Adobe Inc. (ADBE) on Q2 2024 Results - Earnings Call Transcript

Operator: Good day, and welcome to the Q2 FY 2024 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. Jonathan Vaas: Good afternoon and thank you for joining us. With me on the call today are Shantanu Narayen, Adobe's Chair and CEO; David Wadhwani, President of Digital Media; Anil Chakravarthy, President of Digital Experience; and Dan Durn, Executive Vice President and CFO. On this call, which is being recorded, we will discuss Adobe's second quarter fiscal year 2024 financial results. You can find our press release, as well as PDFs of our prepared remarks and financial results, on Adobe's Investor Relations website. The information discussed on this call, including our financial targets and product plans, is as of today, June 13, and contains forward-looking statements that involve risk, uncertainty and assumptions. Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today's earnings release and Adobe's SEC filings. On this call we will discuss GAAP and non-GAAP financial measures. Our reported results include GAAP growth rates as well as constant currency rates. During this presentation, Adobe's executives will refer to constant currency growth rates unless otherwise stated. Non-GAAP reconciliations are available in our earnings release and on Adobe's Investor Relations website. I will now turn the call over to Shantanu. Shantanu Narayen: Thanks, Jonathan. Good afternoon and thank you for joining us. Adobe had an outstanding quarter, achieving revenue of $5.31 billion, representing 11% year-over-year growth. GAAP earnings per share for the quarter was $3.49 and non-GAAP earnings per share was $4.48, representing 15% year-over-year growth. Our success is driven by growing customer value through an innovative product roadmap. The advances we are delivering across Creative Cloud, Document Cloud and Experience Cloud are enabling us to attract an expanding universe of users. Everyone from creators, communicators, students, entrepreneurs and businesses of all sizes are using our products to unleash their creativity, accelerate document productivity and power their digital businesses. Adobe's highly differentiated approach to AI is rooted in the belief that creativity is a uniquely human trait and that AI has the power to assist and amplify human ingenuity and enhance productivity. We're innovating across data, models and interfaces and natively integrating AI across all our offerings. In Creative Cloud, we have invested in training our Firefly family of creative generative AI models with a proprietary data set and delivering AI functionality within our flagship products including Photoshop, Illustrator, Lightroom and Premiere. We're reimagining creativity for a broader set of customers by delivering Adobe Express as an AI-first application across the web and mobile surfaces. Since its debut in March 2023, Firefly has been used to generate over 9 billion images across Adobe creative tools. In Document Cloud, we're revolutionizing document productivity with Acrobat AI Assistant, an AI powered conversational engine that can easily be deployed in minutes. This enhances the value of the trillions of PDFs which hold a significant portion of the world's information. Acrobat AI Assistant features are now available through an add-on subscription to all Reader and Acrobat enterprise and individual customers across desktop, web and mobile. At the end of May, we celebrated the five-year anniversary of Adobe Experience Platform, which we conceived and built from scratch and which is on track to be the next billion-dollar business in our Digital Experience portfolio. We released AEP AI Assistant to enhance the productivity of marketing practitioners through generative AI, while expanding access to native AEP applications. With Adobe GenStudio, we're bringing together products across our clouds including Creative Cloud, Adobe Experience Manager, Workfront, Adobe Journey Optimizer and Customer Journey Analytics as well as Adobe Express for Business to address the massive content supply chain opportunity. Our approach to empower marketers to quickly plan, create, manage, activate and measure on-brand content is resonating with customers and validating our leadership across data, content and journeys to deliver personalized experiences at scale. We're extending our applications to integrate third-party text, image and video models and partnering strategically to create multi-modal large language models offering customers greater choice in tools and further enhancing the value of our leading applications and solutions. We're driving strong usage, value and demand for our AI solutions across all customer segments and seeing early success monetizing new AI technologies across our Digital Media and Digital Experience businesses. Given this rich product roadmap, focus on execution and customer demand in the first half of the year, we are pleased to raise our annual Digital Media net new ARR, Digital Experience subscription revenue and EPS targets. I'll now turn it over to David to discuss the momentum in our Digital Media business. David Wadhwani: Thanks, Shantanu. Hello everyone. In Q2, we achieved net new Digital Media ARR of $487 million and revenue of $3.91 billion, which grew 12% year-over-year. On the Document Cloud side, PDF has become a global standard for automating business and consumer workflows, and Acrobat is the platform of choice to view, edit, share and collaborate with these documents. We continue to see steady growth in monthly active users of our Document Cloud solutions, including Acrobat Reader, Acrobat Standard and Pro, and our signature, share and review workflows across mobile, web and desktop. The introduction of Acrobat AI Assistant, made generally available in April for English documents, marks the beginning of a new era of innovation and efficiency for the approximately 3 trillion PDFs in the world. Acrobat AI Assistant is empowering everyone to shift from reading documents to having conversations with them in order to summarize documents, extract insights, compose presentations and share learnings. AI Assistant is available as a standalone offer for use in Reader and as an add-on to Acrobat Standard and Pro. We're seeing early success driving adoption of AI Assistant as part of our commerce flows and remain optimistic about the long-term opportunities. In Q2, we achieved Document Cloud revenue of $782 million, growing 19% year-over-year. We added $165 million of net new Document Cloud ARR, which was a Q2 record, with year-over-year ending ARR growth of 24% in constant currency. Other business highlights include, general availability of Acrobat AI Assistant support for document types beyond PDF, meeting transcripts and enterprise requirements; Acrobat link sharing for PDF-based collaboration continues to grow rapidly, more than doubling year-over-year and driving viral new user adoption; free monthly active users of Acrobat Web grew over 60% year-over-year, as a result of link sharing and our Microsoft Edge and Google Chrome extensions; continued strength with free-to-paid digital conversion, as a result of product led growth optimizations; strong growth in the SMB segment for our Teams offering, driven by a combination of seat expansion and new account wins; Key enterprise customer wins with AstraZeneca, Chevron, State Government of Florida, State of Illinois, United Healthcare Services and Wells Fargo. Turning to Creative Cloud, creative professionals are leading the global charge to meet the everincreasing demand for engaging content across a variety of platforms and channels. Enterprises rely on creative professionals to produce differentiated content to drive increasingly personalized marketing campaigns. Solopreneurs and small businesses need to stand out in a crowded digital landscape with engaging videos and designs. Educators are passionate about providing students with the visual communication skills needed to thrive in the decades ahead. Consumers are increasingly looking for ways to share their stories digitally. Creative Cloud, Express and Firefly Services are uniquely positioned to catalyze this opportunity for everyone, by leveraging the promise of generative AI. Our Creative Cloud flagship applications continue to release new features that are significantly improving user onboarding while simultaneously delivering an unprecedented level of power and precision. Generative Fill and Generative Expand are already two of the top three features used by customers on the latest version of Photoshop. Text to vector support is off to a great start in Illustrator. Remove Object is the fastest growing feature in Lightroom mobile. Our preview of generative AI capabilities in Premiere won Production Hub Award of Excellence at NAB, the largest video show in North America. We are integrating our leading applications with Firefly and third-party generative AI models to deliver the richest, most engaging content. Our vision for Adobe Express is to provide a breakthrough application to make design easy for communicators worldwide, leveraging generative AI and decades of Adobe technology across web and mobile. Our launch of the all-new Express application on iOS and Android earlier this quarter is off to a strong start, with monthly active users doubling quarter over quarter. This week's Design Made Easy event, which focused on Express for Business, was another big step forward for us. Companies of all sizes are excited about the integrated power and commercial safety of Firefly, the seamless workflows with Photoshop, Illustrator and Adobe Experience Cloud and enterprise-grade brand controls that are now part of Express for Business, making it the optimal product for marketing, sales and HR teams to quickly and easily create visual content to share. We also announced the general availability of Firefly Services and Custom Models at Summit. The platform makes API calls and model customization available to developers, accessible through low-code, no-code tools and integrates with our Experience Cloud products. Firefly Services can power the creation of thousands of asset variations in minutes instead of months, and at a fraction of the cost. This allows us to monetize the volume of content being created through automation services. The increasing availability of Firefly in Creative Cloud, Express, Firefly Services and the web app is giving us opportunities to access more new users, provide more value to existing users and monetize content automation. These integrations are driving the acceleration of Firefly generations, with May seeing the most generations of any month to date. In Q2, we achieved $3.13 billion in revenue, which grew 11% year-over-year. Net new Creative Cloud ARR was $322 million. Other business highlights include, the launch of Express for Business, including support for brand controls and template locking, Firefly custom models, bulk creation and generation of variations, presentation and print capabilities, and workflows with Photoshop, Illustrator and Experience Cloud; the release of Firefly Image 3 Foundation Model with high quality image generation and more control with structure and style reference; the release of the Photoshop beta, with Reference Image and advances in Generative Fill; the debut of Generative Remove in Adobe Lightroom, enabling anyone to remove unwanted objects from any photograph non-destructively with stunning, high-quality, photo-realistic results; the release of the Premiere beta, with new audio workflows driving strong usage; the deep integration of Firefly in Substance 3D, which provides an easy way to create textures and materials from reference images; the introduction of an all new Frame.io, streamlining workflows across content types on a flexible and intuitive collaboration platform; key enterprise customer wins include Credit Agricole, FedEx, Infosys, Rakuten, Ralph Lauren, Samsung, Schneider Electric and Volvo. We're excited about the accelerating pace of innovation across the Digital Media business and pleased with the adoption of AI functionality as well as its early monetization across Document Cloud and Creative Cloud, including our flagship applications, Firefly Services and Express. We're pleased to raise our annual net new ARR target to $1.95 billion and excited to deliver on our rich product roadmap in the second half. I'll now pass it to Anil. Anil Chakravarthy: Thanks, David. Hello, everyone. In Q2, we achieved Experience Cloud revenue of $1.33 billion. Subscription revenue was $1.2 billion, representing 13% year-over-year growth. We are the industry leader in helping enterprises deliver personalized experiences at scale to their customers by combining the right content, customer data and journeys in real time. When we introduced Adobe Experience Platform five years ago, it was a revolutionary approach to address customer data and journeys. Today, we're the number one digital experience platform, and AEP with native apps is well on its way to becoming a billion-dollar business. We're now transforming the content supply chain for enterprises with Adobe GenStudio, enabling them to produce content at scale, leveraging generative AI through native integrations with Firefly services and Adobe Express for Business. Enterprise customers, both B2C and B2B, view customer experience management and personalization at scale as key areas of differentiation, making it a priority investment for Chief Marketing Officers, Chief Information Officers and Chief Digital Officers. We are excited by the customer interest and adoption of our latest innovations, including AEP AI Assistant, a generative AI-powered conversational interface that empowers practitioners to automate tasks, simulate outcomes, and generate new audiences and journeys. For example, customers like General Motors and Hanes brands have been working with AEP AI Assistant to boost productivity and accelerate time to value, while democratizing access to AEP and apps across their organizations. Marriott International is a great example of a customer that's expanded its decade-long relationship with Adobe and turned to Adobe Experience Cloud to orchestrate highly personalized guest experiences across online reservations and the Marriott Bonvoy mobile app. Adobe Real-time CDP and Adobe Journey Optimizer enabled Marriott to connect data from disparate sources and activate relevant experiences in moments that matter, helping the company match individuals with the best options across its portfolio of more than 30 brands and nearly 9,000 properties. Other business highlights include: continued momentum with AEP and native applications, growing subscription revenue 60% year-over-year in Q2; AEP innovations announced at Summit include Adobe Journey Optimizer B2B addition, a new application for B2B customers built on AEP to orchestrate account-specific buying group journeys; federated audience composition, which enables enterprises to minimize data copy and generate audiences directly from their enterprise data warehouses; and real-time CDP collaboration, a new clean room application for brands and publishers to collaborate in a privacy safe way to discover, reach, and measure their high-value audiences in a world without third-party cookies. GenStudio innovations to address enterprise content supply chain needs across workflow and planning, creation and production, asset management, delivery and activation, and reporting and insights. Recent advancements include contextual search in Adobe Experience Manager assets, which enables users to find the right asset and variation in their growing digital libraries. Adobe Workfront Planning, which provides every user with a unified view of all activities across the marketing life cycle through highly visual marketing campaign calendars and dynamic briefs. And AEM Generate Variations, which accelerates the creation of audience-specific content variations to drive personalized web experiences. Strong industry analyst recognition including Gartner's Magic Quadrant for Content Marketing Platforms and leadership for both IDC's B2C and B2B MarketScapes for digital commerce applications. Key customer wins include Amazon, British Telecom, Comcast, Mercedes-Benz, Maruti Suzuki, Nationwide Building Society, Novo Nordisk, ServiceNow, Stellantis, Ulta Beauty, and U.S. Department of the Treasury. We have enabled our vibrant partner ecosystem of system integrators and agencies to deliver advisory and implementation services across our product portfolio. We look forward to engaging with customers and major agencies at the Cannes Lions Festival later this month. Our category-leading solutions, robust pipeline, and tremendous scale position us to drive strong growth in the second half, and we are raising our subscription revenue target for the year. I will now pass it to Dan. Dan Durn: Thanks, Anil. Today, I'll start by summarizing Adobe's performance in Q2 fiscal 2024, highlighting growth drivers across our businesses, and I'll finish with financial targets. In Q2, Adobe delivered strong top line growth and industry-leading profitability while accelerating the pace of innovations we're delivering to market across Document Cloud, Creative Cloud, and Experience Cloud. In the quarter, Adobe achieved record revenue of $5.31 billion, which represents 10% year-over-year growth or 11% in constant currency, with strength across all three clouds. This performance stems from the diversification of Adobe's business across our market-leading products, business models, customer segments, and geographies. When combined with our talented employees, strong execution and world-class financial discipline, you have the ingredients that make this company incredibly resilient. Second quarter business and financial highlights included: GAAP diluted earnings per share of $3.49 and non-GAAP diluted earnings per share of $4.48; Digital Media revenue of $3.91 billion; net new Digital Media ARR of $487 million; Digital Experience revenue of $1.33 billion; cash flows from operations of $1.94 billion; and RPO of $17.86 billion exiting the quarter. In our Digital Media segment, we achieved Q2 revenue of $3.91 billion, which represents 11% year-over-year growth or 12% in constant currency. We exited the quarter with $16.25 billion of Digital Media ARR, up 13% year-over-year in constant currency. Adobe achieved Document Cloud revenue of $782 million, which represents 19% year-over-year growth as reported and in constant currency. We added $165 million of net new Document Cloud ARR, which was a record for Q2. Q2 Document Cloud growth drivers included: demand for Acrobat subscriptions across all customer segments and geographies; new user acquisition resulting from increasing Reader MAU; a great start monetizing AI Assistant through our digital channel; strong usage and engagement from Acrobat Web as well as through our Chrome and Edge partnerships, which are driving free-to-paid conversion; growing team subscription units sold to SMBs, both through adobe.com and our research channel; and strength in our enterprise solutions, demonstrating the importance of PDF as a source of unstructured data in business workflows. We achieved Creative revenue of $3.13 billion, which represents 10% year-over-year growth or 11% in constant currency. We added $322 million of net new Creative ARR in the quarter. Q2 Creative growth drivers included: new subscriptions for Creative Cloud All Apps with particular strength in digital acquisition on adobe.com, with multiple product releases during the quarter driving customer engagement and demand; strong growth of single apps, including in imaging, photography, design, and stock; accelerating customer interest and usage for our new Express Mobile and Express for Business offerings; strong renewals as customers migrate to higher-value, higher ARPU Creative Cloud plans that include Firefly entitlements; continued subscription unit growth, with particular strength in emerging markets; and strength from SMBs adopting our team offering as well as in the enterprise segment with ETLA adoption. We're pleased with the performance of the Creative business in the first half of the year, fueled by strong commercial subscriptions in both Q1 and Q2. As we look at the momentum we're carrying into the back half, we expect to deliver year-over-year growth of Creative net new ARR in Q3 and Q4 and are raising our Digital Media net new ARR target for the fiscal year. Turning to our Digital Experience segment. In Q2, we achieved revenue of $1.33 billion, which represents 9% year-over-year growth as reported and in constant currency. Digital Experience subscription revenue was $1.20 billion, growing 13% year-over-year as reported and in constant currency. Q2 Digital Experience growth drivers included: subscription revenue strength from transformational accounts; market leadership with AEP and native applications, with subscription revenue growing 60% year-over-year; additional subscription revenue strength across the data insights and audiences and customer journey categories; and accelerated adoption of our AEM and Workfront solutions from businesses looking to solve their content supply chain challenges. Turning to the income statement and balance sheet. In Q2, Adobe delivered year-over-year EPS growth of 24% on a GAAP basis and 15% on a non-GAAP basis. This was driven by revenue growth and disciplined prioritization of our investments, which resulted in non-GAAP operating margin strength in Q2. The company continues to deliver world-class gross margins while investing in groundbreaking AI capabilities. Adobe's effective tax rate in Q2 was 18.5% on a GAAP and non-GAAP basis, in line with our expectations for the quarter. RPO exiting the quarter was $17.86 billion, growing 17% year-over-year as reported or 18% when factoring in a 1-point currency headwind. Current RPO grew 12% exiting the quarter. Our ending cash and short-term investment position at the end of Q2 was $8.07 billion, and cash flows from operations in the quarter were $1.94 billion. In Q2, we entered into a $2.5 billion share repurchase agreement, and we currently have $22.7 billion remaining of the $25 billion authorization granted in March 2024. We will now provide Q3 targets as well as updated fiscal 2024 annual targets, factoring in current macroeconomic conditions as well as strong momentum across our business, our current FX outlook into the back half of the year with the U.S. dollar remaining stronger as compared to our original expectations when we set our FY 2024 targets in December, and an expected strong seasonal finish to the year in Q4. For Q3, we're targeting: total Adobe revenue of $5.33 billion to $5.38 billion; Digital Media net new ARR of approximately $460 million; Digital Media segment revenue of $3.95 billion to $3.98 billion; Digital Experience segment revenue of $1.325 billion to $1.345 billion; Digital Experience subscription revenue of $1.20 billion to $1.22 billion; tax rate of approximately 18% on a GAAP basis and 18.5% on a non-GAAP basis; GAAP earnings per share of $3.45 to $3.50; and non-GAAP earnings per share of $4.50 to $4.55. For fiscal 2024, given our first half performance, we are now targeting: total Adobe revenue of $21.40 billion to $21.50 billion; Digital Media net new ARR of approximately $1.95 billion; Digital Media segment revenue of $15.80 billion to $15.85 billion; Digital Experience segment revenue of $5.325 billion to $5.375 billion; Digital Experience subscription revenue of $4.775 billion to $4.825 billion; tax rate of approximately 20.5% on a GAAP basis and 18.5% on a non-GAAP basis; GAAP earnings per share of $11.80 to $12; and non-GAAP earnings per share of $18 to $18.20. In summary, I'm extremely pleased with the company's performance in the first half of the year and the momentum we see in our business. Adobe's product leadership, velocity of innovation, diversity of our business, and financial discipline make us unique, enabling us to deliver strong top and bottom line results through dynamic market conditions. I'm confident in our ability to catalyze transformative long-term trends that will position us to win over the next decade. Shantanu, back to you. Shantanu Narayen: Thanks, Dan. Adobe remains one of the greatest places to work in the industry, and I want to thank our employees for their relentless dedication to supporting our customers and communities. We continue to invest in hiring, including new college grads and interns to bring the best and brightest talent to Adobe. This quarter, Adobe was recognized among Fortune's 100 Best Companies to Work For, Glassdoor's Best-led Companies and the Civic 50 List of the Most Community-minded Companies in the U.S. Demand for our category-defining products and services continues to grow. Our business fundamentals and market tailwinds are strong, and we look forward to building on our momentum in the second half and beyond. Thank you, and we will now take questions. Operator: Thank you. [Operator Instructions] Our first question will come from Mark Moerdler with Bernstein. Mark Moerdler: Thank you very much and congratulations on the quarter and especially the strong net new ARR. I'd like to ask a little more color on specifically the net new ARR that we saw in Creative Cloud. Can you give us a sense of what the contribution near term, medium term to Digital ARR from seat growth versus upsell versus consumption, things like Adobe Stock and AI credits, even rank ordering or quantifying? Anything you can give us -- to give us a sense of what's driving that number? And that would be very helpful in really understanding what's going on in the drivers of that number. Thanks. Shantanu Narayen: Sure, Mark, let me start and then certainly, David and Dan can add. To your point, we had a strong quarter. And I think what's really driving the quarter, big picture, continues to be the innovation that we're delivering. And the way AI is actually making our applications both more affordable, easy to onboard as well as, frankly, higher-value users. New users are still a big driver of the growth that we continue to see in the business. On the Document Cloud side, a lot of that has to do with the introduction of AI Assistant and the fact that people are migrating to the higher-value products. And on Creative Cloud, I would say the things that we're doing on imaging with Firefly and what we've seen both in Photoshop and Lightroom. I think in the prepared remarks Dan certainly talked about what's happening with also each of the different segments. So the SMB segment actually had a strong quarter. Enterprise continues to have a strong quarter. So across the board, Mark, we actually saw strength in the business. Operator: And our next question will come from Alex Zukin with Wolfe Research. Aleksandr Zukin: Hey, guys. Thanks for taking the question and congratulations on this incredible result. I wanted to ask kind of just similar to Mark's question, just how much gen AI demand did you see in the quarter in terms of -- for sort of both the Creative Cloud portfolio and Digital Media, in Creative Studio as well as in GenStudio? And how does it kind of help to pick up more on the enterprise side of the business, on the SMB side of the business? Help us understand that progression and maybe how you're planning for it in the back half of the [indiscernible]. Shantanu Narayen: Sure, Alex. Again, maybe I'll start with that. And just taking a step back, I think we've talked about the platform that we have for gen AI that constitutes data, as well as models and finally, interfaces. On the models, we released Firefly services. We've started to see some customer wins in Firefly services. So they're using it for variations, and these are the custom models that we're creating, as well as access to APIs. I would say that's early in terms of the adoption, but the interest as customers say how they can ingest their data into our models as well as custom models, that's really ahead of us, and we expect that to continue to grow in Q3 and Q4. I think the biggest opportunity for us and why we're really excited about gen AI is in the interfaces, because that's the way people derive value, whether it's in being able to complete their tasks faster, whether it's being able to do new workflows. And I would say in that particular space, Acrobat has really seen a significant amount of usage as it relates to AI Assistant. And Photoshop, I'll have David again add, but Generative Fill and what we are doing there, what we are doing in Illustrator. And that both for existing customers as well as for prospects who now come in and say, the products are becoming increasingly more productive for us, that's what's really driving the value there. And last but not least, the AI-first applications. When we think of an application like Express, Express is all about reimagining what we can do for creatives by sort of leapfrogging existing technologies and providing an AI-first application. And so that's also off to a good start. David Wadhwani: Yes. And just to add to a little bit of what Shantanu said, Alex. We've talked a lot about how FY 2023 was the year that AI was in the playground, and this is the year we need to bring it into production. And a lot of that is industry-wide, but we're in a pretty special position as it relates to that. So to Shantanu's point, a lot of active releases this quarter, right? Acrobat AI Assistant, Firefly updates in Photoshop, Firefly was introduced for the first time into Lightroom, Express Mobile launched, Express for Business launched. We launched Firefly services for enterprises to produce content at scale. So, as you can see, there was a ton of innovation of our core -- in our core applications around generative AI. You put that together with some of the activations that we've done at Summit, and we did at Max London and we're getting our word out very broadly. It starts to create this ability to not just look at and play with AI, but actually use it as part of your workflow. So that's been deeply integrated into everything we do. And that's the key point, the interfaces that people work out if we bring AI there, everyone becomes more productive. Shantanu Narayen: And maybe one last thing, Alex. Sequentially, if you look at it from a route to market, Digital had a very strong quarter as it relates to what we did on adobe.com. We had talked about enterprise doing well in Q1 as well, that continued. And SMB also, the interest in our teams product also continued to do really well. So I think sequentially, I would point to SMB and Digital's strength as driving the further growth. Aleksandr Zukin: That's super helpful. And then maybe just one on the macro. Just given your guys' purview, like what is the story that you're seeing in terms of the macro on the demand environment? Clearly again, you're commenting on solid performance in the SMB and in the enterprise. Is there any areas that you're seeing pockets of weaknesses that's really vertical-dependent? Just maybe give a comment on kind of how we should think about it as we look to the rest of the year. Shantanu Narayen: I think from a macro perspective, what I think differentiates Adobe more than any other company is how differentiated and how diverse the set of products that we have. And again, from individual consumers all the way to enterprises, our products are mission-critical. And so at this scale, it's all about execution. And the business cycles will come and go, Alex, but we're actually continuing to focus on execution and converting the pipeline and the interest and the awareness of AI into monetization. And so, we just will be ruthlessly focused on continuing to execute against that. So nothing really to report different on the macroeconomic environment from our perspective. Aleksandr Zukin: Awesome. Keep doing what you're doing, guys. Operator: And our next question will come from Saket Kalia with Barclays. Saket Kalia: Okay, great. Hey, guys, thanks for taking my question here and echo the congrats on the quarter. Maybe for both, Shantanu and David. There are clearly just so many layers to the Firefly monetization story. But I think one theme that's coming out a little bit in this call and particularly interesting route to monetize is just the increased engagement that Firefly helps drive in your flagship products, right, or I think we call it sort of the interfaces, right? An example there would be like Generative Fill for Photoshop. And you've clearly started expanding that to other flagships like Premier and Illustrator. Maybe to go one level deeper, is there a way that you think about the potential opportunity from things like higher retention rates? Or any other way that -- I know it's really tough to size, but how have you sort of thought about it even qualitatively? David Wadhwani: Yes, it's a great question. And yes, the core has been -- from the very beginning, we've talked to you guys about our primary focus for generative AI is about user adoption and proliferation, right? And that has continued to be the primary thing on our mind. And it's the primary thing on our mind for multiple reasons. And to your point, there are many different ways that we can monetize this. First is, as you think about the growth algorithms that we always have in our head, it always starts with, as Shantanu said, new users, right? And then it's about getting more value to existing users at higher ARPU, right? So in the context of new users, first and foremost, we want to make sure that everything we're doing generative AI is embedded in our tools, starting with Express, right? So we have Express in the market. We're seeing a lot of adoption and usage of Express in the market. As that's happening, we're infusing generative AI more and more into Express in a whole host of ways. And that's really helping, everything from our marketing message for the completeness of the AI offering in there, all the way through to user engagement and success in onboarding and retention. Similarly, though, this is having the same effect in our core Creative products as well, right? The introduction of Firefly combined with some of the product-led growth work we've been doing, in particular, something called the Context Bar makes it easy for new users coming in to just be more successful out of the gate which then, of course, helps with both conversion and retention. And then with AI Assistant, the ability to sort of embed that into the purchase flow for Acrobat and get a high attach rate, we always talk about that as a would you like fries with it moment at Adobe when someone's going through the checkout flow, it's just a great way for people to say, look, this is value I want, I want to add it and buy up to the higher plans. So there are a lot of different mechanisms that we see. But by far, the strongest is going to be the fact that we are seeing people like in Creative Cloud migrating to the higher-priced plans because they include Firefly. And so we just want to get more value to these users as well. Shantanu Narayen: And in terms of the generation, Saket, I think we talked about it. We did a great job at MAX in London talking about some of the new functionality and releasing. Photoshop, I think we're up to 9 billion generations, and actually, I think the greatest amount of generations was in May. So the momentum clearly is the more we integrate this functionality into our interfaces, the more that usage is really driving adoption as well as retention. Saket Kalia: Very helpful. Thanks, guys. Operator: And our next question comes from Brent Thill with Jefferies. Brent Thill: David, on Express, you mentioned the success you're seeing. Can you maybe drill into some of the other metrics and accomplishments that you're seeing out of Express this quarter? David Wadhwani: Yes. For starters, there's a lot of buzz of Express here at Adobe coming off the event we just had earlier this week, but it's really based on the fact that the innovation in Express is on a tear, right? A few months ago, we introduced an all-new Express for the web. This quarter, we introduced an all-new Express for mobile. We introduced Express for Business. We also now have, as we've just talked about, been more deeply integrating AI features, whether it's for imaging generation or generative fill or text effects, character animation, design generations more deeply into the flow for Express. And that combination has led to an incredible set of metrics over the last quarter, in particular, but building throughout the year. Express MAU is growing very quickly. We talked about on the -- in the script earlier that MAU on mobile has more than doubled quarter-over-quarter, which is fantastic to see. And cumulative exports, if you look at year-over-year it has grown by over 80%. So really feeling good about sort of the momentum we're seeing. But if you take a step back, I think it is important to take a step back and understand our vision. Express that is now in market is built on a brand-new platform, right? And that brand-new platform lays the groundwork for the AI era. And this will be -- Express will be the place that anyone can come and create through a combination of conversational and standard inputs. That's the vision that we have. And I think it's an opportunity for us to really leap forward in terms of what we can do on the web and mobile at Adobe. And it's taken us a little time to get here. It hasn't happened overnight. But now that we are here, we are going to pour the gas on go-to-market, right? You know what we can do with our data-driven operating model. We've been ramping up what we're doing in Digital and Adobe.com journeys. We now can do the same thing and unleash all of that expertise in the mobile app store. You know what we're capable in terms of our product-led growth motions. We've now embedded Express Workflows into Acrobat Editor. We obviously have been embedding it into Creative Cloud workflows. And also, as we showed at Summit with Anil, we've embedded it into our Experience Cloud workflows as well. In addition to all of that, we're now unleashing our inside sales force to target the small/medium businesses. Our education teams are really gearing up for the back-to-school launch for K-12 and higher ed. And our field and enterprise sales now have Express for Business. So -- and we're doing all this globally, right? It's a massive market, and we're ramping up and we're ready to go. Brent Thill: Thank you. Operator: And the next question comes from Gregg Moskowitz with Mizuho. Gregg Moskowitz: Hey, thank you very much. And I'll add my congratulations. For your Creative business, how are you thinking about the Q side of the P times Q equation over the balance of the year? Based on these numbers anyway, I would certainly assume that you had really healthy unit growth in Q2. And I'm wondering if you expect that to continue. David Wadhwani: Yes. I mean, again, I think what -- it is this mix of product innovation that we've been putting out there and the steady drumbeat of that. A lot of it getting attention because of the quality and the hooks of AI and being able to sort of bring people, onboarding them quickly and successfully into the product. And then as we talked about, the more they use these AI features, the more they retain. And we feel really good about really that whole workflow. So yes, the new user growth continues to be our primary focus. And when you add in everything we're doing with Express, we're -- again, like I said, we're off to the races and we feel very good about the momentum on new user acquisition and existing member retention. Shantanu Narayen: And Gregg, as you're aware, I mean, certainly with Express, we also have the model of customer acquisition as it relates to people coming in through trial and free and then conversion. So we are seeing the interest level as it relates to Express, in particular, significant interest. Gregg Moskowitz: And Shantanu, since you also called out the strength in Digital earlier, including driving new Creative All Apps subscriptions from your website, are you doing anything different that's helping to drive that behavior? And if so, is that something you think can continue as well? Shantanu Narayen: I would, Gregg, sort of modesty say, we've been world-class at sort of driving that for a long time now. But the team, I think, continues to do an amazing job. And I would say David referred to the DDOM. Adobe Home is now sort of increasingly the way that we're driving a lot of people to get aware of our new products. And so, I would say the mobile part as well and the mobile journeys, as we've got these mobile products, whether it's Lightroom or whether it's certainly, Express, that's an area of increasing focus for us. And the traditional sort of understanding where search terms are, I think we're getting better and better at that, which leads to way more digital traffic for us. So I think it's across the board. But I'd also highlight, I mean, the commerce team that we have at Adobe that understands what the segments are and how for those particular segments we can attract people, that's great. I mean, I think in the prepared remarks, Dan also talked about the strength in emerging markets. And I think the beautiful part about AI is that since they need access to the cloud to get all of the AI functionality, emerging market growth has been really strong for us. Gregg Moskowitz: Very helpful. Thank you. Operator: And moving on to Keith Weiss with Morgan Stanley. Keith Weiss: Thank you guys for taking the question. And again, congratulations on a really solid set of results in an environment where not very many software companies have been able to beat and raise in this type of uneven environment. I wanted to maybe focus in a little bit on the question that Mark Moerdler asked, in particular on what gives you guys the confidence to see a return to year-on-year growth and Creative Cloud net new ARR. It declined in Q2, it declined in Q1. And if I'm not mistaken, the decline in Q2 was a little bit steeper than what we saw in Q1. So what are the particular drivers and maybe some detail on those drivers that give you guys the confidence that, that trend line that has been actually heading in the wrong direction is going to head in the right direction now? We're actually going to see growth in those metrics in Q3 and Q4? David Wadhwani: Yes. Thanks, Keith. This is one of the areas that I think we've shared with you the complexity of the year-over-year comparisons in the first half based on prior pricing marks that we had. But more importantly, to your point, the year-over-year complexities are now behind us. And we're very excited about the momentum of the first half and how it sets us up for the second half, frankly, across both Document Cloud and Creative Cloud. Both are really momentum stories. The 478 -- the 487, sorry, just to be clear, the $487 million that we printed this time is obviously strong performance, and it implies that both CC and DC came in over what the growth -- the guide would have implied otherwise, right? So it's giving us a lot of good momentum going into the back half. Now the momentum is really driven by three things, and just I'll try to share a little bit more context here and hopefully gives you. First is new user acquisition, right? We're seeing Express starting to perform well in terms of bringing a lot of new users into the franchise across mobile and web. AI Assistant in Reader has been a really nice start for us, and we've been very pleased with how the uptake on that's going. And then Firefly itself, as I mentioned, has been increasingly more productive in terms of bringing in onboarding users and then retaining users because of the growth. We continue -- as we drive that more holistically throughout the product set, we start to see more people using it, including, as Shantanu mentioned earlier, in emerging markets. So we are seeing very good strength and usage in emerging markets, and that has certainly been a bright spot for us, which is something that obviously represents a lot of potential and upside for us. In terms of existing customers, the migration has been going very well for us as well. So, more people are moving to the higher-priced, higher-value plans because of the Firefly capabilities. We're even seeing this in enterprises where people are moving up to the highest versions of Creative Cloud, which is what we call it, Creative Cloud Enterprise 4, because they get more access to features beyond just generation. They have more collaborative capabilities beyond just kind of sharing via e-mail. And we're starting to see that create a nice momentum in upgrade cycles in the enterprise segment as well. And then certainly, let's not forget the new offerings, too. While still early, automation and content production is something that we're driving effectively in a lot of these accounts with Firefly services. So that mix of new users, existing user migration, and also the new offerings that we have in market are driving that growth formula that we talked about, which is now P times Q plus V for value with these automation systems. Keith Weiss: That is a great answer. Thank you so much. Operator: And we have a question from Brad Sills with Bank of America. Bradley Sills: Oh, great. Thank you so much. I wanted to ask a question around the generative credit component to your pricing here. It seems like with all the progress you've made embedding Firefly across the key flagship products and the engagement levels that you're seeing, we should start to see perhaps some ramp in that generative credit component to your pricing. Is that a fair assessment? Would you expect to start to see that coming in? Or should we look to other services like the video capabilities that you're going to be launching shortly as a key catalyst there? Thank you. Shantanu Narayen: I think you're right, Brad. When we think about what we've done with imaging and video, we've done the right thing by making sure the higher-value paid plans that people don't have to think about the amount of generative capability. And so there, the balance between for free and trialist users, they're going to run into the generative capability limits and, therefore, have to subscribe. But for the people who actually have imaging and vector needs, that they're not constantly thinking about generative, I think we actually got it right. To your point, as we move to video, expect to see different plans because those plans will, by necessity, take into account the amount of work that's required to do video generation. So you're absolutely right as a sort of framework for you to think about it. The two other things that I would say is, I mean, clearly, Express is really being driven by sort of the need for AI and how people are able to describe what they want and get the final output. When David talked about exports, just to clarify what that means is people who have successfully got what they want to get done, done. And that's a key measure of how we are doing it, and AI is certainly facilitating and accelerating that. And last thing I would say, Brad is, as you know, on the Acrobat side, it's a slightly different model which we like, which is anybody who has Reader and is looking at a document, they can have an upsell to their AI Assistant. If you have Acrobat Pro, you can upsell to the AI Assistant. And if you're a brand new acquisition of a user when you're coming in, the adoption of the highest-value products, so between Standard Pro and Pro Plus Assistant, we've been pleased to see how many people are migrating to the Pro Plus Assistant. So hopefully, that gives you some color of how we think about it differently by product. Bradley Sills: Very helpful. Thank you, Shantanu. Operator: And we'll take a question from Brad Zelnick with Deutsche Bank. Brad Zelnick: Great. Thank you so much and congrats to all of you. I don't want Anil to feel left out, so I'm going to ask a DX question. Anil, it's good to hear AEP is on track to become the next billion-dollar business for Adobe. Can you expand on the journey and drivers that get you there? And in particular, how important are cloud migrations? And how do you see AEP AI Assistant perhaps accelerating the journey to $1 billion? Thanks. Anil Chakravarthy: Thank you, Brad. Appreciate it. As you know, I mean, customer experience management and especially it's been a hugely important priority area for Chief Marketing Officers and with CIOs and Chief Digital Officers as well. And for us, we are focused on personalization scale, which is really built around the AEP platform. We're the largest provider in this space. We're growing faster than any of our peers, and we're the number one Digital Experience platform as a result. And that has really helped us keep the momentum. When you think about the AEP AI Assistant, it's doing a couple of things. One, it's really making it easier for customers to deploy use cases. When you think of use cases that they have around, for example, generating audiences and running campaigns around those audiences, these are things today that require some data engineering. They require the ability to put these audiences together. So they require marketing and IT teams to work together. The AEP AI Assistant is making it much easier for marketers to be able to do it themselves and be able to deploy a lot more use cases. So as there's more usage, it will help drive more consumption and help drive the growth in terms of number of profiles, number of users, and we help -- we see it helping us grow towards that billion-dollar business. Brad Zelnick: Great to hear, and keep up the great work, guys. Thanks. Jonathan Vaas: Hey, operator, we're almost at the top of the hour. We'll take two last questions and then wrap up. Thanks. Operator: Thank you. We'll take a question from Kash Rangan with Goldman Sachs. Kash Rangan : Hi, thank you very much. You guys could have three separate earnings calls because you have three different businesses that even the smallest one is very large. So yes, sorry, Anil, Dave, and Shantanu, I may not be able to ask all the questions that I want. I'm sure we have plenty. But I'll just keep it super high level, Shantanu. Generative AI, it seems to swing back and forth. Just so early in its evolution, the possibilities seem magical sometimes, endless sometimes, sometimes it feels very disappointing. But with every quarter that Adobe is executing on this path, where do you stand with the question that we do get from investors? Will generative AI be so good that it's the end of the creative process? So we don't need creative folks, that software will do everything? That sounds a little far-fetched, but I'm just throwing it out there to see how you would react that proposition. Same in Experience Cloud as well. Could generative AI create its own marketing campaign, put marketing people out of business? Or maybe it doesn't. I'm sure you have strong views. Maybe flipped on the other side, it does create category growth on the other hand, not category compression. So sorry for that super high-level question, but that seems to be a big debate on the stock here, at least from the long-term perspective. Thank you so much. Shantanu Narayen: Yes, Kash. I think there are two things when we talk to investors that are perhaps on their mind. I mean, I think the first is it's fair to say that the interest that exists right now from investors as it relates to AI is all associated with the infrastructure and chips and perhaps rightly so because that's where everybody is creating these models. They're all trying to train them. And there's a lot of, I think, deserved excitement associated with that part of where we are in the evolution of generative AI. If the value of AI doesn't turn to inference and how people are going to use it, then I would say all of that investment would not really reap the benefit in terms of where people are spending the money. And so we're always convinced that when you have this kind of disruptive technology, the real benefits come when people use interfaces to do whatever task they want to do quicker, faster, and when it's embedded into the workflows that they're accustomed to because then there isn't an inertia associated with using it. So with that sort of as a broad segment, I am a big believer that generative AI is going to, for all the categories that we're in, it's actually going to dramatically expand the market because it's going to make our products more accessible, more affordable, more productive in terms of what you -- what we can do. I'm still acting CMO at the company, and I see the excitement around how we can, with agility, create way more content, create variations. When Anil talked about personalization at scale, I think there are two aspects to it, right? I mean, the first was always data, and Anil and the team have done a great job with sort of the real-time customer data platform to get that. And that's hydrated with users. But the real value is when you infuse that with the right content to make that personalized experience. So I think the demand is there for way more content than people can do, and generative AI is going to be an accelerant in that as well. And so net-net, I am absolutely betting on the fact that five years from now, there will be more people saying, I'm using creative tools to accomplish what I want, and there'll be more marketers saying, I can now, with the agility that I need, truly deliver a marketing campaign and an audience that's incredibly more specific than I could in the past. And that's Adobe's job to demonstrate how we are both leading in both those categories and to continue to innovate. But I recognize and I understand the question that exists in the industry associated with AI. If the value doesn't accrue to interfaces, I'll leave you with that. I think the investment would not be as beneficial as I believe it can be. David Wadhwani: And maybe one thing to add to that, Kash, just to build on what Shantanu was talking about. I think the other thing we get asked a fair amount is about the comparison between different models, right? So Firefly might be better at something. Midjourney might be something at something else. DALL-E might do something else. And the key thing here is that around this table, we get excited when models innovate. We get excited when Firefly does something amazing. We get excited when third-party models do something because our view, to Shantanu's point, is that the more content that gets generated out of these models, the more content that needs to be edited, whether it's color correction, tone matching, transitions, assembling clips, or masking composite images. And the reason for this is that this is not a game where there's going to be one model. Each model is going to have its own personality, what it generates, what it looks like, how fast it generates, how much it costs when it generates that, and to have some interface layer to help synthesize all of this is important. And so just sort of to note, we've said this before but I'll say it again here, you will see us building our products and tools and services leveraging Firefly for sure, but you'll also see us leveraging best-of-breed personalities from different models and integrate them all together. Kash Rangan : Awesome, the message here is that, gen AI is going to create more growth in the category. And Shantanu, you did that with the pivot to cloud. You grew the category, so here we go again. Thank you so much. Shantanu Narayen: Thanks, Kash. Operator: And next will be Jake Roberge with William Blair. Jacob Roberge: Hey, thanks for taking the question and I'll echo my congrats on the great quarter. I know it's early, but what's been the feedback and customer behavior for those users that are on Firefly services and GenStudio? And then thinking more longer term, what type of price uplift could you see from those customers over time, just given what you said about the acceleration in Firefly generations being driven by those products? Thanks. David Wadhwani: Maybe I'll start with customer zero. Right before this meeting, I was in a meeting with our CMO. And well, sometimes it's hard to tell, he's running the CMO or CEO head, but CMO this time. And we were reviewing a full-funnel campaign that we're planning on launching later this year. And exactly as Shantanu mentioned earlier, we saw benefits in terms of cost of the campaign, faster time to market for the campaign, and the amount of content that we can create to personalize that campaign. And that is one of those things that we've been doing more and more around our DDOM, which has actually been very productive for us, as you can see this quarter, and what we're pitching to other customers. So we've been working with -- we listed some of the customers earlier, but we've been working with a long list of customers on everything from accelerating the content creation for social, accelerating content creation for regional, and then increasing the number of amount of content that's created for increased personalization, which then, of course, flows through all of the Experience Cloud products that Anil is working on to get targeted better. Shantanu Narayen: And Jake, maybe in terms of what I would say we're seeing usage of, I think the initial usage of Firefly services in most companies was all around ideation. How can they create multiple variations of them and in the ideation process really just accelerate that ideation process? Most companies are then starting with as they're putting it into production, how can they, with the brand assets and the brand guidelines that they have, do this in terms of the variations, whether they be geographic variations or they be just variations? I mean, if you take a step back also, every single ad company right now will tell you that the more variance that you provide, the better your chances are of appropriately getting an uplift for your media spend. So I would say that most companies are starting with creating these variations for geographies. The other one that we see a fair amount of is engaging with their communities. So when they want their communities to have assets that they have blessed for usage within community campaigns, that's the other place where Firefly services are being used. And a company has a community portal where the community can come in, take something and then post whether it's on whatever social media site that you want. So I think that's the initial one. All of the agency companies are companies that have actually even publicly said how GenStudio is something that they have embraced. But even the large media companies, because the media companies are certainly interested in understanding how all of this gen AI could be used to automate as well as accelerate the amount of content that they can produce. So hopefully, that gives you some color of it. If there's been sort of the questions that they ask along the way, which hopefully and actually, luckily, we have great answers, it's all around the indemnification and how they can use it. And I would say that continues to be a really key differentiator for us. But since that is the last question, let me just say I'm proud of how we executed in Q2, both across the product innovation, delivery as well as the go-to-market because clearly, a number of you asked how we were able to put together these numbers where others have perhaps talked about the macroeconomic environment. We certainly remain focused on leveraging technology to light a broader set of customers. And at the end of the day, to the questions that we were asked, we believe that the real value of AI will be in the interfaces that individuals, enterprises use to accomplish their tasks and workflows. And we think we're incredibly well positioned. So thank you for joining us. Jonathan Vaas: Thanks, everyone. This concludes the call. Operator: Thank you. This does conclude today's conference. We do thank you for your participation, and have an excellent day.
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Adobe Beats Q4 Estimates, But Shares Drop 12% on Weak Revenue Outlook

Adobe (NASDAQ:ADBE) delivered strong fourth-quarter results, surpassing analyst expectations for earnings and revenue, yet a softer revenue outlook for the coming periods caused its stock to slide over 12% intra-day today.

For the fiscal fourth quarter, Adobe reported adjusted earnings per share of $4.81 on revenue of $5.61 billion, both ahead of market estimates, which had forecast EPS of $4.67 on revenue of $5.54 billion. The company’s net new digital media annualized recurring revenue reached $578 million, while its digital experience segment saw revenue grow 10% year-over-year to $1.40 billion.

Adobe’s total remaining performance obligations (RPOs) climbed to $19.96 billion, reflecting a 16% year-over-year increase and slightly accelerating from the 15% growth posted in the prior quarter.

However, the company’s guidance for fiscal Q1 raised concerns among investors. While adjusted EPS was forecasted between $4.95 and $5.00, slightly ahead of the $4.94 estimate, revenue was guided between $5.63 billion and $5.68 billion, falling short of the $5.72 billion consensus.

Looking ahead to fiscal 2025, Adobe projected adjusted earnings per share in the range of $20.20 to $20.50 and revenue between $23.30 billion and $23.55 billion. These forecasts came in below analyst expectations of $20.53 EPS and $23.80 billion in revenue. The revenue outlook implied a growth rate of approximately 9%, or about 10% on a constant currency basis.

Adobe Inc. (NASDAQ:ADBE) Q4 Earnings Preview: What to Expect

  • Adobe's anticipated EPS is $4.66, with projected revenue of approximately $5.54 billion, indicating a 9.71% year-over-year growth.
  • The company has a history of earnings surprises, with an average of 2.59% over the last four quarters.
  • Analysts remain optimistic, with a majority recommending a "buy" rating and an average price target suggesting a 12% upside.

Adobe Inc. (NASDAQ:ADBE) is a leading software company known for its creative and digital marketing solutions. As it prepares to release its fourth-quarter earnings for fiscal 2024 on December 11, analysts are closely watching the company's performance. Adobe's anticipated earnings per share (EPS) is $4.66, with projected revenue of approximately $5.54 billion, reflecting a 9.71% increase from the same quarter last year.

The Zacks Consensus Estimate aligns with Adobe's revenue projection, indicating a stable outlook with a 9.13% growth in earnings from the previous year. Adobe has a track record of surpassing expectations, with an average earnings surprise of 2.59% over the last four quarters. This consistent performance is attributed to strong demand for its Generative AI solutions, despite facing competition and valuation challenges.

Analysts are optimistic about Adobe's growth, with 11 out of 15 tracked by Visible Alpha recommending a "buy" rating. The average price target for Adobe's stock is $619, about 12% higher than its recent closing price. This positive sentiment is supported by Adobe's ability to revise its EPS estimate upward by 0.1% over the past month, signaling confidence in its financial performance.

Adobe's financial metrics, such as a price-to-earnings (P/E) ratio of 45.49 and a price-to-sales ratio of 11.51, reflect high market expectations for future growth. The company's enterprise value to sales ratio of 11.46 and enterprise value to operating cash flow ratio of 35.66 highlight its valuation in relation to revenue and cash flow generation. With a debt-to-equity ratio of 0.39 and a current ratio of 1.11, Adobe demonstrates strong financial health, maintaining a low level of debt and a good balance of current assets to liabilities.

Adobe (NASDAQ: ADBE) Maintains "Outperform" Rating by RBC Capital

  • RBC Capital reiterated its "Outperform" rating for Adobe (NASDAQ: ADBE), highlighting the company's leadership in creative and digital marketing solutions.
  • Adobe's integration of AI technologies, particularly the Firefly AI platform, is central to its growth strategy and positions it strongly in the expanding AI market.
  • Despite providing soft guidance, Adobe's Price/Earnings to Growth (PEG) ratio suggests the stock may be undervalued, indicating potential for investors.

On December 5, 2024, RBC Capital reiterated its "Outperform" rating for Adobe (NASDAQ: ADBE), with the stock priced at $534.61. Adobe is a leading software company known for its creative and digital marketing solutions. It competes with other tech giants like Microsoft and Salesforce in the software industry. Adobe's innovative AI technologies, such as the Firefly AI platform, are key to its growth strategy.

Generative AI is creating significant opportunities for companies like Adobe, as highlighted at Bloomberg Intelligence's conference. Adobe is at the forefront of this productivity revolution, alongside key players like Nvidia and PayPal. The integration of AI technologies has contributed to the resurgence of software stocks, including Adobe, which have outperformed semiconductor stocks in the second half of 2024.

Adobe's third-quarter results exceeded expectations, but the company provided soft guidance, leading to a decline in its stock price. Despite this, Adobe's Price/Earnings to Growth (PEG) ratio suggests that the stock may be undervalued. The company's Firefly AI platform shows significant potential, positioning Adobe well in the expanding AI market.

Adobe is set to release its fourth quarter and fiscal year 2024 earnings results on December 11, 2024. This announcement will be followed by a conference call with investors, streamed live on the Adobe Investor Relations Site. The company continues to use its website as a primary channel for distributing important information to investors.

Currently, Adobe's stock is trading at $535.76, with a slight decrease of 0.1361% from the previous day. The stock has seen a low of $529.79 and a high of $536.125 today. Over the past year, Adobe's stock has reached a high of $638.25 and a low of $433.97. The company's market capitalization is approximately $235.84 billion, with a trading volume of 367,608 shares.

Adobe Positioned for Growth Amid AI Opportunities, DA Davidson

DA Davidson analysts reiterated their Buy rating on Adobe (NASDAQ:ADBE), highlighting the company’s strong prospects for sustained growth and margin expansion.

The analysts emphasized Adobe’s ability to enhance its already market-leading margins, driven by increased operational scale and contributions from artificial intelligence. Adobe's durable growth engine, supported by its market leadership and consistent innovation, was viewed as a key factor in maintaining its competitive edge.

Adobe’s valuation was noted as particularly attractive, trading at 26 times next twelve months (NTM) earnings per share—currently the lowest among its large-cap peers. The analysts attributed this discount to concerns about AI’s potential impact on Adobe's business, which they argued were unfounded. Instead, the exponential growth of AI-generated content was seen as a significant monetization opportunity, positioning Adobe for both near- and long-term success.

Marjorie Taylor Greene Invests in Adobe Inc. Amidst Market Fluctuations

  • Adobe Inc. (NASDAQ:ADBE) sees a 19.4% decline in share price over the past year, contrasting with the tech sector's growth.
  • Despite challenges, Adobe's strong demand for Creative Cloud, Document Cloud, and Adobe Experience Cloud drives top-line growth.
  • Adobe is considered a laggard with significant upside potential, trading at $511.69 with a market cap of approximately $225.25 billion.

On November 20, 2024, Marjorie Taylor Greene made a purchase transaction involving shares of Adobe Inc. (NASDAQ:ADBE). Adobe is a leading software company known for its creative and digital marketing solutions. It competes with other tech giants in the digital content and marketing industry.

Despite a 19.4% decline in Adobe's share price over the past year, Wall Street analysts view Adobe as a promising investment, as highlighted by Zacks. This decline contrasts with the broader Zacks Computer & Technology sector's 32.9% return and the Zacks Computer Software industry's 16.9% appreciation. The challenging macroeconomic environment and increased competition in the generative AI space have impacted Adobe's performance.

Adobe's strong demand for its creative products, such as Creative Cloud, Document Cloud, and Adobe Experience Cloud, is driving top-line growth. The company's robust cloud-enabled products and expanding generative AI capabilities enhance its business prospects. Rising subscription revenues and solid momentum in mobile apps are significant positives for Adobe.

Adobe is identified as a laggard with significant upside potential for the remainder of 2024. Despite the impressive rally in U.S. stock markets, Adobe has underperformed. However, it is among a select group of stocks expected to achieve double-digit gains in the near term, supported by a favorable Zacks Rank.

Currently, Adobe is trading at $511.69 on the NASDAQ, with a market capitalization of approximately $225.25 billion. The stock has experienced a 1.44% increase, translating to a rise of $7.25. Over the past year, Adobe's stock has fluctuated between a high of $638.25 and a low of $433.97, indicating potential for future growth.

Adobe Stock Drops 8% After Q3 Results Beat Estimates but Q4 Guidance Falls Short

Adobe (NASDAQ:ADBE) reported its fiscal third-quarter results on Thursday, surpassing analysts' expectations, but its guidance for the upcoming quarter fell short of forecasts, leading to a drop in its stock price of more than 8% pre-market today.

The company posted earnings of $4.65 per share on revenue of $5.41 billion, beating analysts’ predictions of $4.53 EPS on $5.37 billion in revenue.

The company reported $504 million in new digital media annualized recurring revenue (ARR), but concerns arose over its guidance for the fourth quarter. Adobe projected Q4 earnings between $4.63 and $4.68 per share, with a midpoint of $4.66, on revenue ranging from $5.50 billion to $5.55 billion. This missed market expectations, which forecasted $4.67 in EPS and $5.60 billion in revenue.

While Adobe’s Document Cloud business maintained strong momentum, growing over 25%, concerns emerged around the projected growth rate for its Creative Cloud segment. Analysts noted that the expected ARR growth of around 11.5% for Creative Cloud in Q4 was slightly below the growth rates seen in previous quarters.

The company anticipates new digital media ARR for the fourth quarter to be around $550 million, which aligns with the guidance but failed to ease investor concerns over the overall outlook.

Adobe Inc. (NASDAQ:ADBE) Surpasses Q3 Earnings and Revenue Estimates

  • Adobe Inc. (NASDAQ:ADBE) reported a Q3 EPS of $4.65, beating the estimated EPS of $4.53, and revenue of $5.41 billion, exceeding estimates.
  • The company demonstrated significant year-over-year growth with a 10.6% increase in revenue and an EPS growth from $4.09 to $4.65.
  • Adobe's financial health is highlighted by a P/E ratio of 48.70, a P/S ratio of 12.42, and a strong track record of exceeding analyst projections for four consecutive quarters.

Adobe Inc. (NASDAQ:ADBE), a leading software company known for its creative and digital marketing solutions, recently reported its earnings for the third quarter of 2024. The company announced an earnings per share (EPS) of $4.65, surpassing the estimated EPS of $4.53. Additionally, Adobe reported revenue of $5.41 billion, exceeding the estimated revenue of approximately $5.37 billion. This performance underscores Adobe's ability to outperform market expectations and demonstrates its continued growth and financial health.

During the Q3 2024 Earnings Conference Call, key executives, including Chair and Chief Executive Officer Shantanu Narayen and Executive Vice President and Chief Financial Officer Dan Durn, discussed Adobe's financial performance and strategic direction. The presence of analysts from prestigious firms such as Wolfe Research and JPMorgan highlighted the investment community's significant interest in Adobe's financial health and future prospects. This level of engagement from the analyst community reflects confidence in Adobe's market position and its ability to sustain growth.

Adobe's revenue of $5.41 billion for the quarter ending in August 2024 marked a significant year-over-year growth of 10.6%, outperforming the Zacks Consensus Estimate by 0.79%. The company's EPS for the same period was $4.65, compared to $4.09 a year earlier, surpassing the consensus EPS estimate of $4.53 by 2.65%. These figures not only demonstrate Adobe's ability to grow its revenue and earnings year-over-year but also its capacity to exceed Wall Street expectations, making it an attractive option for investors.

The company's financial metrics, such as the price-to-earnings (P/E) ratio of approximately 48.70 and the price-to-sales (P/S) ratio of about 12.42, provide insights into the market's valuation of Adobe. With an enterprise value to sales (EV/Sales) ratio of roughly 12.09 and an enterprise value to operating cash flow (EV/OCF) ratio of approximately 37.63, Adobe showcases its valuation in relation to its sales and cash flow generation. The low debt-to-equity (D/E) ratio of 0.03 indicates minimal reliance on debt for financing, while the current ratio of about 1.11 suggests a balanced ability to meet short-term liabilities with its short-term assets.

Adobe's consistent performance, as evidenced by its ability to surpass consensus EPS and revenue estimates for four consecutive quarters, positions it as a key player in the Zacks Computer - Software industry. This track record of exceeding analyst projections underscores Adobe's strong financial health and potential for sustained growth and profitability.