Adobe (ADBE) 12 Sep 242024 Q3 Earnings call transcript

Good day, and welcome to the Q3 FY '24 Adobe Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jonathan Vaas, VP of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us. Dan call Wadhwani, Shantanu Anil President of Experience; the and Adobe's Chakravarthy, on President Digital David Vice CEO; of and me today Narayen, are Chair President and With CFO. Executive Durn, Digital Media; we which fiscal third financial recorded, XXXX discuss Adobe's On this being will call, results. is quarter year

and our information as and targets those well find and set on forth Adobe's plans, discussed differ results our may financial this product Investor PDFs including of materially these can risks, Actual assumptions. of XX You website. The as as press release Relations on call, from results statements uncertainty remarks today, our contains and is prepared that financial September involve in forward-looking statements.

review filings. On non-GAAP Adobe's release please For today's earnings this we and GAAP more SEC information financial discuss measures. will and those call, on risks,

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

currency otherwise release are During to turn executives will Adobe's to refer the constant Adobe's call on and in unless growth I available Relations over Investor this will rates, website. now reconciliations Non-GAAP our presentation, Shantanu. stated. earnings

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come And Instructions] first question Research. Wolfe with Alex will [Operator the from Zukin

on the question in sequentially almost a XQ, new X strong. strong unseasonably Digital itself, X-parter. you I ARR think, Media net looks it's Congrats grown very into on I just years. but X quarter haven't very because like quarter. a ARR, looked had The particularly what looked It strong

time, unseasonable nervous lowest people think new ARR, year understand next go guide Digital QX net the is makes forward, maybe been it momentum which So strength? little it's this maybe script, a Document confusing just for new QX net at a all the like through comment AI the what same traction it's in the Cloud particularly pricing, went Is product ever the you performance. ARR? But given I the sequentially drove the why bit and the on about to Media

of it's what bit maybe looks on And we're the dichotomy than a And because weighing just hours. different it used kind little so I after stock seasonally this think address to.

I'm think point, that certainly a happy to Media, perform strong Cloud, to the to perform, made, to David you have I that add also then well. with AI the when Document Acrobat point SKU the we continues can about quarter. associated had and Alex, to to And start, we that. your continues I and Assistant mean, Acrobat Digital

said, expect on growth show we As growth had year-over-year. we to Creative

you're few the as that end. look see how typical that looking looking into it relates for target so put as last was we we we going it's have QX, also see expected. And saw would you saying I there it And We're it QX strongest the QX. at at the out to sequential When the weeks a played performance, strength guide. exactly we that saying and can it you're ever Alex. at out strong

think And over to growth all that so ARR We we're talking again in AI, net QX. And to when just we initiatives talk of to would focus. grow the continue new about growth you et continue new Creative about, I perform. expect cetera,

our from what we point, look guided is perspective, year, when QX the of stronger. second we the half So your to at to

then expect continued growth. to seasonally our innovation strong continue QX We and drive a should

desktop, sharing associated Yes. in And strength is maybe distribution of to Shantanu add able we've link strength we're bet going not little said, Cloud. a a web, but this lot with Document that's grow again, be that what and going and drive to to going just that got the underlying on QX continue things to context I'll just it's what business. more continues a something of optimizations that. we've forward because couple and And on flow done bit really to just Obviously, in what behind with Reader across mobile,

plans As had, have ever right? again, that's look offerings have Creative We we business with to base broader impacting Cloud happening a at we that Cloud, than the thanks AI have set Creative we've things Creative is how higher-priced of in higher are offers, doing. Cloud, the value, like innovation we

half strength that driving into mobile and more have proliferation. of and the and the of aggregate quarter We overall, including how look it's of web And had, offerings second things those QX, we've And the half strong as are we set expectation than we half lower-priced going X in the expected with premium second of out now is broader with frankly, as of to at things of the you the going also number. blend ever offerings a out. But play out. came we QX comes second see the a terms how also playing sort into

reason, good you QX specifics the of terms seasonality. stronger a than timing, little for given was In a expected on and

deals than closing linearity typically I terms can between explained think And QX, just expected would that closed the would have that the by few a lot you be of in historically a in dynamic see in QX. that QX. and earlier of that changed QX

And our JPMorgan. with from Mark Murphy come next question will

you versus my if generating I'm the the opportunity image and be wondering solve the And when limitations optimistic the lack then tokens many you're object don't maybe add how an monetization models the sensing expressions interactions or current a some they for models, the handle compare tying models can't they audio enough video is to might to in that video? or can able with With being in potential. with provide video consumed of just detail I'll generation future someone with the video David, that, facial you or resolution can relative congrats. are just image? realism, instance, the your where AI how

Yes, happy to take that.

a sort monetization. that how bit and and take think a step have core back we for of the just we terms me about of in talk of strategy about little Let conversion AI then the

broadest were working our community. that going that were more for with dating differentiate into think ago, incredibly life. more we into base. it continue been we've that safety, integrate controllability. And consistent models actively methodically what back set you've our about on we've years the to fact of X we've talked is bring commercial And to more develop based much months, the creative as we where fundamentally going And said, models the we integratability over quality, as to very the innovation I X.X to of we XX So now year, tools last started to and and seen the

edits photography, with we now tool, Remove, it Shape. have Generative in at look design, we Generative AI-assisted Fill you we have have our Pattern, Generative in If

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but batch with Fill, We be started we're in to and can Gen and all it continue on access what use to in also to and Services work have I able now of APIs. also enterprises through terms the generations, integrate we've for enabling Firefly

expected. our deeper first out that's we're of is look look use played how as When into consumed a seeing credits you when converts people of value accelerated lot that to our monetization, generative it at foremost, about, that these we seeing convert that We're when playing more you use Express to being or application, core If generative integrated applications talked our they're people pricing. and of then tools, more seeing and features, at out, Creative because and integration all products of as come Adobe sort retain that to also to how also we and value they with try Cloud We're better. that that we've able into better.

capability past is the think the implied are all current ancillary into in around model what going benefits is do consumed direct where integrate which every credits we're we But in we've there up. with so you're subsequent terms that credits, of that with the getting. we generative I this. And is see these monetization, said tool, going And total

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And AI include that considering have -- sorry, also that CC things plans standard more set a video but things. and generative capabilities premium premium having having plans so API of other like core will opportunities we're other like also

So also we're deeply over in the you if in play to want continues put see the we're time of chance and it to controllability. very video, into innovation video, happy know some primary about of be I But we don't a out had that's coming, more images engage very we the to videos see text monetization. there and the opportunity lastly directly And our to integrated terms then to guide. proliferation premier, quality, -- out to we

overlays generate ability actually things and just professionals that also and not with all the like dogs humans themes to have work these animals, We with. organic to but and creative now want

set out they And of continue going. box to things that we're very so human get about will can things that get excited the And of just and the get faces better.

We step have hope huge models there. forward research of play a you'll a that you get taken great lot start the see, with to because I and we've to

the it's leveraging what They and the it video spend with of which of which to the the of mean, have Premier, we've they the I couple point, the just always our absolutely work park. think models to I'll the done, application David said, great. that a said, hours David's with little was just have that's integration and it. again, model I integration with out add that is a image where differentiates maybe video, I team. Mark, hit

it." I where small extend you video, a out, came "Wow, you think can changer do. can just were first we real value of is, models game the That's part describe And a a in have to It's it. want is. when other people what of the you value terms like, such

will about of David's value really video. which point, the in be doing the we're sort So base to was images, again, for And monetized excited part we way from that of this the differently have pricing. stuff

to the say question thing have as So is, well. would custom ability the models remember, third the we answer way I your is, and I create

the also ability extend really us. new that that video And for is the not is a that again, represents dependent you edit, when to on so what people what to want data is. And unique ingest ability just model but the the on

leading why the can value of So nonlinear action we're is to those which demonstrate the the pack where how in in hopefully, people editors, terms all be. derive X is going

And Bachman on Keith to moving BMO. with

a And to FY to ability will consumption growth 'XX? think lace bit see will, to year, against ARR the can of may, either the you consumption you turn I I thinking could think, on we you should if state as start we just said contribute to of monetization, in about, pervasive that as price. consumption, wanted limit wanted how competition. up I And David, the monetization. be in competition that at you backdrop there's if or Because turn fact, on consumption pick little to from we look fears your

our where I continue also a Keith, think From Services, to and a have apps consumption models, as which with we of just that's differentiated. the is the think that it's off can to perspective, when that, think you what good look we model at Firefly you uniquely start. really we have

reiterate this find I'll which core in Illustrator, to like is models the products Our to subscription ability and enterprises think because the as it. combination I core I a real it's designed differentiated model it's And give content, to it video, enterprises, custom technology. Photoshop within solution again, ability safe. And create relates and be David we additional said it, the commercially the and but is of think to the seeing the the automate traction subscription models for to differentiation monetize we're models, ways that will

acceleration I space, extending as in if value Lightroom, I'm our it unique. we're up. in you look people relates it's we've what actually sure other of you're it's perspective, seen having clear at mean, catch not than So Illustrator, referring from Photoshop, generations the who the this but competition of specifically to rather to just that

and so the is very addition emphasize to differentiated of And that that something then X is Shantanu commercial safety businesses important all said. there is feel everything other in thing I'd we to that sizes, just very, frankly,

down for year? year, next that at framework down to taking FY QX know a but in ARR the new there give Okay, follow-up, question. perhaps when new year-over-year a guidance want thoughts as to 'XX I year. And will to apply I versus perhaps don't But net great. you're just up QX. new being But X% ARR associated want is I as we next guiding guidance ARR? address think to ARR any the new net then kind net might down you for you of that next want be are relates investors on for to in framework it with pick look wanted And Alex's my anything first net that thereby you

share You're things. right, ARR. give Keith. expect, I'd would last fiscal year more at December give call, FY say a 'XX earnings And did not going guidance. MAX. We'll at on we the We're to of 'XX that color But like we we'll certainly couple

maybe think as that question, Monday relates that which quarter. clearly time, tactically for ARR folks in QX if ] to positive new relates fiscal great what to, the questions XXXX second I I thing. We it half track First, QX and the to We're trend hope Monday, you other to again, take sign. This a around Cyber Friday QX. the the as 'XX, there to record And at believe, about on in your have same is will again, of Typically, beat are number, Black performance it you have we QX. to Cyber is net thing end the we guidance. well as perhaps think as means, QX the because of a and [ and in which Alex and gave

that the QX it's And it our as so performance, we've relates highest target to issued. ever

to out execute to continue go will and We and innovate. continue

the I business, at Keith. way the look that's So

with Saket And Kalia from the will come question next Barclays.

Okay, you. great. David, for maybe

You level in to new the super the which, at in course, But some touched net helpful. that to Document, grow of drivers into which deeper continues love X a some dynamics really maybe of clip. of on nice was ARR I'd go business,

Cloud maybe sort can subscription-heavy where can maybe about, more mind, give journey specifically sense or a Document we we So headwinds to pricing Do in sense? is a make talk tailwinds becoming And also of in of for for business? bit are you its us just Document keep maybe that Cloud? any little there a those should

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come next Citi. question with from our will Tyler And Radke

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up. Operator, then top we're the at We'll X of wrap more hour. in and sneak the question

will question Brent That Jefferies. Thill come with from

to any know guide. has the drill demand? different terms end back the U.S. factors as a curious, that were of Or contemplated. couple that that, just there accelerated? I you're there is thoughts know decelerated that a I'm Can were in? little seeing you Just mentioned bit, in we just anything I in else of is EMEA

mean, the our And business. I think considered had we it's targets Brent, do typical No, strong execution. we see focus and in to the momentum I that a continue we and QX, on our

We anything So of weeks you the saw to the last change that QX, traditional strength it the a few summer we're dynamics. seeing in relates also our know, not see as to the web that I as we mentioned seasonality business expect on ends. traffic.

So I think MAX is coming up.

MAX. what talking of to going have terms of terms We in in an exciting we're about agenda be

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happening side. Imaging Fill momentum think on the road Lightroom demonstrating SKUs whether down and theme how all that Cloud, And a drive map, which on of people of Acrobat, AI video, and the customers we've and retain it Media Lightroom relates and excitement whether on customers, I that's and premium coming our I as monetization the value that we then have Gen Express, and across Digital We therefore, that better. is video. the on team Illustrator and automating In we're Firefly what's Photoshop clearly number whether business. has know it's the of Apps innovation in GenStudio customers asked, what's key done data new and of Services, usage on Mobile, to have the initiatives work that and content, the with it's Gen AEP AI Experience the both for whether been think have Fill, I pike mean, I acquire all a can it's of talking the well, associated the as the that people about,

focus MAX innovation customers. But all of and seeing to you forward look We good. at us. joining you we're our for and feels continue So thank just to going to delighting on

forward Thanks, to and Shantanu. We Yes. MAX we will we to And on management. at be event. with be with there. of XX, that do see for look doing Miami you a the you that, October many we'll joining event hope this Q&A investor the where concludes call, And the thank holding in

an Have day. excellent We thank you That for participation. does today's conclude your conference. do