in enterprise or corporate that's where the value based selling that we do along with the digital experience business really plays out Firefly services as I mentioned.

Speaker Change: With greater rate tapestry and a whole host of others that have come everyone. In this space is driving towards personalization of that content and they absolutely need.

Speaker Change: Into the franchise. In addition to the continuous continued growth that we're getting in our core creative products second in terms of the core creative products. This is where the queue there.

Speaker Change: Scale production and automation pipeline to generate more content and Thats, where our Firefly services does.

Speaker Change: The.

Speaker Change: Sorry, I said it backwards.

Speaker Change: And as as it has hit this level of escape philosophy, we're now integrating it more into the Dx products in particular Gen studio so that it becomes a more holistic solution as we go into FY 'twenty, five and accelerate that and Thats you know Alex that's what's leading to the guide of 11%. If you really take a step back that's one of the best <unk>.

Speaker Change: Price actually increases with our core value because when we are introducing firefly models.

Speaker Change: <unk>, we've given in terms of.

Speaker Change: Next year.

Speaker Change: Growth.

Speaker Change: But one thing maybe to keep in mind is the composition of that growth is going to be a little different next year compared to two <unk>.

Speaker Change: Video and the breadth of our customer base that are going to need access to these video models again remember they are integrated deeply into our applications, including premier. So we're very excited about what that could mean for us.

Speaker Change: 24 again, the growth algorithm is new users, new products and and value and pricing.

New users and new products will be a more significant part of the mix as we go into FY 'twenty five and we look forward to sort of that foundational base of the business growing and driving the business.

Speaker Change: And then lastly, the business value for <unk>.

Speaker Change: Customers in enterprise or corporate that's where the value based selling that we do along with that the digital experience business really plays out Firefly services as I mentioned.

And then just to build on that Alex and I. Appreciate the question around the shape of FY 'twenty five here's what I will share about it we all know we changed the guidance methodology into 2025 to guide around the ending IRR book of business growth.

Speaker Change: With greater a tapestry and a whole host of others that have come everyone. In this space is driving towards personalization of that content and they absolutely need a scaled production and automation pipeline to generate more content, that's where our Firefly services does.

Speaker Change: I just have a strong point of view, it's a better indicator of business health trajectory, David talked about the growth algorithm the growth agenda at the company.

David Wadhwani: And as as it has hit this level of escape philosophy, we're now integrating it more into the Dx products in particular Gen studio so that it becomes a more holistic solution as we go into FY 'twenty, five and accelerate that and Thats you know Alex that's what's leading to the guide of 11%. If you really take a step back that's one of the best <unk>.

Speaker Change: New subscribers to the predominant driver of growth has been continues to be the.

Speaker Change: The second leg cross sell up sell this is something the company's Honda really great skill at over time once we bring people into the adobe ecosystem to journey than through.

<unk>, we've given in terms of next year.

David Wadhwani: Growth, but one thing maybe to keep in mind is the composition of that growth is going to be a little different next year compared to two.

Speaker Change: The rich set of technologies and products that we have to bring them deeper into the ecosystem. That's an important element and then lastly.

David Wadhwani: FY 'twenty four again the growth algorithm is new users, new products and and value and pricing.

Speaker Change: David mentioned on pricing. This is about how we segment the product portfolio the value.

David Wadhwani: New users and new products will be a more significant part of the mix as we go into FY 'twenty five and we look forward to sort of that foundational base of the business growing and driving the business.

Speaker Change: That we deliver to our customers. So as we think about the innovation as we think about the growth algorithm and has we think about increasingly monetizing the rich set of innovation that we've already brought to market as well as in the pipeline to be brought to market.

David Wadhwani: And then just to build on that Alex and I. Appreciate the question around the shape of FY 'twenty five here's what I will share about it we all know we changed the guidance methodology into 2025 to guide around the ending IRR book of business growth.

Speaker Change: <unk> profile, we view it as less important.

Speaker Change: Really want to focus on revenue and EPS.

David Wadhwani: We just have a strong point of view it as a better indicator of business health trajectory, David talked about the growth algorithm the growth agenda the company.

Speaker Change: Focus on the annual book of business growth, we think that's the most important way to look at the business. That's also how we as the management team running the business.

David Wadhwani: New subscribers to the predominant driver of growth has been continues to be the.

Speaker Change: Understood. Thank you guys.

David Wadhwani: The second leg cross sell up sell this is something the company's Honda really great skill at over time once we bring people into the adobe ecosystem to journey them through.

Speaker Change: And the next question will come from Kirk <unk> with Evercore ISI.

Speaker Change: Yes, thanks very much.

Speaker Change: David I Wonder if I could just follow up on your last comment on sort of obviously driving new users new adoptions incredibly important.

David Wadhwani: The rich set of technologies and products that we have to bring them deeper into the ecosystem. That's an important element and then lastly.

Speaker Change: Is there a pricing sensitivity, meaning you're delivering so much value I would think that pricing given the value you're delivering would be a bigger lever.

David Wadhwani: David mentioned on pricing. This is about how we segment the product portfolio the value.

Listeners pricing sensitivities. So can you just walk through that a little bit more because it feels like you should be able to get sort of all three vectors going at the same time, whereas I know you're going to focus more on bringing people in and making them successful.

David Wadhwani: That we deliver to our customers. So as we think about the innovation as we think about the growth algorithm and has we think about increasingly monetizing the rich set of innovation that we've already brought to market as well as in the pipeline to be brought to market.

Speaker Change: I'm sort of I guess is there something else on the pricing side that I'm missing why youre not getting that as well. Thanks.

Speaker Change: Yeah, we've talked about this in the context of proliferation versus.

Clearly profile, we view it as less important.

David Wadhwani: Really want to focus on revenue and EPS.

Speaker Change: Short term monetization and how we have to balance both of those and Thats something that we take very seriously and we look at that.

David Wadhwani: Focus on the annual book of business growth, we think that's the most important way to look at the business. That's also how we as the management team running the business.

Speaker Change: If you look at the lower end of the market as we have entered with.

With <unk> Express and light room, acrobat and by the way the web and mobile motion for US has been productive and bringing in a lot more new users and so you'll expect to see us do more of that and introduce more products in that segment.

Speaker Change: Understood. Thank you guys.

Speaker Change: And the next question will come from Kirk <unk> with Evercore ISI.

Speaker Change: Yes, thanks very much.

Speaker Change: David I Wonder if I could just follow up on your last comment on sort of obviously driving new users new adoptions incredibly important.

Speaker Change: FY 'twenty five as well and there is certainly <unk>.

Speaker Change: Sensitivity at that side of the market when it comes to both freemium users and also converted to paid users and we will continue to enable that when it comes to the core of the core business and this is the business of creative professionals. We are very focused on introducing new value that is going.

Speaker Change: Is there a pricing sensitivity, meaning you're delivering so much value I would think that pricing given the value you're delivering would be a bigger lever.

Speaker Change: Unless theres pricing sensitivity. So can you just walk through that a little bit more because it feels like you should be able to get sort of all three vectors going at the same time, whereas I know you're going to focus more on bringing people in and making them successful.

Speaker Change: To create more segmentation in more peering and.

Speaker Change: Get aligned.

Speaker Change: Align value and pricing to what we are delivering there. So we do see.

Speaker Change: Im sort of I guess is there something else on the pricing side that I'm missing why youre not getting that as well. Thanks.

Speaker Change: A tremendous amount of opportunity there going going forward because.

Speaker Change: Yeah, we've talked about this in the context of proliferation versus.

Speaker Change: The value that we bring and the efficiency, we bring to the content creation process. There is very significant and then last and certainly not least as we talked about in core enterprises, that's where we've been able to sort of cross that chasm from a P times Q business over to a value sale business and we are able to start to get more automation and workflows in place there.

Speaker Change: Short term monetization and how we have to balance both of those and Thats something that we take very seriously and we look at that.

Speaker Change: If you look at the lower end of the market as we have entered with.

Speaker Change: With express and light room, acrobat and by the way the web and mobile motion for US has been productive and bringing in a lot more new users and so you will expect to see us do more of that and introduce more products in that segment.

Speaker Change: As well so it's a mix of these things we are going to continue to balance. We are obviously tracking we believe that proliferation as we've said.

Speaker Change: For some time maintains as one of the top priorities because we know that if people start using our products today.

Speaker Change: FY 'twenty five as well and there is certainly price.

Speaker Change: Sensitivity at that side of the market when it comes to both premium users and also converted to paid users and we will continue to enable that when it comes to the core of the core business and this is the business of creative professionals. We are very focused on on introducing new value that is going.

Speaker Change: Have the opportunity to continue to deliver value for a long time to come and so that balance is what we tried to do and it's a management judgment call, but we think we're getting it right.

Speaker Change: Okay. That's a quick follow up for Dan Dan I'll say black Monday sell into your first quarter current year any color you can offer in terms of what that meant if at all to creative cloud.

To create more segmentation in more peering and.

Speaker Change: Net new <unk> this quarter.

Speaker Change: Yes.

Speaker Change: Align value and pricing to what we are delivering there. So we do see.

Speaker Change: Black Friday cyber Monday played out about as expected we've been talking about a multiyear trend where commercial activity shifting left in terms of timing, we run our promotions over a larger window of time to reflect consumer behavior, and we see a similar pattern.

Speaker Change: Tremendous amount of opportunity there going going forward because.

Speaker Change: <unk> from our customers this year that we've seen in prior years and we'd think about.

Speaker Change: Online shopping this year.

Speaker Change: As well so it's a mix of these things we are going to continue to balance we are obviously tracking and we believe that proliferation as we've said.

Up eight 4% you can see last year, that's up from four 8%. So a nice step up this year versus last year, but you can see cyber Monday from a contribution standpoint, even though the growth last year was was down relative to this year cyber Monday grew at nine six.

Speaker Change: For some time maintains as one of the top priorities because we know that if people start using our products today, we have the opportunity to continue to deliver value for a long time to come and so that balance is what we've tried to do and it's a management judgment call, but we think we're getting it right.

Speaker Change: Percent this year at seven 3% just illustrates the flattening of the profiling consumer behavior around that so.

Speaker Change: Okay. That's a quick follow up for Dan Dan, Obviously, Black Monday fell into your first quarter current year any color you can offer in terms of what that manta if at all to creative cloud.

Speaker Change: Performance as expected.

Speaker Change: Thank you.

Speaker Change: And the next question will come from Keith Weiss with Morgan Stanley.

Speaker Change: Net new <unk> this quarter.

Speaker Change: Yes.

Speaker Change: Black Friday, cyber Monday played out about as <unk>.

Speaker Change: Excellent. Thank you guys for taking the question.

Expected.

Speaker Change: <unk> been talking about a multiyear trend where commercial activity shifting left in terms of timing, we run our promotions over a larger window of time to reflect consumer behavior, and we see a similar pattern.

Speaker Change: A lot of excitement from you guys on the conference call about the pace of innovation going on in the business and we hear that excitement from creative professionals and they talk about an acceleration in the pace of innovation, but.

Speaker Change: I apologize to state the obvious but investors arent feeling that excitement.

Speaker Change: Commercially from our customers this year that we've seen in prior years, and we think about online shopping this year up eight 4% you can see last year, that's up from four 8%. So a nice step up this year versus last year, but you can see <unk>.

Speaker Change: Showing that excitement this stock is a major underperformer on a year to date basis.

Speaker Change: Again on an after hours basis today, and I would point to is the lack of acceleration that we're seeing in the numbers right digital media net new <unk>. This quarter grew just or in creative cloud grew 2% youre guiding to decelerating growth.

Speaker Change: For Monday from a contribution standpoint, even though the growth last year was was down relative to this year cyber Monday grew at nine 6%. This year at seven 3% just illustrates the flattening of the profiling consumer behavior around that so.

In Q into the forward year. Despite all of this innovation and I think the question that it brings up an investor's mind theres somewhat weak in the bucket right. All of this innovation, new monetization avenues pricing going up but the growth is going in the wrong direction.

Is there a part of the equation, that's not working Theyre share losses is there something that we're not seeing that has taken away a momentum in the numbers. That's not we're not seeing the acceleration in the numbers if you.

Speaker Change: Performance as expected.

Speaker Change: Okay. Thank you.

Speaker Change: And the next question will come from Keith Weiss with Morgan Stanley.

Keith Weiss: Excellent. Thank you guys for taking the question.

Speaker Change: Okay, maybe I'll talk about that I mean, if you take a step back and think about.

Keith Weiss: A lot of excitement from you guys on the conference call about the pace of innovation going on in the business and we hear that excitement from creative professional when they talk about an acceleration in the pace of innovation, but.

Speaker Change: I'll certainly address the feedback that you're sharing from our perspective, when we guided at the beginning of the year. When we re guided then in the middle of the year to $19 50, and then when we guided in Q3 I mean, the reality is we beat all of those three targets that we had issued beginning of the middle of the year and end of the year I think.

Keith Weiss: Apologies to state the obvious.

Speaker Change: <unk> aren't feeling that excitement or showing that the stock is a major underperformer on a year to date.

Perfectly maybe as it relates to the Q4.

Speaker Change: Again on an after hours basis today, and I would point to is the lack of acceleration that we're seeing in the numbers right.

Speaker Change: Digital media net new Anr and thinking about it from the creative.

Speaker Change: Digital media net new <unk>. This quarter grew just or in creative <unk> grew 2% Youre guiding Q decelerating growth.

Speaker Change: One thing that I'll point out there is that actually creative did better than probably is evident and that if you think about the contribution of acrobat that went into the creative bucket versus the.

In Q into the forward year. Despite all of this innovation and I think the question that it brings up an investor's mind theres somewhat weak in the bucket right. All this innovation, new monetization avenues pricing going up but the growth is going in the wrong direction like is there a part of the equation, that's not working their share losses there.

Speaker Change: Document cloud business. So certainly acrobat continues to do well record as you saw but the non acrobat contribution and creative actually had more growth than what you would see if you just look at it from a creative cloud AI I think to your bigger question about what's happening in the business and as we think about.

Speaker Change: Something that we're not seeing that.

Speaker Change: In a way that momentum in the numbers that's not we're not.

Speaker Change: I think the acceleration in the numbers.

Speaker Change: At the scale of the business right now.

Speaker Change: Okay, maybe I'll talk about that I mean, if you take a step back and think about.

Speaker Change: Certainly as this.

<unk> world moves towards generative AI as David said, we're executing on both the proliferation play at the bottom with express and acrobat and at the high end with the creative pro and with the enterprise. We are seeing significant adoption of that and I think Jen studio will also be a good unlocked.

Speaker Change: I'll certainly address the feedback that you are sharing.

From our perspective, when we guided at the beginning of the year. When we re guided then in the middle of the year to $19 50, and then when we guided in Q3 I mean, the reality is we bid all of those three targets that we had issued beginning of the middle of the year.

Speaker Change: Jen studio actually brings this all together in the enterprise in a way that nobody else can and so when we think about Firefly services. You think about the cost of models you think about the ability to move all of that into campaigns at base.

Speaker Change: And end of the year I think specifically maybe as it relates to the Q4.

Speaker Change: Digital media net new Anr and thinking about it from the creative the one thing that I'll point out there is that actually creative did better than probably is evident and that if you think about the contribution of acrobat that went into the creative bucket versus the.

Speaker Change: We are seeing significant traction in that particular space. So the.

The business is going through a change as it relates to the lower end, but for the core creative as well as for the enterprise, it's actually headed absolutely in line with our expectations with good acceleration and on the consumer communicator space I think the traction that we're seeing with express on proliferation.

Speaker Change: Document cloud business. So certainly acrobat continues to do well record as you saw but the.

Speaker Change: Non acrobat contribution and creative actually had more growth than what you would see if you just look at it from a creative cloud AI I think to your bigger question about what's happening in the business and as we think about it at the scale of the business right now.

Speaker Change: Also gives us a lot of optimism for how that part of the business is also doing well and so we take our target seriously at the beginning of the year, we want to keep executing and innovating on it to the point that I think you as well as others of US is the opportunity and the growth agenda not just to <unk>.

Speaker Change: Thirdly as this.

Speaker Change: <unk> world moves towards generative AI as David said, we're executing on both the proliferation play at the bottom with express and acrobat and at the high end with the creative pro and with the enterprise. We are seeing significant adoption of that and I think Jen studio will also be a good unlocked.

Speaker Change: About the innovation and the offerings, but to make sure that as we clear these that the pricing and the value is appropriate.

Speaker Change: Absolutely and I think you'll continue to see US I think David mentioned that in there.

Speaker Change: His prepared remarks, as well as Dan did that Youll see US also have new tiered offerings that reflect that value that we're providing to the creative pro as well as through the business segments.

Speaker Change: Campaigns at base.

Speaker Change: We are seeing significant traction in that particular space. So the.

Speaker Change: Excellent thanks for the feedback.

Speaker Change: The business is going through a change as it relates to the lower end, but for the core creative as well as for the enterprise.

Keith Bachman: And moving on to Keith Bachman with BMO.

Keith Bachman: Hi, Thank you very much I wanted to ask David to you if I could on Doc cloud specifically.

Speaker Change: Actually headed absolutely in line with our expectations with good acceleration and on the consumer communicator space I think the traction that we're seeing with express on proliferation also gives us a lot of optimism for how that part of the business is also doing well and so we take our target seriously.

Keith Bachman: Growth was was certainly strong this quarter and I just wanted to understand some of the context associated with durability and if you could break it into some of the parts it looks like your monthly.

Monthly active users continues to grow well.

Speaker Change: It's the beginning of the year, we want to keep executing and innovating on it to the point that I think you as well as others have asked is the opportunity and the growth agenda, not just to think about the innovation and the offerings, but to make sure that as we clear these that the pricing and the value is appropriate.

Keith Bachman: And.

Keith Bachman: In addition to that how are you thinking about.

Keith Bachman: Leveraging the value there in terms of price specifically within the growth of dock crowd and again. The broader question is just on the durability of dock crowds grew 23% over the course of the quarter in terms of.

Absolutely and I think you'll continue to see US I think David mentioned that in his prepared remarks as well as Dan did that Youll see US also have new tiered offerings that reflect that value that we're providing to the creative pro as well as to the business segments.

Keith Bachman: <unk>.

Trying to understand how durable it is and what the pieces are and then I have a follow up.

Keith Bachman: Yeah.

Keith Bachman: I think document cloud has been.

Keith Bachman: If you think about the fact that were 40 years into into this business is really just the.

Keith Bachman: Foundation is the fact that PDF.

Keith Bachman: Has become the de facto standard for for unstructured data in the world.

Speaker Change: Excellent thanks for the feedback.

And moving on to Keith Bachman with BMO.

Keith Bachman: And Adobe and acrobat are the most trusted providers of solutions for that and that's really what what is the foundation.

Keith Bachman: Hi, Thank you very much I wanted to ask David to you if I could on Doc cloud specifically.

Keith Bachman: What is driving the business, including the fact that it's the most secure platform for for leveraging and accessing the content.

Keith Bachman: <unk> was was certainly strong this quarter and I just wanted to understand some of the context associated with durability and if you could break it into some of the parts. It looks like you are.

Keith Bachman: I think what is there are two things that are really the growth drivers of this business. There are a number of things first is exactly like you said I mean monthly active users.

Monthly active users continues to grow well.

Keith Bachman: And we get paid as a key stat that we keep looking at.

Keith Bachman: And.

Keith Bachman: We are very effective at taking free users of reader and converting them to paid users of acrobat and we continue to do that across more surfaces. It used to be predominantly a focus on desktop applications as as we've noted in the past, we now have edge integrations and chrome integrations.

In addition to that how are you thinking about.

Keith Bachman: Leveraging the value there in terms of price specifically within the growth of dock crowd and again. The broader question is just on the durability of <unk> crowd grew 23% over the course of the quarter in terms of.

Keith Bachman: Trying to understand how durable it is and what the pieces are and then I have a follow up.

Keith Bachman: We're also available and teams were also available.

Keith Bachman: Yeah.

Keith Bachman: On mobile devices for iOS and Android.

I think document cloud has been.

Keith Bachman: And the mix of all of those continue to grow on a monthly basis, one of the things that we are doing to drive that growth is.

Keith Bachman: You think about the fact that were 40 years into into this business is really just the.

Keith Bachman: <unk> Foundation is the fact that PDF has.

Keith Bachman: Helping people see the value of sharing a link to the PDF as opposed to sharing the document itself.

Keith Bachman: It's become the de facto standard for for unstructured data in the world.

Keith Bachman: And Adobe and acrobat are the most trusted providers of solutions for that and that's really what what is the foundation of.

Keith Bachman: In doing so you'll get a lot more control in terms of a conversation and feedback and review around that but it also drives the fact that the recipient.

Keith Bachman: What is driving the business, including the fact that it's the most secure platform for for leveraging and accessing the content.

Keith Bachman: <unk>.

Keith Bachman: Guaranteed to be viewing the PDF and an adobe surface that we can then use to close that viral loop.

Keith Bachman: I think what is there are two things that are really the growth drivers of this business. There are a number of things first is exactly like you said I mean monthly active users.

Keith Bachman: Drive drive further top of funnel opportunity to convert so that foundation is very strong. In addition to that AI assistant has been really a phenomenal add unlike many other players in this space.

And free and paid as a key stat that we keep looking at.

We don't require significant.

Keith Bachman: Security and governance reviews, because people can have conversations around the documents.

Keith Bachman: They view.

Keith Bachman: And one of the big things that I think has been unlocked this year.

Keith Bachman: He is moving not just by looking at a PDF that you happened to be viewing, but being able to look at in <unk>.

Keith Bachman: We're also available and teams were also available.

Keith Bachman: Have a conversation with multiple documents some of which don't even have to be PDF. So that transition and that gives us the ability to really take acrobat and make it more of a general purpose productivity platform and Thats really what drove the adoption that we saw in education. This year. So that's another way of saying that the core foundation of acrobat continues to be strong.

Keith Bachman: On mobile devices for iOS and Android.

Keith Bachman: And the mix of all of those continue to grow on a monthly basis, one of the things that we are doing to drive that growth is.

Keith Bachman: Helping people see the value of sharing a link to the PDF as opposed to sharing the document itself.

Keith Bachman: In doing so you get a lot more control in terms of the conversation and feedback and review around that but it also drives the fact that the recipient.

Keith Bachman: And as extra getting stronger with the with now increasing but the new value, we're adding with AI assistant takes acrobat to an entire new level in terms of value and maybe the thing I'll add to that is the durability of that to your point in languages as we roll that out in languages as we roll it out across multiple documents and as we roll it out in.

Keith Bachman: <unk>.

Keith Bachman: Guaranteed to be viewing the PDF and an adobe surface that we can then use to close that viral loop and drive drive further top of funnel opportunity to convert so that foundation is very strong. In addition to that AI assistant has been really a phenomenal add unlike many other players in this space.

Keith Bachman: Enterprises, and <unk>, specifically, so again significant headroom in terms of the innovation agenda of how acrobat can be made even more meaningful as a knowledge tool within the enterprise.

Keith Bachman: We don't require significant.

Keith Bachman: Security and governance reviews, because people can have conversations around the documents that they view and.

Keith Bachman: Okay, and just sort of leads into my follow up question, if I could sneak it in is.

Keith Bachman: We've talked about during the course of this call Tonight, the various drivers of growth for <unk>.

Keith Bachman: And one of the big things that I think has been unlocked this year.

Keith Bachman: There are and I just wanted to specifically ask about consumption as we think about FY 'twenty five.

Keith Bachman: As moving not just by looking at a PDF that you happen to be viewing, but being able to look at in <unk>.

Keith Bachman: Have a conversation with multiple document some of which don't even have to be PDF. So that transition and that gives us the ability to really take acrobat and make it more of a general purpose productivity platform and Thats really what drove the adoption that we saw in education. This year. So that's another way of saying that the core foundation of acrobat continues to be strong.

Keith Bachman: And the question is is that going to be a contributor towards our growth or should investors really be thinking about trying to maximize seats. If you will and really shouldnt be about consumption being additive to growth and $25 Thats. It for me. Thank you.

Keith Bachman: I think Keith Youre going to see.

Quote unquote consumption add to weigh out our and two or maybe three ways more so in 'twenty. Five then in 'twenty for the first and David alluded to this is if you have a video offering in that video offering that will be a pure consumption pricing associated with it I think the second is in Gen studio and for enterprises and what they are seeing.

Keith Bachman: And is actually getting stronger with them with now increasing but the new value, we're adding with AI assistant takes acrobat to an entire new level in terms of value and maybe the thing I'll add to that is the durability of that to your point in languages as we roll that out in languages as we roll it out across multiple documents and as we roll it out in.

Keith Bachman: With respect to Firefly services, which again I think David touched on how much momentum we are seeing in that business. So that is in effect a consumption business as it relates to the enterprise. So I think that will also.

Keith Bachman: Continue to increase and then I think you'll see us with perhaps a more premium price offering. So the intention is that consumption is what's driving the increase the IRR, but it may be as a result of a tier in the pricing rather than a consumption model where people actually have to monitor it.

Speaker Change: Okay, and just sort of leads into my follow up question, if I could sneak it in is.

We've talked about during the course of this call Tonight, the various drivers of growth for IRR and and I just wanted to specifically ask about consumption as we think about FY 'twenty five.

Speaker Change: And the question is is that going to be a contributor towards.

Keith Bachman: It's just another way much like AI assistance is of monetizing it but it's not like we're going to be tracking every single generation for the user it will just be at a different tier and we think that thats, both a better way to deliver value as well as to get the monetization.

Speaker Change: Our growth or should investors really be thinking about trying to maximize seats. If you will and really shouldnt be about consumption being additive to growth and 25% Thats. It for me. Thank you.

Speaker Change: I think Keith Youre going to see.

Keith: Quote unquote consumption add to weigh out our and two or maybe three ways more so in 'twenty. Five then in 'twenty for the first and David alluded to this is if you have a video offering in that video offering that will be a pure consumption pricing associated with it I think the second is in Gen studio and for enterprises and what they are seeing.

Brad Sills: And moving on to Brad Sills with Bank of America.

Wonderful thank you.

Speaker Change: Can I ask a question David a view please.

Speaker Change: In the past you've provided some good color.

Speaker Change: It sounds like there is momentum there it seems like this would be the year with all the Firefly services integration into the core franchises that we could see some acceleration in conversion of that funnel. So would love to get some update from you on that effort and how you see that unfolding.

Keith: With respect to Firefly services, which again I think David touched on how much momentum we are seeing in that business. So that is in effect a consumption business as it relates to the enterprise. So I think that will also continue to increase and then I think youll see us with perhaps a more premium price offer.

Speaker Change: The year. Thank you.

Speaker Change: For a second you actually cut out and so you said Firefly, we heard that did you mentioned any other product before we answer that question, Brad just to make sure we capture your question.

Keith: So the intention is that consumption is what's driving the increase the IRR, but it may be as a result of.

Speaker Change: Really just Firefly services across all of the franchises Photoshop, lightroom et cetera, what could that integration effort due to.

Keith: Here in the pricing rather than a consumption model, where people actually have to monitor it. So it's just another way much like AI assistance is of monetizing it but it's not like we're going to be tracking every single generation for the user it will just be at a different tier and we think that thats, both a better way to deliver value is.

Speaker Change: The conversion activity with the top of funnel.

Speaker Change: Yeah. So.

Speaker Change: Number of things so first of all.

Speaker Change: Youre exactly right in terms of Firefly as a platform and the foundation that we're leveraging across many different products. So as we talked about everything from express and light room and even in acrobat on mobile for a broad base, but then also in our core creative products Photoshop illustrator premiere.

Keith: Well as to get the monetization.

Speaker Change: And moving on to Brad Sills with Bank of America.

Wonderful thank you.

Speaker Change: Ask a question David a view please.

And as we've alluded to a number of times on this call with the introduction of video even a standalone offer for Firefly that that we think will be.

In the past you've provided some good color.

Speaker Change: It sounds like there is momentum there it seems like this will be a year with all the Firefly services integration into the core franchises that we could see some acceleration in conversion of that funnel. So would love to get some update from you on that effort and how you see that unfolding throughout the year. Thank you.

More valuable from a tiered perspective, there and then into Firefly services through API is in connection to Gen studio. So.

Speaker Change: We are looking at leveraging the power of this AI Foundation and all of the activities now as it relates to top of funnel conversion.

Speaker Change: We are very excited and let's start with that.

Speaker Change: With new users and more closer to the low end of the market. We're very excited with the signals we're getting from express.

Speaker Change: Really just Firefly services across all of the franchises Photoshop lightroom et cetera.

In light room on.

Speaker Change: Could that integration effort due to.

Speaker Change: On mobile and web.

Speaker Change: The conversion activity with the top of funnel.

Speaker Change: And as we've talked about express is seeing some really good new user acquisition. We added 4000, new businesses. This year, we increased education.

Speaker Change: Yeah. So.

Speaker Change: Number of things so first of all.

Speaker Change: Youre exactly right in terms of Firefly as a platform and the foundation that we're leveraging across many different products as we talked about everything from express and light room and even in acrobat on mobile for a broad base, but then also in our core creative products Photoshop illustrator premiere.

Speaker Change: Accessed by 84% this back to school versus last back to school, we're seeing.

Speaker Change: Really strong adoption through social digital and mobile traffic as well so we see that when we invest in mobile and web we are getting some very positive signals in terms of user adoption and user conversion rate. So we are using firefly very actively to do that and by the way.

Speaker Change: And as we've alluded to a number of times on this call with the introduction of video even a standalone offer for Firefly that that we think will be.

Speaker Change: The fact that Firefly continues to be the only commercially safe.

Speaker Change: More valuable from a tiered perspective, there and then into Firefly services through API is in connection to Gen studio. So.

Speaker Change: Model integrated into these apps does matter when it comes to as I said, adding 4000, new businesses. The second thing is we are seeing in the core creative business when people.

Speaker Change: We are looking at leveraging the power of this AI Foundation and all of the activities now as it relates to the top of funnel and conversion.

Speaker Change: Something like Photoshop, the Onboarding experience is faster to success because of the use of generative AI and generative capabilities. So youll start to see us continuing to drive more proliferation of those capabilities earlier in the user journeys and that has been proven very productive, but we also noticed that more people use gen.

Speaker Change: We're very excited and let's start with that with new users and more closer to the low end of the market. We're very excited with the signals we're getting from express.

Speaker Change: And in light room on.

Speaker Change: On mobile and web.

Speaker Change: As we've talked about express is seeing some really good new user acquisition. We added 4000, new businesses. This year, we increased education.

Speaker Change: <unk> AI again, we've always had good retention rates, but the more people use generative AI the longer they retain as well and so we are definitely leveraging generative AI for that entire flow in the funnel.

Speaker Change: Access by 84% this back to school versus last back to school, we're seeing.

Speaker Change: And as with past the top of the hour just have time for one more question. Thank you.

Really strong adoption through social digital and mobile traffic as well so.

Speaker Change: And that question will come from Jay shower with Griffin Securities.

Speaker Change: We see that when we invest in mobile and web we are getting some very positive signals in terms of user adoption and user conversion rate. So we are using firefly very actively to do that and by the way. The fact that Firefly continues to be the only commercially safe.

Jay Shower: Thank you good evening.

Jay Shower: And then you noted that your current <unk> was up 13% in the quarter.

Jay Shower: Which resulted in a 10% three year CAGR. The current IPO would you expect that overtime for this in fiscal 'twenty five thats recurring <unk> growth will be closer to what you just reported for Q4 or might revert more to the <unk>.

Speaker Change: Model integrated into these apps does matter when it comes to as I said, adding 4000, new businesses. The second thing is we are seeing in the core creative business when people.

Speaker Change: Our three year CAGR and then for David if I could just simply with so many mentions of tiered offerings.

Speaker Change: By something like Photoshop, the Onboarding experience is faster to success because of the use of generative AI and generative capabilities. So youll start to see us continuing to drive more proliferation of those capabilities earlier in the user journeys and that has been proven very productive, but we also noticed that more people use.

Speaker Change: The concept there more around functionality at the product level as compared to the olden days.

Speaker Change: Hearing that was more about segmentation and packaging.

Speaker Change: Youll see us days or.

Speaker Change: Or is it more currently around the functionality that you're offering on a product by product basis.

Speaker Change: Yes, Thanks, Jay and I definitely don't want to do is get into guiding of CRP O, but when I take a step back and think about the rhythm and flow of the business. What we're seeing on the enterprise side, winning large transformational deals exiting the year with the largest bookings quarter ever.

Speaker Change: And as with past the top of the hour just have time for one more question. Thank you.

Speaker Change: And that question will come from Jay shower with Griffin Securities.

Speaker Change: Thank you and good evening.

Speaker Change: Having premium tears in that product portfolio.

Speaker Change: You noted that your current <unk> was up 13% in the quarter.

Speaker Change: Minimum around AEP and apps continuing to grow at scale and when we think about content supply chain and bringing cross cloud opportunities together that really get at meaningful pain points of customers over time, and then we think about the innovation that we're driving through the digital media business.

Speaker Change: Which results in a 10% three year CAGR. The current IPO would you expect that over time or at least in fiscal 'twenty five thats recurring <unk> growth will be closer to what you just reported for Q4 or might revert more to the <unk>.

Speaker Change: Lower three year CAGR and then for David If I could just thank you for so many mentions of tiered offerings.

Speaker Change: Yes, I feel really good about our ability to continue to drive the business going forward and I'm very encouraged by what I see.

Speaker Change: The concept there more around functionality at the product level as compared to the olden days.

Speaker Change: Yes, and then just adding on briefly to the question on hearing.

Speaker Change: Hearing that was more about segmentation and packaging.

Speaker Change: Jay it's.

Speaker Change: If you think about where what we've done over the last year, there's been a bit of experimentation obviously in the core creative applications. We've done the degenerative credits model, what we saw with acrobat was this idea of.

Speaker Change: Youll see us days or.

Speaker Change: Or is it more currently around the functionality that you're offering on a product by product basis.

Speaker Change: It's a separate package in a separate SKU that created a tier that people were able to access the feature through and as we learned from all of these we think as Sean you had mentioned earlier that the REIT peering model for us is going to be a combination of feature access to certain features and usage limits on it so the higher.

Speaker Change: Having premium tears.

And that product portfolio.

Speaker Change: The tier the more features you get and the more usage you get oven.

Speaker Change: Momentum around AEP and apps continuing to grow at scale, when we think about content supply chain and bringing cross cloud opportunities together that really get at meaningful pain points.

Speaker Change: And since that was the last question. Let me again, maybe in quick summary, just talk about first.

Speaker Change: Had a strong 24, but I think that really sets us up even better for a strong 25, given the innovation that we've had.

Speaker Change: Of customers over time, and then we think about the innovation that we're driving through the digital media business I feel really good about our ability to continue to drive the business going forward and I'm very encouraged by what I see.

Speaker Change: I think as it relates to all three businesses that we have.

Speaker Change: Creative cloud with everything that we've done around AI, we have a lot of momentum going into the business in a really great.

Speaker Change: And then just adding on briefly to the question on tearing yes Jay.

Speaker Change: Diverse portfolio in terms of both the customers as well as our offerings acrobat continues to perform really well with AI assistant as we bring it to other languages get more vertical.

Jay Shower: If you if you think about where what we've done over the last year or there has been a bit of experimentation obviously in the core creative applications. We've done the generative credits model, what we saw with acrobat was this idea of.

Speaker Change: Use cases for that particular solution and extended beyond a single document. We continue to think that the document cloud has significant opportunity ahead of us and I think bringing that all together with digital experience Q4 was really an extremely strong quarter as it related to us bringing all of these solution.

Speaker Change: Yes.

Speaker Change: It's a separate package in a separate SKU that created a tier that people were able to access the feature through and as we learned from all of these we think as Sean had mentioned earlier that the REIT peering model for us is going to be a combination of feature access to certain features and usage limits on it so the higher the.

Speaker Change: Together and Jen studio I think much like we did with AEP and apps and data and have driven that to $1 billion business I feel just the same amount of excitement with what we can do with content and AI and how we can accelerate the creation of that all the way from ideation to the multiple variations that's required.

The tier the more features you get and the more usage you get oven.

Speaker Change: And since that was the last question. Let me again, maybe in quick summary, just talk about first we had a strong 24, but I think that really sets us up even better for a strong 25, given the innovation that we've had.

Speaker Change: So we look forward to sharing more with you.

Speaker Change: At the end of Q1, but in the interim thank you for joining us and happy holidays.

I think as it relates to all three businesses that we have the creative cloud with everything that we've done around AI, we have a lot of momentum going into the business in a really great.

Speaker Change: Thank you and that does that does.

Speaker Change: Thanks.

Speaker Change: And that does conclude today's conference we do thank you for your participation today.

Speaker Change: Diverse portfolio in terms of both the customers as well as our offerings.

Speaker Change: <unk> continues to perform really well with AI assistant as we bring it to other languages get more vertical.

Speaker Change: Use cases for that particular solution and extended beyond a single document we continue to think that the document cloud has significant.

Speaker Change: The opportunity ahead of us and I think bringing that altogether with digital experience Q4 was really an extremely strong quarter as it related to us, bringing all of these solutions together and Jen studio I think much like we did with AEP and apps and data and have driven that to $1 billion business I feel just the same amount of <unk>.

Speaker Change: <unk> with what we can do with content and AI and how we can accelerate the creation of that all the way from ideation to the multiple variations that's required. So we look forward to sharing more with you.

At the end of Q1, but in the interim thank you for joining us and happy holidays.

Thank you and that does that does.

Speaker Change: And that does conclude today's conference we do thank you for your participation today.

Okay.

Q4 2024 Adobe Inc Earnings Call

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