Q1 2026 Adobe Inc Earnings Call
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Good day and welcome to the Q1 of FY 2026, Adobe Earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to that Clark Vice President of Investor Relations. Please go ahead. Good afternoon, and thank you for joining US with me on the call today are shortening and Orion.
Speaker #1: Day and welcome to the Q1 FY 2026 ADOBE Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Doug Clarke, Vice President of Investor Relations.
Speaker #1: Please go ahead.
Adobe's chair and CEO, David Wadhwani, president of creativity and productivity.
Speaker #2: Good afternoon, and thank you for joining us. With me on the call today are Shantanu Narayen, ADOBE Chair and CEO; David Wadhwani, President of Creativity and Productivity; Anil Chakravarthy, President of Customer Experience Orchestration; and Dan Durn, Executive Vice President and CFO.
Ill Cakravartin president of customer experience orchestration, and Dan <unk> Executive Vice President and CFO.
On this call, which is being recorded we will discuss adobe's first quarter fiscal year 2026 financial results.
Speaker #2: On this call, which is being recorded, we will discuss ADOBE's first quarter fiscal year 2026 financial results. You can find our press release as well as PDFs of our prepared remarks and financial results on ADOBE's Investor Relations website.
Can find our press release as well as pdfs of our prepared remarks in financial results on Adobe's Investor Relations website. The information discussed on this call, including our financial targets and product plans is as of today March 12 and contains forward looking statements that involve risks uncertainty and assumptions actual results may differ materially from those set forth in these statements.
Speaker #2: The information discussed on this call, including our financial targets and product plans, is as of today, March 12, and contains forward-looking statements that involve risk, uncertainty, and assumptions.
Speaker #2: Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today's earnings release and Adobe's SEC filings.
For more information on those risks. Please review today's earnings release, and Adobe's SEC filings.
On this call, we will discuss GAAP and non-GAAP financial measures are reported results include GAAP growth rates in non-GAAP growth rates, including constant currency rates. During this presentation Adobe as executives will refer to revenue growth in constant currency rates unless otherwise stated.
Speaker #2: On this call, we will discuss GAAP and non-GAAP financial measures. Our reported results include GAAP growth rates and non-GAAP growth rates, including constant currency rates.
Speaker #2: During this presentation, ADOBE's executives will refer to revenue growth and content currency rates unless otherwise stated. Non-gap reconciliations are available in our earnings release and on ADOBE's Investor Relations website.
non-GAAP reconciliations are available in our earnings release and on Adobe's Investor Relations website, I will now turn the call over to Sean to now.
Speaker #2: I will now turn the call over to Shantanu.
Speaker #3: Thanks, Doug. Good afternoon, everyone, and thank you for joining us. Earlier today, we announced that I will be transitioning from my role as CEO after over 18 years and 100 earnings calls.
Thanks, Doug Good afternoon, everyone and thank you for joining us.
Earlier today, we announced that I will be transitioning from my role as CEO. After over 18 years and 100 earnings calls.
Speaker #3: Over the coming months, I will be working with Frank Calderoni, ADOBE's lead director, and the board of directors to identify my successor and to ensure a smooth transition.
Over the coming months I will be working with Frank Alder, Oni Adobe's lead director and the board of directors to identify my successor and to ensure a smooth transition.
Speaker #3: Until then, I will continue to lead ADOBE as CEO and will stay on as Chair of the Board to support my successor, just as John and Chuck did when I took on this role.
Until then I will continue to lead Adobe as CEO and will stay on as chair of the board to support my successor, just as John and Chuck did when I took on this role.
Speaker #3: What attracted me to ADOBE 28 years ago remains unchanged. Our leadership in creating new market categories, world-class products, a relentless drive to innovate in every functional area of the company, and our employees who continue to invent the future.
What attracted me to Adobe 28 years ago remains unchanged, our leadership in creating new market categories World class products, a relentless drive to innovate in every functional area of the company and our employees who continue to invent the future.
Speaker #3: The privilege of leading this company has been the greatest honor of my career. And I'm committed to setting it up for its next decade of growth with the right leader and executive team, in partnership with the board, while driving our fiscal 2026 strategic priorities.
The privilege of leading this company has been the greatest honor of my career and I'm committed to setting it up for its next decade of growth with the right leader and executive team in partnership with the board, while driving our fiscal 'twenty six strategic priorities.
Speaker #3: Our mission to empower everyone to create represents an even larger opportunity in the AI era. Let me outline what ADOBE is doing to drive our top-line growth while maintaining a high level of profitability.
Our mission to empower everyone to create represents an even larger opportunity in the AI era.
Speaker #3: As a company that has prided itself on creating categories, our AI transformation begins with a focus on customer-centric product strategy, to anticipate and fulfill the diverse needs of a large and growing customer base.
Let me outline what Adobe is doing to drive our topline growth, while maintaining a high level of profitability.
As a company that has prided itself on creating categories.
Our AI transformation begins with a focus on customer centric product strategy to anticipate and fulfill the diverse needs of a large and growing customer base.
Speaker #3: At Adobe, we're targeting business professionals, consumers, and creative and marketing professionals through differentiated, AI-infused and AI-first product offerings, across various routes to market and different monetization models.
At Adobe, we are targeting business professionals and consumers and.
And creative and marketing professionals through differentiated AI infused an AI first product offerings across various routes to market and different monetization models.
Speaker #3: With creativity at the core, we're expanding innovation in all our flagship applications, as well as investing in new offerings. These new products include ADOBE Acrobat Studio with ADOBE Express, ADOBE Firefly, and ADOBE Gen Studio.
With creativity at the core we are expanding innovation in all our flagship applications as well as investing in new offerings.
Speaker #3: Our new AI-first offerings ending ARR more than tripled year over year, reflecting progress against this opportunity with individuals and enterprises alike. ADOBE's continued success in AI will be underpinned by our deep understanding of creativity domains, the vast amount of data to which we have access, delivery of complex workflows driving business outcomes, and a great brand across individuals, small and medium businesses, and enterprises.
These new products include Adobe Acrobat studio with Adobe Express.
Adobe Firefly and Adobe Gen studio.
Our new AI first offerings, ending a IRR more than tripled year over year, reflecting progress against this opportunity with individuals and enterprises alike.
Adobe is continued success in AI will be underpinned by our deep understanding of creativity domains.
Speaker #3: Content is at the heart of all ADOBE solutions, which powers educational, social, marketing, brand, entertainment, and business content. Our growth has always been fueled by attracting new users.
The vast amount of data to which we have access.
Delivery of complex workflows driving business outcomes.
And a great brand across individuals small and medium businesses and enterprises.
Content is at the heart of all Adobe solutions, which powers educational social marketing brand entertainment and business content.
Speaker #3: Individual consumers, students, and business professionals into our products delighting them and driving adoption. We're ruthlessly focused on monthly active users as an indicator of adoption and success for Acrobat and Express, Creative Cloud applications, and ADOBE Firefly across different surfaces.
Our growth has always been fueled by attracting new users individual consumers students and business professionals into our products delighting them and driving adoption.
Speaker #3: Including desktop, web, mobile, and LLM platforms, in Q1 we surpassed 850 million monthly active users of Acrobat, Creative Cloud, Express, and Firefly, achieving 17% year-over-year growth.
We are ruthlessly focused on monthly active users as an indicator of adoption and success for acrobat and express creative cloud applications, and Adobe Firefly across different surfaces, including desktop web mobile and LLM platforms.
Speaker #3: A clear indication that we have both strong usage and a foundation for monetization. In addition to broad end-user adoption, ADOBE has always been a trusted partner for enterprises and we're increasingly being asked to help them drive their AI strategy, across customer experience orchestration, globally.
In Q1, we surpassed 850 million monthly active users of acrobat creative cloud Xpress and Firefly achieving.
Achieving 17% year over year growth.
A clear indication that we have both strong usage and a foundation for monetization. In addition to broad end user adoption Adobe has always been a trusted partner for enterprises, and we're increasingly being asked to help them drive their AI strategy across customer experience orchestration.
Speaker #3: Enterprises are looking to the combination of employees and automation to deliver on the demands of content and marketing at scale. Agentic AI will further enable outcome-focused enterprise workflows as customers look beyond speed to elevate creative differentiation, brand governance, and personalized experiences across channels.
Globally.
Enterprises are looking to the combination of employees and automation to deliver on the demands of content and marketing at scale.
Speaker #3: Adobe's end-to-end solutions are uniquely designed to meet these needs at scale. Strong momentum across our enterprise offerings underscores our leadership and customer confidence in Adobe's ability to deliver AI-driven value.
Agenda AI will further enable outcome focused enterprise workflows as customers look beyond speed to elevate creative differentiation brand governance and personalized experiences across channels.
Speaker #3: In Q1, globally, we achieved over 30% year over year growth in AP and apps, as well as ADOBE Gen Studio ending ARR. Our goal has always been to meet customers wherever they work across the broad range of surfaces they use every day and emerging new platforms have always been additive to our market opportunity.
Adobe is end to end solutions are uniquely designed to meet these needs at scale.
Strong momentum across our enterprise offerings underscores our leadership and customer confidence in adobe's ability to deliver AI driven value.
Speaker #3: In addition to Windows, Mac, iOS, Android, Chrome, and Edge, we intend to integrate with leading AI platforms such as Anthropic, Google, Microsoft, NVIDIA, and OpenAI, providing customers with access, choice, and flexibility.
In Q1 globally, we achieved over 30% year over year growth in AEP and apps as well as Adobe Gen studio ending a R. R.
Our goal has always been to meet customers.
Speaker #3: We're jointly driving enterprise transformation at scale in collaboration with global leaders such as Accenture, Cognizant, Deloitte, Dentsu, EY, IBM, Infosys, Omnicom, Publius, BWC, Stagwell, TCS, and WPP.
Wherever they work across the broad range of surfaces. They use every day and emerging new platforms have always been additive to our market opportunity.
In addition to Windows, Mac, iOS, Android chrome and edge, we intend to integrate with leading AI platforms, such as anthropic, Google, Microsoft Nvidia and open AI.
Speaker #3: To give the strategy, I'm pleased with how Adobe is transitioning to an AI-driven business. We had a strong start to the year, achieving $6.4 billion in revenue in Q1, representing 11% year-over-year growth.
<unk> customers with access choice and flexibility.
We're jointly driving enterprise transformation at scale in collaboration with global leaders, such as Accenture cognizant, Deloitte Dentsu E Y IBM Infosys Omnicom, Publicis, Pwc stag well D C S and W. P P.
Speaker #3: The GAAP earnings per share for the quarter was $4.60, and the non-GAAP earnings per share was $6.06, representing 11% and 19% year-over-year growth, respectively.
Speaker #3: Driving this momentum were Acrobat and Express, Creative Cloud Pro, overall strength in the CXO enterprise solutions, as well as our AI-first applications. Importantly, we saw tremendous growth in our new initiatives that dampens ARR in the short term but sets us up to deliver in the quarters ahead.
Given the strategy I'm pleased with how Adobe is transitioning to an AI driven business we.
We had a strong start to the year, achieving $6 4 billion in revenue in Q1, representing 11% year over year growth.
GAAP earnings per share for the quarter was $4 60.
Speaker #3: As we continue to transform the business to capitalize on the AI opportunity, our customer-focused strategy, rich product roadmap, innovation momentum, and early success across all routes to market position us well to empower everyone to create.
And non-GAAP earnings per share was $6.06, representing 11% and 19% year over year growth respectively.
Driving this momentum will acrobat and express.
<unk> cloud Pearl overall strength in the <unk> enterprise solutions as well as in our AI first applications.
Speaker #3: I'll now turn it over to David.
Speaker #5: Thanks, Shantanu. Hello, everyone. AI is fundamentally reshaping how people create and work, as experiences become increasingly conversational and outcome-driven, more people than ever will benefit from our creativity and productivity tools.
Importantly, we saw tremendous mild growth in our new initiatives that dampens IRR in the short term, but sets us up to deliver in the quarters ahead.
Speaker #5: Our approach is to expand access to AI across our existing audiences in products like Creative Cloud and Acrobat, reach new audiences with products like Firefly and Express, and help automate content production in enterprises with Firefly Enterprise.
As we continue to transform the business to capitalize on the AI opportunity.
Customer focused strategy rich product road map innovation momentum and early success across all routes to market position us well to empower everyone to create.
Speaker #5: As we execute on our strategic initiatives, we're pleased with the progress we're making against the real growth drivers. First, new user acquisition is gaining momentum, and we are reaching more new users than ever before as measured through the growth of monthly active users.
I'll now turn it over to David.
Thank you <unk> Hello, everyone AI is fundamentally reshaping how people create and work as experience has become increasingly conversational and outcome driven more people than ever will benefit from our creativity and productivity tools.
Speaker #5: Notably, Creative Premium has now crossed 80 million, growing 50% year over year, and includes web and mobile versions of Firefly, Express, Premiere, Photoshop, and Lightroom.
Our approach is to expand access to AI across our existing audiences in products like creative cloud and acrobat reach new audiences with products like Firefly in express and help automate content production and enterprises with Firefly enterprise as we execute on our strategic initiatives. We're pleased with the progress we're making against three growth.
Speaker #5: Second, AI usage continues to grow quickly as measured through record levels of generative credit consumption. Third, our content automation solutions continue to see strong enterprise adoption as measured through record numbers of API calls.
Speaker #5: These metrics highlight that we're executing against our strategy to empower individuals and businesses to create content in new ways in the era of AI.
Drivers.
First new user acquisition is gaining momentum and we are reaching more new users than ever before as measured through the growth of monthly active users, notably creative premium Mal crossed 80 million growing 50% year over year and includes web and mobile versions of Firefly Express Premier Photoshop and.
Speaker #5: In the first quarter, subscription revenue for business professionals and consumers was $1.78 billion, growing 15% year over year. Our vision for business professionals and consumers is to deliver AI-powered applications that reinvent how users comprehend, create, and share content.
Speaker #5: PDF spaces transform collections of files and links into dynamic knowledge hubs that allow you to easily collaborate with others. Acrobat AI Assistant provides users conversational experiences that help them comprehend information faster and more accurately, with an individual PDF or across documents in a PDF space.
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Second AI usage continues to grow quickly as measured through record levels of generative credit consumption.
Third our content automation solutions continue to see strong enterprise adoption as measured through record numbers of API calls. These metrics highlight that we're executing against our strategy to empower individuals and businesses to create content in new ways in the era of AI in the first quarter subscription revenue for business professionals and consume.
Speaker #5: Our Acrobat and Express integrations empower users to turn content they're consuming into generated presentations, infographics, audio summaries, and more. It's clear that these AI-based capabilities are resonating with users, as AI Assistant has now doubled year over year and Express has now tripled year over year.
Mers was 1.78 billion growing 15% year over year, our vision for business professionals and consumers is to deliver AI powered applications that reinvent how users comprehend create and share content.
Speaker #5: Express is now used in 99% of US Fortune 500 companies. In Q3, we introduced ADOBE Acrobat Studio, a single offering that brings together all these AI creative capabilities with the PDF tools users know and rely on.
<unk> spaces transforms collections of files and links into dynamic knowledge hubs that allow you to easily collaborate with others.
Speaker #5: Subscription upgrades to offerings that include Acrobat Studio value are off to a strong start across the Russia market, including adobe.com and enterprise license renewals. We're embedding Adobe's capabilities directly into new conversational platforms. In Q1, we launched Acrobat and Express for ChatGPT, significantly expanding the reach of our creativity and productivity workflows.
Acrobat AI assistant provides users conversational experiences that help them comprehend information faster and more accurately with an individual P. D F or across documents in a PDF space, our acrobat and express integrations empower users to turn content, they're consuming into generated presentations info graphics audio summaries and more.
Speaker #5: You can expect to see similar integrations into Copilot, Claude, and Gemini, as those platforms support integrated application experiences. We activated new Express partnerships, including Airtel in India, illustrating how our distribution strategy continues to accelerate new user acquisition at scale.
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It's clear that these AI based capabilities are resonating with users as AI assistant Mal doubled year over year and express Mal tripled year over year Express is now used in 99% of U S. Fortune 500 companies.
Speaker #5: Partnerships like these are helping to drive momentum across our business professional and consumer offerings, across individuals and businesses. Subscription revenue in Q1 for Creative and marketing professionals was $4.39 billion, growing 11% year over year.
In Q3, we introduced Adobe acrobat studio a single offering that brings together all these AI creative capabilities with the PDF tools users know and rely on.
Subscription upgrades to offerings that include acrobat studio value are off to a strong start across routes to market, including Adobe Dot com and enterprise license renewals.
Speaker #5: Our strategy for creators and creative professionals is to empower everyone to create, from first-time creators to seasoned professionals to large enterprises seeking to scale content production.
We're embedding adobe capabilities directly into new conversational platforms. In Q1, we have launched acrobat unexpressed protect GPT significantly expanding the reach of our creativity and productivity workflows, you can expect to see similar integrations into copilot, Claude and Gemini as those platforms support integrated application experiences.
Speaker #5: Firefly and our all-in-one creative AI studio are the right tools for the next generation of creators and creative professionals. Creative Cloud, with deeply infused AI capabilities, continues to be the destination of choice for power and precision creation. Enterprises are increasingly turning to Firefly Enterprise to unlock a new era of content automation.
We activated new express partnerships, including Airtel in India, illustrating how our distribution strategy continues to accelerate new user acquisition at scale partnerships. Like these are helping to drive momentum across our business professional and consumer offerings across individuals and businesses subscription revenue in Q1 for creative and Mark.
Speaker #5: Firefly is quickly becoming the go-to destination for content generation, ideation, and assembly. Users can generate with over 30 industry-leading models, including Adobe, Google, and OpenAI.
Speaker #5: They can collaboratively ideate with stakeholders in ADOBE Firefly boards. They can edit and assemble image, video, and audio using Firefly's prompt-based editing capabilities with integrated Photoshop and Express web journeys.
<unk> professionals was 4.39 billion growing 11% year over year, our strategy for creators and creative professionals is to empower everyone to create from first time creators to seasoned professionals to large enterprises seeking to scale content production Firefly and all in one creative Ai's studio is the right tool for.
Speaker #5: Firefly momentum is strong, with generative credit consumption growing over 45% quarter over quarter. While that growth is broad-based, generations are skewing toward higher-value modalities, with video generative actions growing more than 8x year over year, and audio generative actions doubling year over year, reflecting customers moving deeper into AI-assisted creation across the full creative process.
The next generation of creators and creative professionals creative cloud with deeply infused AI capabilities continues to be the destination of choice for power and precision creation and.
Speaker #5: As a result, Firefly subscription and credit pack ending ARR grew 75% quarter over quarter. Creative Cloud applications continue to embed new AI capabilities, making users far more productive.
And enterprises are increasingly turning to Firefly enterprise to unlock a new era of contact automation Firefly is quickly becoming the go to destination for content generation Ideation and assembly users can generate with over 30 industry, leading models, including Adobe, Google and open AI.
Speaker #5: Photoshop added new partner models and support for higher-resolution image generation and editing. Illustrator expanded its generative design capabilities with models from OpenAI, Ideogram, and Google to support frequent vector workflows.
They can collaboratively ideate with stakeholders and Adobe Firefly boards, they can edit and assemble image video and audio using fireflies prompt based editing capabilities with integrated Photoshop and express web journeys.
Speaker #5: Premiere added AI object masks, which quickly became one of the most used AI features in the application. As Creative Cloud users increase AI usage, we're seeing purchases of Firefly credit packs ramp nicely.
Firefly momentum is strong with generative credit consumption growing over 45% quarter over quarter.
Speaker #5: Firefly Enterprise, the combination of Firefly services and Firefly Foundry, is empowering the world's largest brand to scale content production to unprecedented levels. Firefly services provide enterprise-grade APIs, giving businesses more than 30 content production capabilities which can be run in automated workflows.
That growth is broad based generations are skewing toward higher value modalities with video generative actions growing more than <unk> year over year, and audio generative actions doubling year over year, reflecting customers moving deeper into AI assisted creation across the full creative process as a result, firefly subscription and credit pack ending <unk>.
Speaker #5: These include 3D digital twin workflows, showcasing physical products, image and video resizing across every social and digital channel, and campaign variant generation and assembly for personalized marketing content.
<unk> grew 75% quarter over quarter creative cloud applications continue to embed new AI capabilities, making users far more productive photoshop added new partner models and support for higher resolution image generation and editing illustrator expanded its generative design capabilities with models from open AI ideogram.
Speaker #5: Firefly Foundry enables the world's largest marketing teams and media companies to build private, deeply tuned AI models trained on their own IP. Unlike generic AI models, Firefly Foundry gives enterprises a commercially safe model that understands and is able to accurately generate their branded assets.
And Google to support frequent vector workflows Premier added AI object masks, which quickly became one of the most used AI features and the application.
Speaker #5: Together, these products are driving measurable business outcomes by increasing production scale, accelerating velocity, and reducing cost. Firefly Enterprise's new customer acquisition grew 50% year over year.
As creative cloud users increased <unk> usage, we're seeing purchases of Firefly credit packs ramped nicely.
Speaker #5: Additional Q1 creators and creative professionals highlights include: Photoshop launched a conversational editing experience in ChatGPT. 85% of films premiering at the 2026 Sundance Film Festival were made using Adobe Creative Cloud tools.
Firefly enterprise the combination of Firefly services, and Firefly foundry is empowering the world's largest brands to scale content production to unprecedented levels.
Firefly services provide enterprise grade Apis, giving businesses more than 30 content production capabilities, which can be run and automated workflows.
Speaker #5: Frame is emerging as the cross-media work in progress repository to manage the rapidly increasing volume of content being created and doubled the number of assets under management year over year.
These include three D digital twin workflows, showcasing physical products image and video resizing across every social and digital channel and campaign variant generation and assembly for personalized marketing content.
Speaker #5: And Firefly Foundry continues to build momentum in the media and entertainment vertical, with partnerships including B5 Studios, Cantina Creative, Creative Artist Agency, United Talent Agency, and WME.
Firefly foundry enables the world's largest marketing teams and media companies to build private deeply tuned AI models trained on their own IP. Unlike generic AI models Firefly foundry gives enterprises at commercially safe model that understands and is able to accurately generate their branded assets together. These products are driving measure.
Speaker #5: While Q1 had many highlights, our traditional stock business saw a steeper decline than we expected. This shift is playing out more quickly than we had planned for, and our focus remains on giving customers meaningful choice between stock and generative AI as they build their creative and marketing workflows.
Speaker #5: Q1 reinforced our confidence in the strategy and opportunity across creativity and productivity. We're thrilled with the new user acquisition and usage growth for Creative Premium offerings.
Bell business outcome by increasing production scale accelerating velocity and reducing cost.
Firefly enterprise, new customer acquisition grew 50% year over year additional.
Speaker #5: We're excited to see the momentum continue with workflow and automation capabilities driving incredible efficiencies in enterprises. I'll now turn it over to Anil. Thanks, David.
Additional Q1 creators and creative professionals highlights include Photoshop launched a conversational editing experience and CECI P T.
Speaker #5: Hello, everyone. ADOBE provides the leading AI-powered solutions for creative and marketing professionals to deliver personalized customer experiences at scale. AI remains a tailwind for our enterprise business, enabling us to deliver creative and marketing professional subscription revenue of $4.39 billion in Q1, growing 11% year over year.
85% of films premiering at the 2026 Sundance Film Festival were made using Adobe creative cloud tools frame is emerging as the cross media work in progress repository to manage the rapidly increasing volume of content being created and doubled the number of assets under management year over year.
And Firefly foundry continues to build momentum in the media and entertainment vertical with partnerships, including B Five studios cantina creative.
Speaker #5: ADOBE pioneered the category of customer experience management. Enterprises around the world rely on our software to identify prospects, acquire new customers, engage in delight them with personalized experiences, and grow customer lifetime value.
Dave Artist Agency, United Talent Agency and WMA.
Speaker #5: We are the leading provider of content management systems for websites and mobile apps, and the leading customer data platform services the foundation in enterprises for digital customer engagement.
While Q1 had many highlights our traditional stock business saw a steeper decline than we expected. This shift is playing out more quickly than we had planned for and our focus remains on giving customers meaningful choice between stock and generative AI as they build their creative and marketing workflows.
Speaker #5: We serve 99% of the Fortune 100 and are the digital platform of choice for chief marketing officers and chief digital officers for their ongoing campaigns and for major marketing moments like the Olympics and Super Bowl.
Q1, reinforced our confidence in the strategy and opportunity across creativity and productivity, we're thrilled with the new user acquisition and usage growth for creative freemium offerings. We're excited to see the momentum continue with workflow and automation capabilities driving incredible efficiencies in enterprises.
Speaker #5: During the 2026 Super Bowl, ADOBE enabled experiences peaked with more than 8 billion analytics overheads, 21 million concurrent viewers, 34 million page views, 1.5 million view requests per minute, and 216 million emails delivered.
I'll now turn it over to another.
Speaker #5: In the era of AI, every enterprise needs to drive their current business while harnessing AI to address new trends in consumer behavior and expectations.
Thanks, David Hello, everyone.
It provides the leading AI powered solutions for creative and marketing professionals to deliver personalized customer experiences at scale.
Speaker #5: Companies must ensure their brands remain front and center, even as consumers are increasingly discovering new information, engaging with businesses, and buying products through LLMs and agents.
AI remains a tailwind for our enterprise business, enabling us to deliver creative and marketing professional subscription revenue of 4.39 billion in Q1 growing 11% year over year.
Speaker #5: These trends vary significantly by geography and consumer segment, adding complexity for global companies that need to provide personalized experiences through well-established channels like websites, email, and mobile apps while ramping up new channels like LLMs.
Adobe pioneered the category of customer experience management.
Enterprises around the world rely on our software to identify prospects acquired new customers engage and delight them with personalized experiences and grow customer lifetime value.
Speaker #5: ADOBE has become a trusted partner for AI-powered customer experience orchestration. Through our thought leadership, rapid innovation, and omnichannel capabilities, while providing the security, reliability, data governance, global scale, and partner ecosystem that enterprises require.
We are the leading provider of content management systems for websites and mobile apps and the leading customer data platform that serves as the foundation and enterprises for digital customer engagement.
Speaker #5: ADOBE's unified CXO platform provides solutions for brand visibility, content supply chain, and customer engagement. ADOBE Experience platform is a leading platform for digital customer engagement and brings together new AI-powered apps and agents to transform how businesses build, deliver, and optimize marketing campaigns and customer experiences as well as reduce costs.
We sold 99 of the Fortune 100, and or the digital platform of choice for Chief marketing officers and Chief digital officers for their ongoing campaigns and four major marketing moments like the Olympics and Super Bowl.
During the 'twenty 'twenty six Super Bowl Adobe enabled experiences peak with more than 8 billion analytics. Several hits 21 million concurrent viewers 34 million page views, one and a half million video request per minute and 216 million E mails Stoller.
Speaker #5: In Q1, we introduced new AEP agents along with expanded agent-orchestrated capabilities. Now available to all AEP customers via a trial and buy program. The scale of our platform has grown to over 35 trillion segment valuations and more than 70 billion profile activations per day.
In the era of AI every enterprise needs to drive their current business, while harnessing AI to address new trends in consumer behavior and expectations.
Speaker #5: Subscription revenue for AEP and native apps grew over 30% year over year, demonstrating continued momentum and valualization. As consumers increasingly use LLMs and agents to discover brands and purchase products, brand visibility has become critical for success in the agentic web.
Companies must ensure their brands remain front and center, even as consumers are increasingly discovering new information engaging with businesses and buying products through <unk> and agents.
<unk> vary significantly by geography, and consumer segment, adding complexity for global companies that need to provide personalized experiences through well established channels like websites email and mobile apps, while ramping up new channels like LLS.
Speaker #5: According to ADOBE Digital Insights, during the 2025 holiday season, traffic to retail sites from LLMs increased nearly 7X, bringing qualified referrals that convert 31% higher and generate 254% more revenue per visit.
Adobe has become the trusted partner for AI powered customer experience orchestration through our thought leadership rapid innovation and omni channel capabilities, while providing the security reliability data governance global scale and partner ecosystem that enterprises require.
Speaker #5: ADOBE's brand visibility solution, which includes ADOBE Experience Manager, ADOBE LLM Optimizer, and ADOBE Brand Concierge, empowers brands to engage consumers across their own properties, search, social media, LLMs, and agentic channels.
Speaker #5: ADOBE LLM Optimizer enables enterprises to enhance the discoverability of their websites by LLMs and significantly increase their organic traffic. ADOBE Brand Concierge is an AI-first application enabling businesses to configure and manage agentic AI experiences on their websites and mobile apps to guide consumers from exploration to purchase decisions using immersive and conversational experiences.
Adobe's unified <unk> platform, providing solutions for brand visibility content supply chain and customer engagement.
Adobe experience platform is a leading platform for digital customer engagement and brings together, our new AI powered absent agents to transform how businesses bird, Delaware and optimize marketing campaigns and customer experiences as well as reduce costs.
In Q1, we introduced new AEP agents, along with expanded agent orchestrated capabilities now available to all <unk> customers were a try and buy program.
Speaker #5: We expect our pending acquisition of Semrush will expand our offering to provide marketers with comprehensive solutions to shape how their brands appear across their own websites, LLMs, traditional search, and the wider web.
The scale of our platform has grown to over 35 trillion segment evaluations and more than 70 billion profile Activations per day.
Speaker #5: Content is at the heart of delivering personalized customer experiences, and the demand for high-quality, on-brand content has exploded. Gen Studio is our comprehensive content supply chain offering, spanning content ideation, creation, production, and activation.
Subscription revenue for AEP and native apps grew over 30% year over year, demonstrating continued momentum in value realization.
Speaker #5: Gen Studio is highly differentiated by Adobe's creativity and marketing applications, including Creative Cloud, Firefly Enterprise, Frame, Adobe Experience Manager, and Workflow. In Q1, we delivered breakthrough innovations enabling Gen Studio creative assets to flow directly into activation workflows across the Adobe stack and broad ecosystem of advertising platforms, including Amazon Ads, Google, LinkedIn, and Meta.
As consumers increasingly use llm's and agents to discover brands and purchase products brand visibility has become critical to success in the agent equip.
According to Adobe digital insights during the 20th certified holiday season traffic to retail sites from Llm's increased nearly seven X, bringing qualified referrals that convert 31% higher and generate 254% more revenue per visit.
Speaker #5: NDKRO for the Adobe Gen Studio family of products grew over 30% year over year, as the world's leading brands and agencies increasingly turned to Adobe to power their content supply chain.
Adobe's brand visibility solution, which includes Adobe experience manager Adobe LLM Optimizer Adobe brand consideration.
Empowers brands to engage consumers across their own properties search social media Llm's and <unk> channels.
Speaker #5: In Q1, accomplishments in business highlights include strong customer demand for our agentic web offerings, with over 650 customer trials underway for Adobe LLM Optimizer, Site Optimizer, and Brand Concierge.
Adobe Air them Optimizer enables enterprises to enhance the discovery ability of their websites by Llm's and significantly increase that organic traffic.
Speaker #5: Continued adoption and momentum for AEP Assistant, with 70% of all AEP customers using the agentic capabilities. Partnership in the OpenAI initiative to enable brands to create ads for ChatGPT.
Adobe brand conscious is an AI first application, enabling businesses to configure and manage the <unk> experiences on their websites and mobile apps to guide consumers from exploration to purchase decisions using immersive and conversational experiences.
Speaker #5: Accelerating momentum for Firefly services and custom models as part of the Gen Studio solution, with over 2,500 custom models since launch, and Q1 industry analyst recognition, including being named a leader in two Forrester Waves for digital asset management solutions and revenue marketing platforms for B2B.
We expect our pending acquisition of Sem Rush will expand our offering to provide marketers with a comprehensive solution to shape, how their branch appeared across their own websites llm's traditional search and the wider web.
Speaker #5: As well as the Gartner Magic Quadrant for personalization engines, Adobe's unique value is helping enterprises solve their comprehensive customer experience and content supply chain needs, balancing creativity, automation, and costs.
Content is at the heart of delivering personalized customer experiences and the demand for high quality on brand content has exploded.
10 studio is our comprehensive content supply chain offering spanning content ideation creation production and activation.
Speaker #5: Global customer wins in enterprise in Q1 included Centene, Danske Bank, Deutsche Bank, Heineken, HP, MongoDB, Nordstrom, Paramount, Pilot Travel Centers, RACQ, Revlon, Sherwin Williams, Southwest Airlines, Stagwell, Target, TUI Travel Group, and WPP.
10 studios highly differentiated by integrating best in class capabilities across Adobe creativity, and marketing applications, including creative cloud Firefly enterprise frame Adobe experience manager and warfarin.
Speaker #5: Customer experience orchestration is a critical imperative for every business to drive both top-line and bottom-line growth. Our unique vision—comprehensive offerings, rapid pace of innovation, extensive partner ecosystem, and laser focus on delivering business value—positions Adobe as the partner of choice for AI-powered customer experience orchestration.
In Q1, we delivered breakthrough innovations, enabling gen studio created assets to flow directly into activation workflows across the Adobe stack and a broad ecosystem of advertising platforms, including Amazon ads, Google Linkedin and meta.
<unk> for the Adobe tends to be a family of products grew over 30% year over year as the world's leading brands and agencies increasingly turned to adobe to power the cotton supply chain.
Speaker #5: We look forward to unveiling significant innovations and partnerships that will further advance our leadership position at Adobe Summit in April. I'll now pass it to Dan.
Q1 accomplishments and business highlights include strong customer demand for identical of offerings with over 650 customer trials underway for Adobe and <unk> Optimizer sites Optimizer and brand continues.
Speaker #6: Thanks, Sunil. Today, I'll start by summarizing Adobe's performance in Q1, fiscal 2026, highlighting growth drivers across our customer groups, and I'll finish with our financial targets.
Continued adoption and momentum for EPA assistant with 70% of all AP customers using the agency capabilities.
Speaker #6: In Q1, Adobe achieved revenue of $6.40 billion, growing 12% year over year as reported, and 11% in constant currency. GAAP EPS was $4.60, and non-GAAP EPS was $6.06, increasing 11% and 19% year over year, respectively.
Partnership in the open AI initiatives to enable brands to create ads, which at GPT.
Accelerating momentum for Firefly services and customers as part of the <unk> solution with over 2500 custom models since launch and Q1 industry analyst recognition, including being named a leader in to Forrester waves for digital asset management solutions and revenue marketing platforms will be debate.
Speaker #6: GAAP operating margin was 37.8%, and non-GAAP operating margin was 47.4%. Q1 financial highlights included total Adobe ending ARR of $26.06 billion, growing 10.9% year over year.
As well as the Gartner magic quadrant for personalization edges.
Adobe's unique value is helping enterprises solve the comprehensive customer experience and content supply chain needs balancing creativity automation and cost.
Speaker #6: Total customer group subscription revenue of $6.17 billion, growing 13% year over year, or 12% in constant currency. RPO of $22.22 billion exiting the quarter, growing 13% year over year, or 12% in constant currency.
Global customer wins in the enterprise in Q1 included Centene Danske Bank Deutsche Bank, Heineken, HP, Mongo, DB Nordstrom Paramount pilot travel centers RAC Q.
Speaker #6: And CRPO growing 12%, as reported, or 11% in constant currency. Cash flows from operations in the quarter were a Q1 record of $2.96 billion, and ending cash and short-term investment position exiting Q1 was $6.89 billion.
Sherwin Williams Southwest Airlines Stag will target TUI travel group and W. P P.
Customer experience orchestration is a critical imperative for every business to drive both topline and Bottomline growth.
Speaker #6: And repurchasing approximately 8.1 million shares of our stock during the quarter. Exiting Q1, we have $3.89 billion remaining of our $25 billion authorization granted in March 2024.
Our unique vision comprehensive offerings rapid pace of innovation.
And through a partner ecosystem and laser focus on delivering business value position Adobe as the partner of choice or AI powered customer experience orchestration.
Speaker #6: Business professionals and consumers subscription revenue was $1.78 billion, increasing 16% year over year as reported, or 15% in constant currency. Q1 growth drivers for business professionals and consumers included sustained double-digit ending ARR growth across all geographies.
We look forward to unveiling significant innovations and partnerships that will further advance our leadership position Adobe summit in April.
I'll now pass it to Dan.
Thanks, and now today I'll start by summarizing Adobe's performance in Q1 fiscal 2026, highlighting growth drivers across our customer groups and I'll finish with our financial targets in Q1, Adobe achieved revenue of 6.40 billion growing 12% year over year as reported and 11% in.
Speaker #6: Acrobat and Express Mail grew approximately 20% year over year. Acrobat AI Assistant ARR grew approximately 3x year over year. And there were strong upgrades to Acrobat Studio as part of enterprise license renewals.
Speaker #6: Creative and marketing professionals subscription revenue was $4.39 billion, increasing 12% year over year, or 11% in constant currency. Q1 growth drivers for creative and marketing professionals included growth in Creative Cloud driven by the CC Pro offering.
Constant currency GAAP EPS was $4 60.
And non-GAAP EPS was $6, six <unk>, increasing 11% and 19% year over year, respectively. GAAP operating margin was 37, 8% and non-GAAP operating margin was 47, 4%.
Speaker #6: Creative freemium mail cost $80 million, growing over 50% year over year, and includes web and mobile versions of Firefly, Express, Premiere, Photoshop, and Lightroom.
Q1 financial highlights included total Adobe ending IRR of 26.06 billion growing 10, 9% year over year.
Speaker #6: Generative credit consumption increased more than 45% quarter over quarter. Firefly ending ARR across Firefly app, Firefly credit packs, and Firefly Enterprise exceeded $250 million.
Total customer groups subscription revenue of $6, $1 7 billion growing 13% year over year or 12% in constant currency.
P O of 22.22 billion exiting the quarter.
Growing 13% year over year or 12% in constant currency.
Speaker #6: Gen Studio and AEP, and apps ending ARR, each grew over 30% year over year. Strong pipeline momentum for new AI offerings across LLM Optimizer, Site Optimizer, and Brand Concierge.
And C. R P O growing 12% as reported or 11% in constant currency.
Cash flows from operations in the quarter, where Q1 record of $2 96 billion and ending cash and short term investment position exiting Q1 was $6 $8 9 billion.
Speaker #6: We saw continued strength in retention across the enterprise customer base, and continued success in the enterprise, as total customers with ARR over $10 million grew greater than 20% year over year.
And repurchasing approximately $8 1 million shares of our stock during the quarter exiting Q1, we have 389 billion remaining of our $25 billion authorization granted in March 2024.
Speaker #6: As we transform our business, we continue to deliver double-digit total Adobe ARR growth at scale, driven by innovative technology, the breadth of our solutions, and strong go-to-market motions.
Business professionals and consumers subscription revenue was $1 78 billion, increasing 16% year over year as reported or 15% in constant currency.
Speaker #6: From a product perspective, Q1 ARR growth was driven by Acrobat and Express, Creative Cloud Pro, and AEP and apps in GenStudio and the enterprise, as well as growing momentum in our expanding portfolio of AI-first applications, including the Firefly app and Firefly Enterprise.
Q1 growth drivers for business professionals and consumers included sustained.
Sustained double digit ending air growth across all geographies.
Speaker #6: In total, ARR from AI-first applications more than tripled year over year. In Q1, we drove significant Mail growth for our new creative web and mobile freemium offerings.
Acrobat and express MAU grew approximately 20% year over year.
Acrobat AI assistant <unk> grew approximately three X year over year.
Speaker #6: Including Express, Firefly, Photoshop, and Premiere. While this freemium approach is intentionally designed to serve the next generation of creators, build the Adobe brand, and set the foundation for accelerated growth over time, these offerings have a near-term impact on ARR.
And strong upgrades to acrobat studio as part of enterprise license renewals.
Creative and marketing professional subscription revenue was $4, three 9 billion, increasing 12% year over year or 11% in constant currency.
Speaker #6: In addition, we continue to monitor and drive utilization of AI functionality across our products. In Q1, this AI functionality drove significantly greater credit consumption quarter over quarter.
Q1 growth drivers for creative and marketing professionals included.
Growth in creative cloud driven by the <unk> pro offering.
Creative freemium MAU crossed 80 million growing over 50% year over year and includes web and mobile versions of Firefly Express Premier Photoshop and lightroom.
Speaker #6: However, in Q1, we experienced a greater-than-anticipated decline in our traditional standalone stock book of business. While this is happening faster than expected, our strategy is to provide customers with the choice to use stock or generate AI offerings for creative and marketing workflows.
[noise] generative credit consumption increased more than 45% quarter over quarter.
Speaker #6: We expect strength for our core Acrobat and CC products. Enterprise demand for our CXO solutions, coupled with new Mail growth for Firefly and Express, and increasing AI usage and monetization, to gain momentum as we move through the year.
Firefly, ending <unk> across Firefly, App, Firefly credit packs, and Firefly enterprise exceeded $250 million.
Jen studio and AEP and apps ending <unk> each grew over 30% year over year.
Speaker #6: We continue to expect total Adobe ARR growth of 10.2% for FY26. Let me now turn to our financial targets, which assume current macroeconomic conditions and do not include the contribution of SEMrush, which we continue to expect to close in Q2, subject to regulatory approvals and closing conditions.
Strong pipeline momentum for new AI offerings across LLM optimizer sites Optimizer and brand concierge.
Continued strength in retention across the enterprise customer base.
And continued success in the enterprise as total customers with over $10 million grew greater than 20% year over year.
Speaker #6: For Q2 fiscal 2026, we're targeting total Adobe revenue of $6.43 to $6.48 billion. Business professionals and consumers subscription revenue of $1.80 to $1.82 billion.
As we transform our business, we continue to deliver double digit total Adobe air our growth at scale.
Driven by innovative technology, the breadth of our solutions and strong go to market motions from.
Speaker #6: Creative and Marketing Professionals subscription revenue of $4.41 to $4.44 billion. GAAP EPS of $4.35 to $4.40. Non-GAAP EPS of $5.80 to $5.85. For Q2, we expect non-GAAP operating margin of approximately 44.5%.
From a product perspective, Q1, <unk> growth was driven by acrobat and express.
Creative cloud <unk>.
And AEP and absent Gen studio in the enterprise as well as growing momentum in our expanding portfolio of AI first applications, including Firefly App and Firefly enterprise.
Speaker #6: And non-GAAP tax rate of approximately 18%. In addition, we are reaffirming our FY26 targets. Adobe remains focused on executing our growth strategy in a period of profound technological change.
In total <unk> from AI first applications more than tripled year over year.
In Q1, we drove significant MAU growth for our new creative web and mobile freemium offerings, including express Firefly Photoshop and Premier.
Speaker #6: As customer behavior evolves, the strength of our platforms and the rapid pace of our AI-driven innovation in creativity, productivity, and customer experience orchestration workloads position us to drive profitable growth and seize the opportunities ahead.
While this freemium approach is intentionally designed to serve the next generation of creators build the Adobe brand and set the foundation for accelerated growth over time. These offerings have a near term impact on IRR.
Speaker #6: Shantanu, back to you.
Speaker #1: Thanks, Dan. Q1 presented a strong start to the year, both for our existing platforms where we've been innovative with AI, as well as the new strategic initiatives that will drive future growth.
In addition, we continue to monitor and drive utilization of AI functionality across our products in Q1. This AI functionality drove significantly greater credit consumption quarter over quarter.
Speaker #1: Adobe remains steadfast in its commitment to innovation and delivering value to our customers, partners, and shareholders. We're confident that our customer-centric approach, groundbreaking product innovations, passionate employees, and unwavering execution will continue to drive growth and create durable value.
However, in Q1, we experienced a greater than anticipated decline in our traditional stand alone stock book of business.
While this is happening faster than expected our strategy is to provide customers with the choice to use stock or generative AI offerings for creative and marketing workflows.
Speaker #1: Thank you, and we will now take your questions. Operator,
We expect strength for our core acrobat and Cc products and enterprise demand for our <unk> solutions, coupled with new MAU growth for Firefly in express and increasing AI usage and monetization to gain momentum as we move through the year.
Speaker #2: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing *1 on your telephone keypad.
Speaker #2: Please limit yourself to one question in order to give everyone an opportunity. If you are using your speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
We continue to expect total adobe or our growth of 10, 2% for FY 'twenty six.
Speaker #2: Again, please press *1 to ask a question. And we will take our first question from Jeffery Shah with Griffin Securities.
Let me now turn to our financial targets, which assume current macroeconomic conditions and do not include the contribution of some rush, which we continue to expect to close in Q2 subject to regulatory approvals and closing conditions.
Speaker #3: Thank you. Good evening. Shantanu, first for you—I just want to say how much I have appreciated our three-decade relationship, and I do want to commend you—if that's a strong enough word—for the multi-transformations at the company that we've seen over that long period of time.
For Q2 fiscal 2026, we're targeting <unk>.
Total Adobe revenue of $6 four three to 648 billion.
Business professionals and consumers subscription revenue of 180 to 1.82 billion.
Speaker #3: So I just wanted to make that personal and professional remark before I ask the question, which this evening is actually Dan. Not a product question.
Creative and marketing professional subscription revenue of 4.41 to 444 billion.
Speaker #3: One of your most important metrics, I think, is and will be the progression of your current RPO. The constant currency growth rate for CRPO was about a point better than in Q4.
GAAP EPS of $4 35.
To $4 40.
And non-GAAP EPS of $5 80.
Speaker #3: And also, over the last number of years, we've seen that CRPO has fairly consistently been somewhere around 51%, 52% of your estimated next 12-month revenue, on a quarterly basis.
To $5 85.
For Q2, we expect non-GAAP operating margin of approximately 44, 5%.
And non-GAAP tax rate of approximately 18%.
In addition, we are reaffirming our FY 'twenty six targets.
Speaker #3: Is there any reason to believe that your revenue visibility via CRPO coverage might proportionally increase over the next number of years? Maybe just talk about that—perhaps any structural change you foresee.
Adobe remains focused on executing our growth strategy in a period of profound technological change is.
Speaker #3: If any, in your CRPO.
As customer behavior evolves, the strength of our platforms and the rapid pace of our AI, driven innovation and creativity productivity and customer experience orchestration workflows position us to drive profitable growth and seize the opportunities ahead.
Speaker #1: Yeah, thanks, Jay. Appreciate the question. We're pleased with the momentum that we exited the year with. Last year, 2025, strong progression across all three customer audiences, and the business performed well as we windowed into this year.
<unk> back to you.
Speaker #1: You can see the strength in terms of our enterprise business and the way we're combining solutions from creativity to marketing to create those content automation solutions.
Thanks, Dan Q1 represented a strong start to the year, both for our existing platforms, where we've been innovated with AI as well as the new strategic initiatives that will drive future growth.
Adobe remains steadfast in its commitment to innovation and delivering value to our customers partners and shareholders.
Speaker #1: And help brands drive their business in this environment. So we're pleased with the progression and the performance and the strategy, and the execution against that strategy.
We're confident that our customer centric approach groundbreaking product innovations passionate employees and unwavering execution will continue to drive growth and create durable value.
Speaker #1: I don’t see any reason why the trends we’ve seen in the business historically would inflect to drive a different dynamic as it relates to RPO.
Speaker #1: CRPO and translation to revenue.
Thank you and we will now take your questions.
Speaker #4: And Jay, I just wanted to say thank you for those kind thoughts. And I have to—I'll be honest—if I didn't say that I'm even more excited about what we've been accomplishing as it relates to the AI transformation and the opportunity ahead of us.
Operator.
Thank you if you have dialed in via the telephone and would like to ask a question. Please signal by pressing star one on your telephone keypad. Please limit yourself to one question in order to give everyone an opportunity.
Speaker #4: So we're going to stay really focused on capitalizing on that opportunity.
Speaker #3: Thank you.
If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again. Please press star one to ask a question.
Speaker #2: Thank you. And we will take our next question from Zach Atkalia with Barclays.
Speaker #1: Okay, great. Hey guys, thanks for taking my question here. Shantanu, I just want to start by echoing Jay's comments. I mean, clearly this has been a very dynamic space, but you've helped build one of the largest SaaS businesses in the world over the years.
And we will take our first question from Jason <unk> with Griffin Securities.
Thank you and good evening.
Continental first for you I just wanted to say how much I appreciate it.
Speaker #1: So let me start by saying, congrats. But maybe on that point, I was wondering—just a bit of a broad question—what is the board looking for in Adobe's next CEO?
Three decade relationship and I do want to commend you for that.
A strong enough word.
For the multiple transformations at the company that we've seen over that long period of time. So I just wanted to make that personal and professional remark before I ask my question, which this evening is actually for Dan.
Speaker #4: Well, thanks again, Zach. I think at the core, we're always going to be a product company. And I think taking advantage and looking around the corner as it relates to the immense opportunity that AI has across creativity and marketing is the real opportunity for not just the CEO, but the company as well.
Not a product question.
One of your most important metrics I think is and will be the progression of your call with IPO.
The constant currency growth rate for <unk> was about one point better than Q4.
Speaker #4: And I think, from my perspective, it's a massively scaled business right now. And so just continuing to have a growth agenda, and we're all about our people.
And also over the last number of years, we've seen that CRP O is fairly consistently been somewhere around 50, 152% of your estimated next 12 month revenue on a rolling quarterly basis is there any reason to believe that your revenue visibility via CRP O coverage my proposal.
Speaker #4: And so the values associated with it. And I'm actually really confident that the board and the special committee will do a great job of shepherding that search.
The increase.
Speaker #1: Very helpful. Thank you.
Over the next number of years, maybe just talk about that perhaps structural changes you foresee if any in the <unk>.
Speaker #2: Thank you. We will take our next question from Brad Zelnick with Deutsche Bank.
Speaker #1: Great. Thank you so much. Firstly, Shantanu, congrats on an epic run. Your impact on Adobe and the industry at large, I know, will be enduring for decades to come.
Yes, Thanks, Jay I. Appreciate the question, we're pleased with the momentum that we exited the year.
Last year 2025 strong progression across all three are cut.
Speaker #1: But my question is for David. David, it's great to hear the generative credit consumption is ramping so meaningfully—up 45% sequentially—and much of the expansion has been skewing towards video and audio.
Customer audiences and the business performed well as we window into this year you can see the strength in terms of.
Speaker #1: We'd love to understand what use cases you're seeing consume credit so meaningfully in video and audio. Are we still in more of an exploration stage, or maybe acting differently?
Our enterprise business and the way, we're combining solutions from creativity to marketing to create those content automation solutions.
Speaker #1: What are the use cases you're seeing from leading-edge customers that are driving this type of consumption? Thanks.
And help brands drive their business in this environment.
Speaker #4: Yeah, I think that's a really important question and indicator in terms of where we're going. If you take a step back, I think when you look at the evolution of AI, it has definitely gone from a funding to play with to something that is evolving and being integrated more and more into existing workflows.
So we're pleased with the progression and the performance and the strategy and the execution against that strategy I don't see any reason why the trends we've seen in the business historically would inflect to drive a different dynamic as it relates to RPI CRP L and translation to revenue.
Speaker #4: And now I think people are very much relying specifically on the need for AI to be part of their creative process. And so you can, for those who haven't been tracking, you can think about generative credit like tokens for our creative applications.
And Jay I, just wanted to say thank you for those kind of thoughts and I have to I'd be remiss, if I didn't say that I'm, even more excited about what we've been accomplishing as it relates to the AI transformation and the opportunity ahead of us. So you know.
Speaker #4: Obviously, we do a lot of generations across the entire business, but that's effectively what that is. The net of what you're seeing here is we have more people generating than ever before.
We're going to stay really focused on capitalizing on that opportunity.
Speaker #4: You saw that monthly active users of our premium creative software, as an example, is up to over 80 million—up 50% year over year. So we have more people generating.
Okay.
Thank you.
Thank you.
We'll take our next question from Zachary <unk> with Barclays.
Okay, Great Hey, guys. Thanks for taking my question here.
Speaker #4: They're generating higher resolution because it's not just a fun thing to play with—it's actually part of their existing workflows. And they're generating higher modalities.
Sean I just want to start by echoing Jay's comments I mean, clearly this has been a very dynamic space, but you've helped built one of the largest SaaS businesses in the world over the year or so so let me just start by saying congrats.
Speaker #4: Things like video, audio, design— and so you see all of that pushing generative credit up. The second thing is they're actually generating in more places.
Speaker #4: We've certainly started the process by having them create and use generative AI in our core flagship applications, and that continues to grow nicely. Firefly is becoming really more of a destination.
But maybe on that point I was wondering just a bit of a broad question what.
What is the board looking for and Adobe's next CEO.
Speaker #4: We talked about how that business grew 75% sequentially, quarter over quarter. Express, Boards, for broad-based ideation and stakeholder value. So, lots of reasons to look at this as the right leading indicator.
Well, thanks again socket.
At our core we're always going to be a product company and I think you know taking advantage and looking around the corner as it relates to the immense opportunity that AI has across our creativity and marketing is is the real opportunity for not just the CEO, but the company as well and you know I think from.
Speaker #4: And the last thing I'll say is we're starting to see a nice ramp in terms of existing creative professionals adding on additional Creative Packs as a result of this.
My perspective, it's a massively scaled business right now and so you know just continuing to have a growth.
Speaker #1: It's really helpful. Thank you so much.
Speaker #2: Thank you. We will take our next question from Mark Murphy with JP Morgan.
Gender and now we're all about our people and so the values associated with it and I'm actually really confident that the board and the special Committee.
Speaker #1: Thank you, Shantanu. Congrats on one of the greatest and longest CEO tenures and growing Adobe to $26 billion in revenue. I want to ask you, and also the others—it's remarkable to see 13% subscription revenue growth.
You know, we'll do a great job of shepherding that search.
Very helpful. Thank you.
Thank you we will take our next question from Brad Zelnick with Deutsche Bank.
Speaker #1: We haven't seen that in quite some time. It's intriguing that total revenue growth accelerated in constant currency to 11%, or maybe I should say upticked.
Great. Thank you so much firstly shot the new congrats on an epic run.
Speaker #1: Can you speak to the revenue acceleration? We were not expecting to see revenue accelerate quite yet, and I'm just trying to understand—did we assume the stock business is pretty small?
Your impact on Adobe in the industry at large I know will be enduring for for decades to come.
But my question is for David David It's great to hear the generative credit consumption is ramping so meaningfully up 45% sequentially and much of the expansion has been skewing towards video and audio would love to understand what use cases, you're seeing consume credits. So meaningfully in video and audio are we still in more of an exploration stage or.
Speaker #1: And therefore, whatever minor setback you saw, it's being more than offset by tripling in AI revenue and the step-up in credit consumption that Brad asked about.
Speaker #1: And that, maybe, is it that kind of netting out that drove this top-line acceleration during the quarter?
Maybe asked differently what are the use cases, you're seeing from leading edge customers that are driving this type of consumption. Thanks.
Speaker #5: Yeah, a couple of things, Mark. I mean, if you take a step back and really look at, as we've been going through this transition, what we've been focused on, first and foremost, it's about: are we driving the right product innovation with great new customer audiences in sight?
Yeah, I think that's a really important question indicator in terms of where we're going.
If you take a step back I think when you look at the evolution of AI. It has definitely gone from a fun thing to play with to something that is that that's evolving and and being integrated more and more into the into existing workflows.
Speaker #5: And the way I tend to think about that, it's on the user side, as we have been saying, really driving a huge amount of new user adoption and usage.
Speaker #5: Is the early indicator for us that we are driving success with the next generation of creators, business professionals, and consumers? Because our strength with creative professionals continues.
And now I think people are very much relying specifically on the need for AI to be part of their creative process and so you can.
Speaker #5: And so I think we’ve done a really good job with Firefly, Acrobat, and Express, continuing to drive innovation in those particular areas. And then on the other side of the spectrum—I mean, we’ve always said one of our sustainable differentiations is what we do within the enterprise.
Those who haven't been tracking you can think about generative credits like tokens for our creative applications. You know obviously, we do a lot of generation across the entire business, but that's effectively what that is.
The net of what Youre seeing here as we have more people generating than ever before you saw that monthly active users of our premium creative software as an example is up to.
Speaker #5: And so, the enterprise pipeline, and continuing to make sure that we deliver. You saw both Gen Studio as well as AD and Apps growing 30%.
Speaker #5: I think as it relates to the revenue, and we're doing a better job of really making sure that, as it relates to translating ARR to revenue, that we're really focused on it. That continues to be both a focus on making sure that we drive retention and just looking at linearities.
To over $80 million, 50% year over year, So we have more people generating there.
That are generating higher resolution because it's not just a.
Fun thing to play with its actually part of their existing workflows, and they're generating higher modalities things like video audio design.
And so you see all of that pushing generative credits credits up the second thing is they are actually generating in more places right. We've certainly started the process by having them create and use generative AI in our core flagship applications and that continues to grow nicely Firefly is becoming really more of a destination, we talked about how that grew.
Speaker #5: The linearity also associated with the business tends to help with that. So we're pleased with revenue as well as EPS. But I think bigger picture, we just look at it and say the fact that we're driving AI across the individual user segment and the enterprise, which was really a strong quarter.
That business grew 75% sequentially quarter over quarter Express our boards for broad based ideation and stakeholder value. So.
Speaker #5: I think, as it relates to your question around stock order magnitude, it's about a $450 million book of business. And maybe just to talk a little bit about that, if you take out the stock business, like-for-like, instead of the 10.9% growth, it would have been approximately 11.2% growth.
Lots of reasons to look at this as the right is a leading indicator and the last thing I'll say is we're starting to see a nice ramp in terms of existing creative professionals.
Adding on additional creative packs as a result of this.
Speaker #5: So just to give you a flavor. Now, we still look at that entire business as an opportunity because people do like to start any creation or marketing workflow with a piece of content that's increasingly become generative.
That's really helpful. Thank you so much.
Thank you we.
We will take our next question from Mark Murphy with J P. Morgan.
Thank you Sean Congrats on one of the greatest and longest CEO tenures and growing Adobe to 26 billion in revenue.
Speaker #5: That's why you saw the scale, I think, and how we are doing generations. But hopefully, that gives you a flavor of how we think of that business.
Want to ask you and and.
Speaker #5: And we want to make sure that we offer a combined royalty-free stock plus generative AI offering to take advantage of that opportunity.
Also are the others.
It is remarkable to see 13% subscription revenue growth, we haven't seen that in quite some time, it's intriguing that total revenue growth accelerated in constant currency to 11% or maybe I should say uptick.
Speaker #1: Wonderful. Thank you so much.
Speaker #2: Thank you. We will take our next question from Keith Weiss with Morgan Stanley.
Can you speak to the revenue acceleration, we were not expecting to see revenue.
Speaker #1: Excellent. Thank you, guys, for taking the question. And Shantanu, I hope you can start your question without congratulating you on what was really an amazing career.
Accelerated quite yet and I'm just trying to understand should we assume the stock business is pretty small.
Speaker #1: I think it's pretty safe to say that you've been a North Star of leadership for the entire career of probably most of the people on this call.
And therefore, whatever minor setback you saw it just being more than offset by tripling in AI revenue and.
Speaker #1: And your series of stewardship of Adobe has just been legendary. So you'll be soaring this. So it's been a pleasure working with you. So thank you for all of that.
The step up at credit consumption that Brad asked about and that maybe is it that kind of netting out that drove this topline acceleration during the quarter.
Speaker #1: And best of luck on your future endeavors. Maybe as a little bit of an advertisement for your future successor, you talked a lot about laying the foundation for future growth.
Yeah, a couple of things Mark I mean, if you take a step back and really look at you know as we've been going through this transition what we've been focused on.
Speaker #1: You talked about some of the initiatives in the near term that temporarily impact near-term ARR, but set us up for success in the longer term.
First and foremost it's about how are we driving the right product innovation with great new customer audiences insight and you know the way I tend to think about that it's on the user side as we have been saying you know really driving a huge amount of new user adoption and usage is the early indicator for us that we're driving.
Speaker #1: Can you talk to us a little bit more about the initiatives, and a little bit more about those foundations? And how you expect that to evolve?
Speaker #1: Maybe the timeframe for when what today is a foundation-building initiative becomes more of an ARR-driving initiative, and when that becomes more of the acceleration story within Adobe?
<unk> success with the next generation of creators and business professional and consumers because our strength with the creative professional continues and so I think we've done a really good job of with Firefly and acrobat and express.
Speaker #1: Thank you.
Speaker #5: Yeah, sure. Keith, and again, thank you all for the kind remarks. I'm not done yet—I just want to make sure, make no mistake.
Speaker #5: I'm going to be laser-focused on continuing to drive the company until we have a new CEO and make sure they are successful. But the things that we try to outline as strategic priorities—I mean, first, creativity is at the core, in the DNA.
Continuing to drive innovation in those particular areas and then on the other side of the spectrum I mean, we've always said one of our sustainable differentiation does what we do within the enterprise and so you know the enterprise pipeline and continuing to make sure that we deliver yourself about gen studio as well as AEP and apps growing 30% I think.
Speaker #5: And as it relates to the business professional and consumers, we just believe that the combination of creativity and marketing creativity and productivity with the Acrobat plus Express is what's going to drive both usage as well as ARR.
As it relates to you know the revenue as you know, we're doing a better job of really making sure.
Speaker #5: And so, I think in terms of how we look at that particular business that's driving good machines growth, then we want to, as we continue to drive applicability of Express in that, accelerate that business.
That you know as it relates to translating IRR to revenue that were really focused on it.
That continues to be both a focus on making sure that we drive retention and.
Speaker #5: And so the good news is, the early indicators—which is MAO—are really increasing. Same thing with the freemium. I think in our prepared remarks, we talked about the 80 million that we're seeing as it relates to the creative freemium MAO.
Just looking at linearity. So the linearity also associated with the business tends to help with that so you know we're pleased with the revenue as well as EPS, but I think bigger picture, we just looked at it and say the fact that we're driving AI.
Speaker #5: And so I think even that's driving the business. The slight difference, Keith, in those businesses tend to be that in the traditional business, when somebody came and bought it, you would just immediately translate that into ARR.
Across the individual user segment and the enterprise, which you know was really strong quarter I think as it relates to your question around stock order of magnitude.
Speaker #5: And here, they have to see a little bit of the paywall, and they have to get—so it's a little phase shift, is how I think about it.
It's about a $450 million book of business and maybe you know just to.
Talk a little bit about that if you had if.
Speaker #5: But for that particular customer segment, the fact that we're driving MAO—that is the right early indicator for us to focus on, like we did with Rita for so many years. You get the adoption, and you get the usage.
If you take out the stock business like for like instead of the 10, 9% growth. It would've been approximately 11, 2% growth. So just just to give you a flavor now we still look at that entire business as an opportunity because people do like to start any creation or <unk>.
Speaker #5: And Rita, ubiquity—even in new environments like Chrome, as well as Edge—is really what's driving revenue. So that's sort of the early indicator, and driving that.
Marketing workflow with a piece of content that's increasingly become generative. That's why you saw the you know our scale I think and how we are doing generations, but hopefully that gives you a flavor of how we think of that business and we want to make sure that we offer a combined.
Speaker #5: The core creative professional—I think the ARR will continue to be driven by adding more value to the products. Creative Pro, which is the offering there, it's good to see the success associated with that.
Speaker #5: And I think on the enterprise side, hopefully, both from our prepared remarks and from the answers to your question, that's really an area of strength for us because people are looking at it.
Royalty free stock plus generative AI offering to take advantage of that opportunity.
Wonderful. Thank you so much.
Speaker #5: And with AI, everybody wants to know how you transform your business. Every CEO that I talk to wants to ensure that they deal with the next generation of consumers and attract them.
Thank you we will take our next question from Keith Weiss with Morgan Stanley.
Excellent. Thank you guys for taking the question.
This afternoon I don't think we can start a question without congratulating you on what was really an amazing chemyr career, I think it's pretty safe to say that you have been our north star of our leadership or the entire careers, probably most of the people on this call.
Speaker #5: What they want to do then is say, how do I ensure that for my marketing spend, I'm getting as much breadth as I can, as well as how much automation and productivity in terms of revenue?
Speaker #5: And so I think the fact that we have all these new offerings, specifically Firefly, and then I think we talked about a $250 million book of business for Firefly that didn’t exist a few years ago.
And your Stuart.
Third ship of Adobe has just been.
Legendary so you'll be sorely missed all of it's been a pleasure working with you. So thank you for all of that and best of luck on your future endeavors.
Speaker #5: As we talk about what's happening with Gen Studio, 30% growth, AP and Absinthe, I would venture to say, Keith, that we should hopefully see what we have identified as the AI-first sort of book of business.
Maybe as a.
A little bit of an advertisement for your future successor.
You talked a lot about laying foundation for future growth you talked about some of the <unk>.
Initiatives in the near term that temporary near from Air Bud.
Speaker #5: That tripled. But that should be our next billion-dollar business. So that's why we're ruthlessly focused on all of those. So, hopefully, that gives you some color on why we're excited about the performance that we put up.
So for success in the longer term can you talk a little bit more about those initiatives in a little bit more about those foundation and how you expect that to evolve.
I'm frame or what today is a foundation building initiatives to win.
Speaker #1: Outstanding. That was great. Thank you so much.
And that becomes more of a a or are driving initiative when that becomes more of the acceleration story with mobility.
Speaker #2: Thank you. We'll take our next question from Alex Zukin with Wolf Research.
Yeah sure Keith and again, thank you all for the kind remarks, I'm not done yet.
Speaker #4: Yes. Hey, guys. Thanks for taking my question again. Echoing everybody's praise, Shantanu, on the call—it's truly been a special opportunity to work with you and follow your progress.
I just wanted to make sure I make no mistake I'm gonna be laser focused on continuing to drive the company into law.
Speaker #4: I guess maybe I have a quick two-parter, which is, if I think about the impact of AI MAU growth on ARR growth in the quarter, can you maybe just unpack exactly why it was dampened?
We have a new CEO and to make sure they are successful but.
The things that we tried to outline our strategic priorities I mean first creativity is at the core on the DNA and as it relates to you know the business professional and consumers. We just believe that the combination of creativity and marketing creativity and productivity with the acrobat plus express.
Speaker #4: And as some of these trends improve, how do we think about that kind of impact as we head through Q2, Q3, Q4? When does net new ARR growth start to maybe go positive?
Is you know what's going to drive both usage as well as they are and so I think in terms of how we look at that particular business. That's driving you know good mid teens growth and we want to you know as we continue to drive.
Speaker #4: And maybe just anything on the timeline that we as investors should expect around the CEO search? Is this something that is a quarter, multiple quarters—any timing there would be helpful?
<unk> applicability of expression that accelerate that business and so you know the good news is the early indicators, which is MAU, our Israeli increasing same thing with the premium I think in our prepared remarks, we talked about the 80 million there we're seeing as it relates to the creative freemium model and so I think.
Speaker #5: Maybe I'll cover the second part and start, which is—if I take a step back, actually—because this is a question that, if it is on people's minds, I just want to actually say that there never would have been a good time, given how much Adobe is part of me.
Speaker #5: So I do want to start off with that. And in many ways, I've always believed that my role is looking around the corner, whether it's positioning the company for the future or about product and leadership.
Even that's driving the business you know the slight difference Ah Keith in those businesses tend to be that in the traditional business when somebody came and bought it.
Speaker #5: And as we said many times on product, I feel really good about how we've transformed our roadmap. Based on the AI and customer audiences, the new products are both exciting and groundbreaking.
You would just immediately translate that into way out or in here they have to see a little bit of the paywall and they have to get.
It's a little phase shifted is how I think about it.
Speaker #5: On leadership, we've always invested in developing a really deep bench of outstanding execs. But timing-wise, part of it is, it was really important for me to be transparent about my decision and communicate.
But you know for that particular customer segment. The fact that we're driving mall that is the right early indicators for us to focus on much like we did with reader for so many years, which as you know you'll get the adoption and you'll get the usage and reader ubiquity, even in a new environments like chrome as well as edge are really what's.
Speaker #5: And I love the board to take ownership of the selection. So I would suspect it’ll take a few months. This is not because I’ve just notified them.
Speaker #5: So hopefully, it gives you that little flavor for that. And I'll start on the other question, Alex, a little bit, and then I'll turn it over to David and Dan, which is—the way you have to think about it is, our traffic patterns in terms of creativity at adobe.com are only going up and to the right.
Driving the revenue so that's sort of the early indicator and driving that.
Core creative professional.
The IRR will continue to be driven by adding more value to the products the creative Pearl which is the offering that it's good to see the.
Speaker #5: We have two options in terms of how we guide that traffic. We can guide that to ARR that comes immediately, or we can guide it to a long-term value and what drives greater long-term value in terms of getting the right product.
Success associated with that and I think on the enterprise side, hopefully you know both from our prepared remarks and from the answer to your question. That's really you know an area of strength for us because people are looking at it and with AI everybody wants to know how you transform your business.
Speaker #5: And increasingly, we're ensuring that we transition. So, top-line traffic is good, and that's why, when we say dampen, I like phase shift also a little bit.
Every CEO that I talked to one store ensure that they deal with the next generation of consumers and attract them.
Speaker #5: Because that sort of moves out. If you think about the fact that we reaffirmed our targets—I mean, that would imply that we would expect double-digit ending book of business growth for the remaining three quarters.
As well as what they wanted to do then is say how do I.
Ensure that for my marketing spend I'm getting as much breath as I can as well as how much automation and productivity in terms of revenue and so you know.
Speaker #5: So hopefully, that gives you some flavor. David? Yeah. I'm happy to just add on a little bit there. So, as Shantanu indicated, we look at creativity as a whole as bigger than it's ever been.
I I think the fact that we have all these new offerings, specifically Firefly, Dan I think talked about a $250 million book of business for Firefly that didn't exist a few years ago as we talk about what's happening with Gen studio, a 30% growth AEP and absent you know I would venture to say Keith.
Speaker #5: And as we look forward, we couldn't be more excited about the fact that literally everyone in the world is going to be creating. They're going to be creating visually.
Speaker #5: They're going to be creating images, videos, designs. And that's really our wheelhouse, right? And if we think about the shape of that broader creative audience, that is evolving, right?
Speaker #5: So, we have creators now representing basically anyone in the world that wants to create visually. We have creative professionals who are under more and more pressure to create more prolifically and more content.
We should hopefully see what we had identified as the AI first.
Sort of a book of business.
Speaker #5: And we have enterprises that are looking to automate more of that creativity. And so, as we think about that creativity and fusing itself into everything, we think about it in two columns.
That triple but yeah that should be our next billion dollar business. So you know that's where we're ruthlessly focused on all of those so hopefully that gives you. Some color on you know why we're excited about the performance that we put up.
Speaker #5: The first is around the end user, right? And if you think about that, it really is about reaching the end user where they are.
Outstanding Okay, great. Thank you so much.
Speaker #5: And so we have freemium offers like Firefly Express. We have power and precision by embedding AI in our existing creative products. And we have more and more products for businesses around automation with Firefly Foundry and Firefly Services, now kind of Gen Studio.
Thank you we'll take our next question from Alex Zukin with Wolfe Research.
Hey, guys. Thanks for taking my question and again echoing everybody sprays John's here on the call it's truly been a special opportunity to <unk>.
Speaker #5: So as we think about the growth algorithm for growth, we're going to see more traffic to adobe.com. We've continued to see record traffic levels.
Work with you and.
Yes.
Follow your progress.
I guess maybe.
Speaker #5: Traffic has continued to go very nicely. And how we route that traffic to freemium offers is going to be really the evolution that Shantanu talked about, in terms of the changes that we should expect to see.
I have a quick two parter, which is if I think about the impact of.
AI Mou growth on AOR growth in the quarter can you, maybe just unpack exactly why it was dampened and as consumption trends improve how do we think about that.
Speaker #5: And as that traffic goes to these new offers, it's just going to take a little time for them to use the product, to hit the paywalls, and then translate out.
Speaker #5: So again, as we've said in the prepared remarks, this is really on strategy to drive MAU, drive credit consumption, and drive enterprise usage. We should expect to see that start to accelerate and back up.
The impact as we head through Q2 Q3 Q4.
<unk> net new <unk> growth start to.
Maybe go positive and then maybe just anything on the timeline that we are an investor should expect around the CEO search is this something that is.
Speaker #2: Thank you.
Speaker #1: So thank you.
Speaker #2: We will take our next question from Matt Swanson with RBC Capital Markets.
As of quarter multiple quarters, any any timing there would be helpful.
Speaker #1: Yeah, great, thank you. Shantanu, I'd echo my congratulations, I guess, as a worker of this too. But I wanted to talk to you about the partnerships that we've had announced the last two quarters.
Maybe I'll cover the second part and Scott riches.
No.
If I take a step back actually you know because this is a question that.
<unk> is on People's minds, I, just wanted to actually say that they never would have been a good time given how much Adobe is part of me. So I do want to start off with that and then you know in many ways I've always believed that my role is looking around the corner, which whether it's positioning the company for the future or about product and leadership and as.
Speaker #1: So last quarter, we embedded models, and then this quarter, building on even more so with a lot of the advertising platforms—Amazon Ads, Google, Meta.
Speaker #1: It's a lot of different companies that I think, over the last year on this Gen AI journey, investors have brought up to us as potential competitors or maybe almost a risk to Adobe that are now kind of part of the ecosystem.
As we've said many times on product I feel fairly good about how we've transformed our road map.
Speaker #1: Can you talk a little bit more about how you're evolving in this role of orchestration to really help monetize all this new creative content for all these stakeholders?
Based on this AI and customer audiences, the new products are both exciting and groundbreaking.
On leadership, we've always invested in developing a really deep bench of outstanding exacts.
Speaker #5: Great. And so maybe I'll touch on the enterprise one first, and then I'll touch on the models. I mean, I think as it relates to the enterprise, I mean, what's completely clear is, as we are helping people with customer experience orchestration—and I can certainly add to that.
But timing wise you know a part of it is it was really important for me to be transparent about my decision and communicate and allowed the board to take ownership for the the selection. So I I would suspect it'll take a you know a few months. This is not because I've just notified them. So hopefully it gives you that a little flavor for that and I'll start.
Speaker #5: I mean, people are looking at us from everything. They're—
On the other question, Alex a little bit and then ask David and Dan which is the way you have to think about it is our traffic patterns in terms of creativity at Adobe Dot com is only going up into the right.
We have two options in terms of how we guide that traffic, we can guide that to.
A R. R that comes immediately all weekend guided to our long term value and what drives greater long term value in terms of getting the right product and increasingly where you know ensuring there'll be transitioned. So top line traffic is good and that's why when we say dampened you know I like phase shift also a little bit.
Because that sort of moves out if you think about you know the fact that we reaffirmed our targets I mean that would imply that you know we would expect double digit ending book of business growth for the remaining three quarters. So hopefully that gives you some flavor, but David Yeah happy to just add on a little bit. There. So you know, it's certainly indicated like yeah.
We look at creativity as a whole as bigger than it's ever been and if we look forward.
We couldnt be more excited about the fact that literally everyone in the world is going to be creating theyre going to be creating visually they're gonna be creating images and videos designs and that's really our wheelhouse right.
And if we think about the shape of that broader accretive audience that is evolving right. So we have creators now representing basically anyone in the world that wants to create visually we have creative professionals, who are under more and more pressure to create more prolifically in more content and we have enterprises that are looking to automate more.
More of that that creative.
Creativity, and so as we think about that creativity infusing itself into everything we think about it into two columns. The first is around the.
The end user right and if you think about that.
It really is about reaching the end user where they are until we have freemium offers like Firefly in express we have the power and precision by embedding AI in our existing creative products and we have more and more products for businesses around automation with Firefly foundry and Firefly service is now part of.
Jen studio so as we think about the growth algorithm for growth, we're gonna see more traffic to Adobe Dot com, we continue to see record traffic levels traffic as it continues to grow very nicely and how we route that traffic to a freemium offers is going to be really the evolution of that chart and you are talking about in terms of the change.
We should expect to see and as that as that as that traffic goes to these new offers it's just going to take a little time for them to use the product to hit the paywalls and then translate out though again as we said on the prepared remarks. This is really on strategy to drive MAU drive credit consumption drive enterprise usage, and we should expect to see.
See that start to accelerate in the back half.
Yeah.
Thank you. Thank you guys.
We'll take our next question from Matt Swanson with RBC capital markets.
Yes, great. Thank you.
Jonathan.
My.
<unk> I guess.
Work for us too, but I wanted to talk to you about the partnerships that we've had announced the last two quarters. So last quarter with all the embedded models. This quarter building on even more so with a lot of the advertising platforms Amazon ads, Google matter is a lot of different companies, but I think over the last year on this journey a journey.
Investors have brought up to us.
Potential competitors or maybe almost a risk to adobe that are now kind of part of the ecosystem. So can you talk a little bit more about kind of how you are evolving.
In this role of orchestration to really help.
Monetize all this new creative content for all the stakeholders.
Great and so maybe and I'll touch on the enterprise one first and then I'll touch on the models I mean, I think as it relates to the enterprise.
What's completely clears as we are helping people with customer experience orchestration and Arnold can certainly add to that I mean people are looking to us from everything they're looking to us for you know brand visibility acquiring customers serving them.
And then ensuring that they create a long term engagement. So if you think of it that way.
There's just no question that from.
From the perspective of a CMO or a CIO or the head of business Theyre looking to Adobe because in this LLM world, it's going to become even more important to them that they actually have a direct engagement with their customers and their own sites actually take way more important in terms of the value.
Speaker #1: A question that, from the perspective of a CMO or CIO or the head of business, they're looking to Adobe because in this MLM world, it's going to become even more important to them that they actually have a direct engagement with the customers.
So you know as a multichannel work.
<unk> channel World emerges.
India LLM space, our ability to support it so those specifically like the partnerships with Google and Amazon meta as well as the other places I think to your point all of them may have an offering because they have to allow a self serve offering those typically tend to be geared towards the small and medium.
Speaker #1: And their own sites . Actually take way more importance in terms of the value . And so , you know , as a multichannel work , multichannel world emerges in the LM space , our ability to support it .
Speaker #1: So those specifically—this is one of the historical strengths of the, feel confident that, community. We have confidence that it is on top of the customers where they are, it is on strategy to meet the customers where they are, allow them to engage in the way in which they.
Business, and maybe even smaller part because its important but they value. The fact that we can actually help them get campaigns foster and understand the efficacy of those campaigns by closing the loop and they would like to work with us to jointly go to a customer and say see if you advertise on our channel your return.
On investment is much better so that as it relates to that side same thing with the agencies because the agencies are partnering with us to say, we need more automation, we need more technology to help deal with how AI is going to impact marketing spends let's partner with you and so that's why you know partnership with publicists are WPB.
Is that.
I think on the module side my take on the module side would be as follows which is they're going to be so they're going to be two or three really large language models that actually succeed.
All of these individual models that exist you know small modeling companies in one part of our media ecosystem I, just don't see how long term they.
Survive because people aren't interested in just the model they're interested in the workflow and so for us offering customers with that choice was actually a very strategic because we can actually then provide for all of our creative customers. The right model for the right case, because these all have different brands and so.
You know I think as it relates to the support of all of these models I think it's a win win they would like access to customers with your Adobe has and we would like access to these different models because they have different brand attributes and you know I think if you look at the larger companies like Google, where actually with them and with nano banana, it's been a great part.
No sure because we are providing them with a lot of customers and they're providing us with great technology, and so and to some degree I look at that and I think I may have said that in my prepared remarks, I definitely look at that as I looked at you know when iOS game, along or Android came along or the browser game along whether that's.
Because people aren't interested in just the model, they're interested in the workflow. And so for us, offering customers that choice was actually very strategic, because we can actually then provide all of our creative customers the right model for the right case, because these all have different brands. So, you know, I think as it relates to the support of all these models, I think it's a win-win. They would like access to customers, which we have, and we would like access to these different models because they have different brand attributes. And, you know, I think if you look at the larger companies, like Google, you'll actually see Google with them.
Edge or chrome or Mac and PC frankly every single environment in which people want to engage is additive to the opportunity and if we don't think it's additive to the opportunity. We're just unnecessarily ignoring that so that's the way I look at it.
Thank you and frankly Youll continue to see more partnerships. So stay tuned I mean, that's something that we you know continue to work on.
And see how long-term they, uh, survive because people aren't interested in just the model; they're interested in the workflow. And so for us, offering customers that choice was actually, uh, very strategic, because we can actually then provide for all of our creative customers the right model for the right case, because these all have different brands. And so, you know, I think as it relates to the support of all these models, I think it's a win-win— they would like access to customers, which Adobe has, and we would like access to these different models because they have different brand attributes. And, you know, I think if you look at the larger companies like Google, we're actually with them. And with Nano Banana, it's been a great partnership because we are providing them with a lot of customers and they are providing us with great technology and so, and to some degree, I look at that. And I think I, I, I may have said that in my prepared remarks. I definitely look at that as I looked at, you know, when iOS came along or Android came along or the browser came along, whether that's Edge or Chrome.
Thank you.
We'll take our next question from Brent Thill with Jefferies.
Thanks.
The dampening of <unk> with with new premium offerings I guess, what gives you confidence in the back side that you can monetize this.
Or Mac and PC, frankly, every single environment in which people want to engage is additive to the opportunity, and if we don't think it's additive to the opportunity, we're just unnecessarily ignoring that. So that's the way I look at it.
Thank you, and frankly, you'll continue to see more partnerships, so stay tuned. I mean, that's something that we, you know, continue to work on.
Yeah, So I.
Thank you. And frankly, you continue to see more partnerships—just stay tuned. I mean, that's something that we, you know, continue to work on.
I would say first of all we already are monetizing it you see the momentum we have with our express you see the momentum we have with Firefly and we've got a long history acrobat I think is the first freemium funnel around software and that's the one of the most performing parts of our business and so we feel good about the journey we've been on.
Thank you.
Thank you. We will take our next question from Brett, though, with Jeffrey.
We will take our next question from Brent, though, with Jeffrey.
Thanks. Uh, the dampening of our—
Thanks. The dampening of ARR with news for me offerings—I guess, what gives you confidence in the backside that you can monetize this?
Offerings. I guess, what gives you more confidence on the back side that you can monitor some of this?
It takes a large surface area of highly engaged users takes them on journeys, where they dive deeper from a feature functionality standpoint had paywalls and bring them down the funnel and once they are paying customers and niche freemium models and frankly, this is where our customers preferences.
Yes. So um I would say if the first of all we already are monetizing the EC, the moment we have with an Express. You see the momentum we have with fiser fly and we've got a long history uh with acrobat I think is the first premium funnel Arena software and it's the 1 of the most performed parts of our business. And so we
And behaviors are going they want to try before they buy and so it's meeting the customers where they are but we've got an incredible ecosystem that is pervasive and once they become deeper customers around those freemium entry points to the opportunity to have more deeply monetize that over time with.
A well worn motion around upsell and cross sell is one of the historical strengths of the company and will continue to be so we feel confident that it is on strategy to meet the customers where they are allowed.
Allow them to engage in the way in which they want to engage and then.
<unk> continued to bring them deeper into the Adobe ecosystem, which becomes an effective monetization lever over time. So we feel good about the strategy and how we're executing against it.
And then Dan one quick follow up just on capital allocation.
From an M&A perspective, I know you have backed off quite a bit but the environment has changed considerably.
Shantanu Narayen: Into the Adobe ecosystem, which becomes an effective monetization lever over time. We feel good about the strategy and how we're executing against it.
Shantanu Narayen: Into the Adobe ecosystem, which becomes an effective monetization lever over time. We feel good about the strategy and how we're executing against it.
Considerably where other large companies are feeling things are easier to get done.
Have you shifted your view at all on the buyback versus M&A.
[Analyst]: Dan, one quick follow-up just on capital allocation. From an M&A perspective, I know you've backed off quite a bit, but the environment's changed considerably where other large companies are feeling things are easier to get done. Have you shifted your view at all on the buyback versus M&A?
[Analyst]: Dan, one quick follow-up just on capital allocation. From an M&A perspective, I know you've backed off quite a bit, but the environment's changed considerably where other large companies are feeling things are easier to get done. Have you shifted your view at all on the buyback versus M&A?
Yeah, I don't think there's a change in our philosophy. We've always said, there's three elements to our capital allocation strategy first pillar is to grow the company grow it organically by investing in game changing category defining innovation, but also complemented from time to time with inorganic activity.
And then Dan 1 1 quick follow up just on Capital allocation uh from a from an m&a perspective I I know you you backed off quite a bit but the environment's changed.
Daniel Durn: Yeah, I won't say there's a change in our philosophy. We've always said there's three elements to our capital allocation strategy. First pillar is to grow the company, grow it organically by investing in game-changing category defining innovation, but also complement it from time to time with inorganic activity, then maintain a flexible, strong balance sheet and return excess capital to shareholders. That framework is standing the test of time. We've announced Semrush, great asset, great acquisition, complements the business well and allows us to engage from a brand visibility standpoint in an evolving environment where you're layering in LLMs next to search engine optimization, and we'll have the industry's best leadership, product category defining products. We continue to look, but we won't be, you know, cavalier about M&A. We've got great innovation in flight.
Daniel Durn: Yeah, I won't say there's a change in our philosophy. We've always said there's three elements to our capital allocation strategy. First pillar is to grow the company, grow it organically by investing in game-changing category defining innovation, but also complement it from time to time with inorganic activity, then maintain a flexible, strong balance sheet and return excess capital to shareholders. That framework is standing the test of time. We've announced Semrush, great asset, great acquisition, complements the business well and allows us to engage from a brand visibility standpoint in an evolving environment where you're layering in LLMs next to search engine optimization, and we'll have the industry's best leadership, product category defining products. We continue to look, but we won't be, you know, cavalier about M&A. We've got great innovation in flight.
Considerably, where other large companies are feeling things are easier to get done. Do—if you shifted your view at all on the buyback versus M&A.
Pain, a flexible strong balance sheet and return excess capital to shareholders that framework is standing the test of time, we've announced some rush a great asset great acquisition complements the business well and allows us to engage from our brand visibility standpoint, and an evolving environment, where youre layering in New Orleans next to search engine.
Optimization, and we will have the industry's best leadership product category defining products and so we continue to look but we won't be.
Cavalier about M&A, we've got great innovation in flight, we've got an organic engine that we're pleased with the innovation, we're bringing in the strategy that we're executing against but we continue to look to see how we complement that organic growth engine within organic N and the bar is going to be high, but when we see something thats.
Interesting and attractive we will absolutely go out in action and so I would say theres really no change to the the approach Brian.
Daniel Durn: We've got an organic engine that we're pleased with the innovation we're bringing and the strategy we're executing against. We continue to look to see how we complement that organic growth engine with inorganic and the bar is gonna be high, but when we see something that's interesting and attractive, we will absolutely go out and action it. I would say there's really no change to the approach, Brent.
Daniel Durn: We've got an organic engine that we're pleased with the innovation we're bringing and the strategy we're executing against. We continue to look to see how we complement that organic growth engine with inorganic and the bar is gonna be high, but when we see something that's interesting and attractive, we will absolutely go out and action it. I would say there's really no change to the approach, Brent.
Yeah, I would say there's a change in our philosophy. We've always said there's three elements to our capital allocation, uh, strategy. Uh, first pillar is to grow the company. Grow it organically by investing in game-changing, category-defining innovation, but also complement it from time to time with inorganic, uh, activity. Uh, then maintain a flexible, strong balance sheet and return excess capital to shareholders. That framework is standing the test of time. We've announced Semrush—uh, great asset, great acquisition—complements the business well, and allows us to engage from a brand visibility standpoint in an evolving environment, where you're layering in LLMs next to search engine optimization. And we'll have the industry's best, uh, leadership, uh, productive, uh, category-defining products. And so, uh, we continue to look, but we won't be, um, you know, cavalier about M&A. Uh, we've got great innovation in flight. Uh, we've got an organic engine, uh, that we're pleased, um,
Great. Thanks.
Thank you.
We'll take our next question from Michael <unk> with Wells Fargo Securities.
Hey, great. Thanks, very much appreciate you taking the question this one's for the broader team.
The company is still delivering greater than 47% operating margin, it's an impressive number but the net new <unk> number was.
With the innovation we're bringing and the strategy that we're executing against, um, but we can continue to look to see how we complement that organic growth engine, uh, with inorganic, and the bar is going to be high. But when we see something that's interesting and attractive, we will absolutely go out and action it. And so, I would say there's really no change to the approach, Brent.
[Analyst]: Great. Thanks.
[Analyst]: Great. Thanks.
Daniel Durn: Uh-huh.
Daniel Durn: Uh-huh.
Great, thanks.
Operator: Thank you. We will take our next question from Michael Turrin with Wells Fargo Securities.
Operator: Thank you. We will take our next question from Michael Turrin with Wells Fargo Securities.
Down a touch this quarter. So I'm just wondering what the teams thoughts on potentially taking margin down to grow faster. It's a question, we're getting from investors across software.
Thank you, we will take our next question from Michael Turen with Wells Fargo Securities.
Michael Turrin: Hey, great. Thanks very much. Appreciate you taking the question. This one's for the broader team. The company's still delivering greater than 47% operating margin. It's an impressive number, but the net new ARR down number was down a touch this quarter. I'm just wondering what the team's thoughts are on potentially taking margin down to grow faster. It's a question we're getting from investors across software. Is that something you think you could do with some of the newer revenue streams and engagement levels you're seeing? Or maybe talk to us around how you're evaluating the trade-offs there, just given the current environment. Thanks very much.
Michael Turrin: Hey, great. Thanks very much. Appreciate you taking the question. This one's for the broader team. The company's still delivering greater than 47% operating margin. It's an impressive number, but the net new ARR down number was down a touch this quarter. I'm just wondering what the team's thoughts are on potentially taking margin down to grow faster. It's a question we're getting from investors across software. Is that something you think you could do with some of the newer revenue streams and engagement levels you're seeing? Or maybe talk to us around how you're evaluating the trade-offs there, just given the current environment. Thanks very much.
Is that something you think you could do with some of the newer revenue streams and engagement levels youre seeing or maybe talk to us around how you're evaluating the trade offs there.
Given the current environment, thanks very much.
Sure I'll start and then I mean, we are always looking to make sure that we spend our money to drive long term value and on some of the businesses, namely I would say of Firefly in express a you're absolutely right, which is the more marketing we spend on it the more without.
Hey, great. Uh, thanks very much. Appreciate you? Taking the question this 1's for the broader team. Um, the company is still delivering greater than 47% operating margin. It's an impressive number, but the net new. Our number was, was down to touch this quarter. So, I'm, I'm just wondering what the team's thoughts are, and potentially taking margin down to grow faster. It's a question we're getting from investors across software. Um, so is that something you think you could do with some of the newer revenue streams and engagement levels? You're seeing or maybe talk to us around how you're evaluating the trade-offs there? Um, just given the current environment. Thanks very much.
Shantanu Narayen: Sure. You know, I'll start and then. I mean, we are always looking to make sure that we spend, you know, money to drive long-term value. On some of the businesses, namely, I would say Firefly and Express, you're absolutely right, which is the more marketing we spend on it, the more, with our data-driven operating model, we continue to see it. I think you'll see as it relates to the Q2, you know, there's a slight degradation that has as much to do with, you know, the Summit and the other events.
Shantanu Narayen: Sure. You know, I'll start and then. I mean, we are always looking to make sure that we spend, you know, money to drive long-term value. On some of the businesses, namely, I would say Firefly and Express, you're absolutely right, which is the more marketing we spend on it, the more, with our data-driven operating model, we continue to see it. I think you'll see as it relates to the Q2, you know, there's a slight degradation that has as much to do with, you know, the Summit and the other events.
Oh, driven operating model, we continue to see it I think you'll see as it relates to the Q2 are you know theres a slight degradation that has as much to do with you know the summit and the other events, but maybe what's not well understood is how.
Below the surface, where actually constantly getting more efficient as it relates to our spend and making sure that we spend that more on marketing as well as on the Cogs associated with what's happening. So we now track tokens and token usage within the company and its nice to see that broken usage increase because that means that our AI.
Sure. Uh, you know, I'll start and then, I mean, we are always looking, uh, to make sure that we, uh, spend, uh, you know, money to drive long-term value and, um, on, uh, some of the businesses, namely, I would say Firefly and Express. Uh, you're absolutely right, which is the more marketing we spend on it, the more, uh, with our data-driven operating model.
Shantanu Narayen: You know, maybe what's not well understood is how, below the surface, we're actually constantly getting more efficient, as it relates to our spend and making sure that we spend that more on marketing as well as on the COGS associated with what's happening. We now track tokens and, you know, token usage within the company, and it's nice to see that token usage increase because that means that our AI products are seeing great value associated with it, and we will continue to do that. You know, given we have the best customer experience orchestration solutions, we know where that ROI is helpful and where that ROI can be wasteful.
Shantanu Narayen: You know, maybe what's not well understood is how, below the surface, we're actually constantly getting more efficient, as it relates to our spend and making sure that we spend that more on marketing as well as on the COGS associated with what's happening. We now track tokens and, you know, token usage within the company, and it's nice to see that token usage increase because that means that our AI products are seeing great value associated with it, and we will continue to do that. You know, given we have the best customer experience orchestration solutions, we know where that ROI is helpful and where that ROI can be wasteful.
Model, uh, we continue to see it. I think you'll see as it relates to Q2. Uh, you know, there's a slight degradation that has as much to do with, you know, the Summit and the other events, but, you know, maybe what's not well understood is how, uh,
Our products are seeing great value associated with it and we will continue to do that we will continue to do that and you know given we have the best.
Customer experience orchestration solutions, we know where that ROI is helpful and where that ROI can be wasteful, but it's a good question and.
Be assured that we're spending.
On the newer initiatives and that's why you know tripling that revenue and you're right. I mean, we will continue to see how we can accelerate that as well.
I mean, given that is the last question maybe again in summary, what I would say is that as it relates to our business our strong start to the fiscal year and as we think about where the company's focus, namely AI products and ensuring that at the user level, we continue to see accelerated our acquisition and usage.
Shantanu Narayen: It's a good question, and be assured that, you know, we're spending on the newer initiatives, and that's why, you know, tripling that revenue. You're right. I mean, we will continue to see how we can accelerate that as well. I mean, given that is the last question, maybe again, in summary, what I would say is that as it relates to our business, a strong start to the fiscal year, and as we think about where the company's focused, namely AI products and ensuring that at the user level, we continue to see accelerated acquisition and usage, and on the enterprise, making sure that we combine the power of our creative tools to enable them to accomplish their business objectives with customer experience orchestration. We feel really good about that.
Shantanu Narayen: It's a good question, and be assured that, you know, we're spending on the newer initiatives, and that's why, you know, tripling that revenue. You're right. I mean, we will continue to see how we can accelerate that as well. I mean, given that is the last question, maybe again, in summary, what I would say is that as it relates to our business, a strong start to the fiscal year, and as we think about where the company's focused, namely AI products and ensuring that at the user level, we continue to see accelerated acquisition and usage, and on the enterprise, making sure that we combine the power of our creative tools to enable them to accomplish their business objectives with customer experience orchestration. We feel really good about that.
Below the surface, we're actually constantly getting more efficient, uh, as it relates to our spend and making sure that we spend that more on marketing as well as on the COGS associated with what's happening. So, we now track tokens and, you know, token usage within the company. And it's nice to see that token usage increase because that means that our AI products are seeing great value associated with it. And we will continue to do that. We will continue to do that. And, you know, given we have the best customer experience orchestration solutions, we know where that ROI is helpful and where that ROI can be wasteful. But it's a good question and, uh, be assured that, you know, we're spending, uh, on the newer initiatives. And that's why, you know, tripling that revenue, and you're right, I mean, we will continue to see how we can accelerate that as well.
And on the enterprise, making sure that we combine the power of our creative tools to enable them to accomplish their business objectives with customer experience orchestration Oh, we feel really good about that so thank you for joining us and hope to see all of you at summit.
Yeah.
Thank you everyone for joining.
I mean, GI, that is the last question. Maybe, again, in summary, what I would say is that as it relates to our business—a strong start to the fiscal year. And as we think about where the company's focus is, namely AI products, and ensuring that at the user level we continue to see accelerated acquisition and usage, and on the enterprise, making sure that we combine the power of our create.
Thank you.
And it does conclude today's question and answer session I would now like to turn the call back to Shannon you for any additional or closing remarks.
Shantanu Narayen: Thank you for joining us, and hope to see all of you at Summit. Doug?
Shantanu Narayen: Thank you for joining us, and hope to see all of you at Summit. Doug?
I think we actually close thank you very much.
[Company Representative] (Adobe): Thank you everyone for joining.
Doug Clark: Thank you everyone for joining.
Of tools to enable them to accomplish their business objectives with customer experience. Orchestration. We feel really good about that. So, thank you for joining us, and, uh, hope to see, uh, all of you at Summit, Doug.
Thank you everyone for joining.
And this does conclude today's call. Thank you for your participation and you may now disconnect.
Operator: Thank you. This does conclude today's question and answer session. I would now like to turn the call back to Shantanu for any additional or closing remarks.
Operator: Thank you. This does conclude today's question and answer session. I would now like to turn the call back to Shantanu for any additional or closing remarks.
Thank you.
Okay.
I would now like to turn the call back to Shantanu for any additional or closing remarks.
Shantanu Narayen: I think we actually closed. Thank you very much.
Shantanu Narayen: I think we actually closed. Thank you very much.
I think we actually closed. Thank you very much.
Operator: This does conclude today's call. Thank you for your participation, and you may now disconnect.
Operator: This does conclude today's call. Thank you for your participation, and you may now disconnect.
And this does conclude today's call. Thank you for your participation, and you may now disconnect.