Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Hey, good morning, good afternoon, everyone. My name is Saket Kalia. I cover software here at Barclays. Very happy to have with us Anil Chakravarthy, President of the Digital Experience, or DX business, at Adobe. As everyone knows, this is nearly a $4 billion business for Adobe, and certainly a leader in this marketing cloud space. We've also got my buddy, Jonathan Vaas, Head of Investor Relations on as well. Just to frame today's call, we have about 50 minutes, that's 5-0. Let's take maybe the first 25 minutes or so for some fireside chat with Anil and Jonathan. What I'd say at the outset is, I'd love to make this interactive. We're going to use the raising hand function as part of this. So just pop up your hand using the raise hand function, I'll get to as many questions as we can in the time that we've got. And so maybe with that as a framework, Anil and Jonathan, thanks so much for being with us here today.

Thanks, Saket. Thanks for inviting us.

Thanks for inviting us.

Yes. Absolutely. Always welcome. Anil, maybe just to kick us off here. Coming out of Analyst Day, I think we said the Digital Experience business looks to be on track for just short of $4 billion in subscription revenue this year. And I believe, set for another year of kind of adjusted high-teens growth. I guess maybe just to kind of level set all of us, how would you sort of describe the business performance coming out of the pandemic and through 2022? And what, if anything, has surprised you about that performance? Does that make sense?

Yes, yes. I think if you look at the trajectory of the business and the performance, there continues to be a huge focus on customer experience and digitizing and managing the digital customer experience. Obviously, coming out of the pandemic, there was a lot of emphasis on that because everybody had to have the basics of digital marketing, digital customer experience, commerce in place. If they didn't have that, they had to get that in a hurry. Otherwise, there's just no storefront. And then with post pandemic, though, what we are seeing is that there's a continuation of that trend. And people are looking at, hey, now I have the basics in place, but I really need to differentiate myself from everybody else in this space. I need to make sure that I stand out. And it's a necessity because a consumer or even a business buyer in a B2B setting is looking at the experience they get from an Amazon or Google and so on and saying, whichever company I deal with, I want a similar level of experience. So the bar is continuously going up on Digital Experience for customers. And that's what we see. That's what we see playing out is there's a lot of focus on what we call personalization at scale and emphasis on continuing to invest in that area.

Got it. Got it. That makes a ton of sense. I think one of the common questions I feel like we've gotten through the year, right, for -- not just for Adobe, for a lot of our names, right, it's just been the macro backdrop, because I think some of Adobe's deal, and it was a great slide we were just talking about earlier, they had a lot of the -- some of the stats and just some of your largest customers. But I think the other side of that coin is that some of these deals can be very large, very strategic. I know that you spend a lot of time with customers. Can you just talk about just what you think about the macro backdrop here for the DX business? What do you hear from customers on sort of their willingness to spend? And sort of what gives you the confidence in growing low teens subscription next year despite that macro?

Yes. If you look at -- I mean, one is the overall trend and the continued focus on investing in this area, so that you can focus on improving the customer experience, focus on personalizing their digital marketing and so on. So that trend continues across all markets, but definitely here in the U.S., we see that in pretty much all the major markets, U.K., Germany, Australia, et cetera. We continue to see that trend. The second thing that we see is when we look at our accounts, we talked about this at the Analyst Day. We established partnerships with all of our major accounts, especially with the CMOs and the CIOs. And this is a decision that gets driven by the CEO, but implemented by the CMO and the CIO and maybe the Chief Customer Officer. What we do in terms of relationships is there are some customers we call transformational accounts that are saying, hey, this is a massive transformation. The CEO and the Board are committed to it, and we want to really put a strategic partner and go at full speed. And so those -- we gave a couple of examples of those, a health care account, for example, and a telecoms account. We shared a couple of those examples at Analyst Day about that. There are a number of other accounts, who have the same kind of strategic vision. But they're also looking to say, hey, I want a strategic partner. I want someone to -- like Adobe to work with over the next 5 years. But I want to take it one step at a time. I really like their portfolio, but I want to, for example, my content management system is falling behind or I don't have what I need, or I really need to invest in the customer data platform, et cetera. They pick a critical area, or 1 or 2 critical areas, invest in it, get value out of it and then grow from there. And so what we see from a macro perspective is customers making those decisions on which way they want to go. That's the first big thing that we see. And then the second thing is they are really trying to make sure they confirm that they have the whole plan in place, not just the partner they want to work with, not just the product they want to select, but also who is going to implement it for them? Do they do it in-house or do they do it with a partner? Do they have the change management in place? Do they have the business case in place of how they're going to get the value, whether it's increased revenue or cost savings through optimization and so on. What we see customers doing in this macro is regardless of the type of approach they take, they want to have that full picture as they make their commitment to us. So that's -- those are some of the key trends that we are seeing right now.

Got it. Got it. So still a very strategic area, it sounds like, Anil. Maybe there are some product areas that maybe people focus on a little bit more first, right, like content management or CDP, as you said, but still a very strategic area kind of despite the macro from hearing you.

Absolutely. Exactly.

Got it. Got it. That makes a lot of sense. I'd love to dig into the business just a little bit. It's a really helpful slide actually that I think Adobe has shown for the last couple of years that kind of breaks out the DX subscription base into, I think, into 4 areas, right? I think you've also talked about sort of just the growing book of business from customers with 4 or more products. And so one of the things that I always wondered is, what are sort of the DX products that are the biggest contributor to that sort of number of products per customer metric, right? So which are the most popular ones? And then which ones do you think have the most opportunity to add to that metric going forward? And why?

Yes. The 4 categories that we think of, that we typically break out, right, are data insights and audiences; content and commerce; customer journeys and marketing workflow. Within each of those, we have several products -- key products that, I mean, thousands of our customers use. We had the customer count, and we showed how it grow -- how it grew over the last few years. So if you look at data insights and audiences, that's built around our Adobe Analytics portfolio. That was the acquisition of Omniture that everybody has been using for website tracking and so on and so forth. We've expanded that web analytics to entirely to customer journey analytics, understanding the full scope of the customer journey, whether the customer is coming into the web, both through mobile apps or in product or call center or CRM, et cetera, or in store. It could be any channel that you're interacting with the customer. So as you can imagine, that is a huge growth area. We're seeing a lot of growth in that area. Also part of that portfolio is obviously our -- the CDP, which is the customer data platform. And the real distinguishing feature there is the nature of real-time CDP that we provide, where you have a very fast response, typically less than 250 milliseconds so that you can respond in real time. So a customer shows up at your website, you can put a personalized offer in front of them. Or if they are in store and an agent is looking up the system, you have that next best action that you can lay out for the agent. So those are the kinds of things you can do in real time. So those are a couple of the key areas in that bucket that are growing extremely rapidly. And the second bucket of our content and commerce, again, that's sort of self-explanatory. Content is our Adobe Experience Manager. We're the leading provider of content management solutions. And everybody is interested in this idea of the content supply chain, which is how do I make content available more quickly for personalized campaigns. People don't want this sort of elaborate process. So okay, I initiated a request for content, it may go to an internal agency, it may go to an external agency. It comes -- there's a campaign brief that's written for it, and then it comes back couple of months later after going through proofs and reviews and so on. That's just way too slow. So if you're going to initiate a campaign and you want to get it out and have the entire campaign run in a couple of weeks, that has to be extremely agile. And so the combination of our Creative Cloud and our enterprise content management solutions with Adobe Experience Manager, that is really helping us along with Workfront to be the content supply chain. So we're seeing a lot of interest in that. Commerce continues to be of huge interest. I think commerce obviously went through a huge growth during the pandemic. And what's happening now is sort of the next level of what we call experience-driven commerce. The idea being you connect commerce to your other marketing engines into your customer data platform like our AEP. And then you are able to both send the events that happen on the commerce platform into your -- into the data platform so you can keep track of what customers are doing. But you can also decide what offers you want to put in the commerce engine, right? You can suggest, hey, do you want to add this to your cart? And that's a personalized offer that you can put on the card. So we're continuing to see our customers expand, in fact, the telecom account that we shared was one of those examples of that experience-driven commerce. Third area is customer journeys where it's all about personalization based on very fine segmentation. So if you think of all of this data you gathered about customers, you put it into this customer data platform, you take action through the customer journeys, and there, our focus is both B2B and B2C. On the B2C world, we really built this new native app on top of the Adobe Experience platform called Adobe Journey Optimizer, and that is personalized, it's omnichannel, it's interactive. And then for B2B, we have the leading position with Marketo. And so those are the areas that we are really investing in, and we're seeing good growth across those areas as well. And the last one is marketing workflow, which is built on Workfront, which has both -- it really acts as the glue for our content supply chain. It also acts as the workflow layer across all of marketing. And as you know, marketing has traditionally, when it comes to automation, workflow, it's been underserved, and we hear that from CMOs a lot. As they look to optimize -- everybody is looking at cost savings. We are seeing a lot of our customers using our Workfront as the basic marketing workflow layer to support that.

That's really interesting. That was very thorough. Thanks, Anil. I thought the experience-driven commerce was actually something very interesting that I hadn't heard about. And the telecom customer, I remember the ramp that you showed on that one. So that's an interesting tidbit. One of the things that you also mentioned there, right, is AEP, right, or Adobe Experience Platform. And sometimes I get kind of a basic question from some investors just around, okay, what is AEP, right? Like how do we sort of define AEP there? We talked about some apps that are on top of it. But maybe more specifically, how is AEP different than some of the core tools, right, in DX? We already know about Adobe Analytics and kind of what came from Omniture -- Adobe Experience Manager. Talk us through kind of how you describe the AEP to someone a little bit newer to the platform?

Yes. So AEP, yes, I can totally understand, as people look at, hey, what is this AEP? And why did it take you guys 5 years to build and now you're seeing this huge ramp? It's a complex platform to build and a relatively simple platform to explain to marketers because what -- I'll start with what marketers want to do, and that's why AEP has been complex to build and why we believe we have such a significant lead. What marketers want, first of all, is a single view of the customer. That's easier said than done, right? It basically says, I don't even -- I may not even know -- have an identifier for a customer. So just say somebody comes to a website. I have through -- they went to a search engine, they clicked, they came to our website. I don't quite know who they are yet. But I have -- I can start tracking them. I can see what they're interested in. Maybe then they register. And then I have, okay, an e-mail address for them. And I say, okay, this person, [email protected] was the same person who was browsing all these parts of the website, went into the chat bot, asked for some information, went away for a couple of weeks, came back, whatever it might be. So I can stitch that together into what we call a profile. So then the profile, as I get to know more and more about John Smith, as I do more activity around John Smith, and this is very different based on which business unit. Some businesses, the sales cycle might be a couple of days. Somebody comes in and boom, either they buy something from you or they don't. And then they may not come back for a full year. Other businesses might be considered purchasers, right? Like if you are buying an engagement ring, that might be a 6-month process, and you're going to go through a lot of steps. And there, the merchant really needs to know what you're doing and how to think of all the things that you're doing to get to know the product that you're buying. So what we've really built in the Adobe Experience Platform, first of all, is a really flexible platform that says, how do I build a profile of an individual. And when I build a profile of an individual, I might start with all the actions and the interactions that we have and I log them. And so I can -- the profile extends over time. It's basically a time-series-based profile. So I can then say, this is the profile I'm building of John Smith over time of -- they responded. I sent them an e-mail. They responded to an e-mail. They came to this website. They called somebody at our call center. All those get logged in, and that becomes part of the profile. And that profile then, you can then use to drive segmentation, interactively, decision-making, et cetera. So you can see, for example, if you are, let's say, an apparel retailer, and you say, I want to understand a segment of who are all the customers who are -- have some demographic data, like, for example, they are moms, they have kids, they are interested in yoga, they have actually downloaded our app, but they've really not been active with us in the last 30 days. That's the kind of query you can perform on the Adobe Experience Platform. So you can then take that information and then you can then integrate that with one of our apps or an app that you have, or you can use that -- you can take all kinds of action based on that. That's what we call a segment. And so that kind of segment devaluation, that's what we disclosed. We're up to almost 30 trillion such segment evaluations per day or calculations per day. That gives you a sense of the scale of the platform. So that's the basic idea of the Adobe Experience Platform is think of these profiles of consumers, and the consumer profiles are kept separate for every customer. Every customer can then run AI models on them. They can use them to create new segments. They can do -- generate offers or actions based on that. And then they can close the loop and see how people responded and feed that back into the platform and say, okay, we calculated a segment. We sent out a special offer. If it worked, great. Can I do more of that? If it didn't work, well, why did it not work? And what do I do differently? So it's really the basis of this next generation of customer experience or marketing because it's going to be iterative, it's going to be fast, it's going to be real time. And so that's what the platform is built for.

Got it. Got it. In some ways, as you were describing that, it reminded me a little bit of Adobe Analytics right? Like where -- but Adobe Analytics is so focused on the website and sort of that's reconstructing a click stream. This feels like a broader kind of analytics platform, right? That's not just taken from the website, but from all different data sources. Is that right? Is that the right way to...

I think that -- so obviously, I mean, we took all of our experience with Analytics and used it to build this. So that's 2 things in common, and 2 things are different. Exactly as you mentioned, we stitch together all of this, like we stitch together the click stream, we stitch together with the profile, right, across all these events. Second, you can use it to understand patterns or segments based just like Analytics data. Hey, who is going from which page to which other page and what is working and what's not and so on, you can change the navigation. The 2 things that are different are: One, this is in real time. You can set triggers and act in real time. Typically, Adobe Analytics was not built for that. Adobe Analytics was built to run reports and so on. And you would take action. You'd look at -- you put up a website, and then you might change the website once a week or once a month, what have you. But basically, this is meant to take action. The second is, it is for the personalization at scale. When you think of Adobe Analytics, we did that from the viewpoint of how do I optimize my web presence. Here, I'm looking to optimize the interactions with every single individual, right? That's what the end goal is. And so those are the 2 key differences between what we -- what we've been doing with Analytics and what Adobe Experience Platform can do.

Got it. Got it. I expect we're going to have some questions on this one. But maybe just to go a little bit deeper into AEP. I think there was a really interesting chart in the Analyst Day slides that showed AEP-related revenue. I think going from sub $100 million, right, in fiscal '20 to nearly $500 million in fiscal '22, which is pretty significantly faster growth than the overall DX business. I think you've touched on some of the things that make it so valuable. But how do you sort of talk about what's driven that growth? And how you think about the runway for that growth as well?

Yes. I think what's driven that growth is really the AEP being at the heart of the transformation across industries. So we gave a few examples. If you think of banking and financial services, for example, digital banking self-service is a critical initiative for every bank. They want people -- people have downloaded their apps. People go to -- they have their website accounts, et cetera, for every banking customer, almost everybody has it. But they still see a lot of people calling into the call center or going into a branch to do things, and they go, why is that? What is not working with respect to the -- with our digital presence? And that requires a very detailed understanding of the consumer and what they're actually doing on your website and stitching that journey together. You have to be able to know what happened. There was somebody, who was trying to fill out a mortgage application online, and they stopped midway and then they picked it up, maybe they called the call center or they have to go into a branch. So what happened? What broke? And so that is an example of a journey that's made possible by the Adobe Experience Platform. So in terms of the growth, what we see is the full understanding of the customer journey. And just like we have done with our data-driven operating model, every customer is like what gets customers further along the journey and what stops them from going? They're using AEP to do that, and that's driving a lot of that. The second thing that's driving AEP a lot is just this fine-grained segmentation, the ability to do much more agile, personalized marketing based on the data in the Adobe Experience Platform and the CDP that we built on top of that. That is driving a lot of the growth as well. So those would be the 2 most common patterns that we see across industries. And so every industry, whether it's B2C or B2B, has this kind of need right now, where they're looking at, hey, otherwise, I have just disjointed efforts, and I'm doing a lot of different things in different places. Without a platform like Adobe, I'm not getting the benefit of an integrated experience. And so that is what is driving a lot of the growth.

Got it. Got it. Maybe last question here, and then I want to open it up to the audience. So just to prep everyone, if you've got a question, again, just hit that raise-hand function, then we'll start queuing up here in a second. But talking about that great growth in revenue, maybe it's a good segue into profitability. You -- I thought it was very deliberate at the Analyst Day, right? You've talked about profitable growth at the Analyst Day in the DX business. Maybe just an open-ended question for you, Anil. What are the levers that you have in the DX business to grow margins in your view?

Well, I mean, obviously, the first big lever is continuing to grow revenue. I think that we have made a lot of investments to get to where we are. I mean we were well ahead of the market when we started investing in the Adobe Experience Platform. That's why we have this lead in the market. But we really invested to make it a platform that a bank would buy or a health care company would buy, which means that it has its ability to work at scale, reliability, performance, data governance, security. These are all significant investments that we've made, and we're seeing it pay off, right? I mean, you mentioned the growth that we've seen. And so as you get that revenue, that starts to obviously help us on the margin side because, obviously, we made a lot of upfront investment and we're continuing to grow. The second is, this is a cloud scale platform. And we work closely with the likes of Microsoft on Azure and so on. So we need to make sure that from a cost perspective, we are continuously taking advantage of innovations that they make, and also working very closely with them to drive those innovations that can help us as we expand the use of the platform that the cost of operating the platform grows slower than the revenue curve, which is again something that we are starting to see. So that's the second big one. And I think the third one for us is go-to-market, and that's why we shared so much at the Analyst Day on sort of the segmented go-to-market strategy with transformational accounts, industry-led accounts, solutions and accounts, et cetera, which makes it a much more efficient go-to-market model over time. So I would say those are the 3 big operating levels for us to continue to increase our profitable growth.

Got it. So 3 levers. Obviously, the top line growth, costs, right, the cloud costs kind of growing slower than revenue, and then the segmented go-to-market model. I heard that.

I'll just jump in to put it in the context of all Adobe for folks, who may not have tuned into our analyst meeting, we shared that when you look at Adobe's full company margin in 2019 to date, you've seen about 5 points of expansion, and a lot of that expansion was driven by what we're doing and how we're growing profitably in the DX business.

Very helpful. Got it. Operator, can we maybe open up the line for Q&A here? I've got a couple of email -- a couple of questions in my inbox on e-mail. We can go to those, but maybe just to go to the raise hand function first, and then we can we can go around from there. Okay. I think I see Jeff Corey first. So operator, can we unmute Jeff for his first question?

Jeff, you can ask your question.

Perfect. Great. I just had a question on the Workfront business. If I understand it right, it's, per the 10-K, 36% of revenues for the segment. Can you just comment on that business and how it fits in and its growth trajectory?

Yes. I mean the marketing workflow business, the category is really built around Workfront for us. So when you think of Workfront, think of it as the workflow layer that really helps the marketing team. Typically, it's something that's selected by the marketing operations team that reports into the CMO, and they use that as the workflow layer to connect all the key people, who are involved in the marketing activities. So typically, the reason it's an underserved area is if you go into a typical marketing department, what they're doing is somebody writes up a campaign brief and say this is a campaign I want to do. Then they e-mail it to somebody else, who checks to say, okay, can you tell me the goals for this campaign, and they have an understanding of the goals of the campaign in terms of what [indiscernible] they want to get. Then there's an approval process, and they kick it off. They say this is the creative I need. All of that is typically done in a very ad hoc manner. So when you then want to go and say, hey, what exactly happened? Is the campaign -- the efficiency of the campaign, the effectiveness of the campaign, there's no great way to track it if you don't have a system. And so we are the leader. Think of that as the -- just like you have a ServiceNow for your IT service management and you're tracking all the activity that's going on in the IT department building on something like a ServiceNow, we're doing that for marketing based on Workfront.

Excellent. Thanks, Jeff. Maybe while folks on the line start to queue up, I've got a couple of questions in the inbox maybe I can go to. So Anil, maybe for you, just going back to the topic of AEP, the question I've gotten from one investor is, is AEP synonymous with CDP? I mean the way that you talked to it, it sounds like CDP, something that sits on top of AEP. And I know we're throwing around a lot of TLAs here, right? But just to make sure we distinguish the difference between AEP and CDP. Can you just talk through that?

Yes. So we think of the AEP as the platform that supports multiple applications. And these are apps that we have built. These are apps that partners build. These are apps that customers build. And so the platform actually is open in terms of its data model. It is open in terms of the data it can ingest, et cetera, et cetera. And so that -- it supports lots of different applications. The CDP, the RTCDP, we call it the Real-Time CDP, is one of those applications. So what it does is the RTCDP is the main application that does the segmentation analysis that we talked about. And then it ingests the right data to do the segmentation analysis, put it into the platform to help you drive the analysis that you want in terms of the segmentation, and then provides the output to whatever application needs to take it on further. So if you think of the customer setting up the segments that they want to know, like the example that I gave you. You want an application that says, hey, tell me all the moms who do yoga, who downloaded the app, but have not done anything with us in the last 30 days. You would use RTCDP to specify that. That's how you look for the marketer is using Real-Time CDP as an app to specify all of that. All the crunching happens in the platform, and then the output comes back into the real-time CDP, and this then gets forwarded or consumed by the marketer or by whatever app that they forward it to and so on. So that's really how -- the difference between the RTCDP, which is an app running on top of the platform.

Got it. Got it. Maybe another question here in the inbox, just building on this topic a bit. How is it that we build a profile, right? I mean is it dependent on something like IDFA? Is there an opt out? I mean how is the -- right, not to go too technical, right? Like -- but can you go one level deeper into kind of how that's possible? Because it does sound very unique.

Yes. So that's right. So the -- building the profile, that's where all the knowledge that Adobe has built over the last 15 years that we really pioneered digital marketing comes to play, right? That's where understanding how third-party cookies work. What are the different data governance requirements in different geographies and so on. That is the value we bring into assembling all of this platform, in addition to all the data engineering world. I mean, obviously, if somebody wanted to start from scrap, they could start with a data warehouse, or they could start with a data platform like a Snowflake, call an Azure Synapse and build it themselves. But the real value of AEP is all of this gets built in. So in other words, you, as a marketer, can go in and say, hey, this is where my profile starts. I'm actually going to start with -- I still have a third-party cookie as an identifier, I can start with that. But I have a lot of rules on what I can actually do with that in terms of actions. And that's specified as part of the platform definition. And then all the privacy controls are also part of the platform definition. That's why we had that as one of the modules. You can say, for example, I only allow e-mails to customers that have opted in specifically. I may have other actions that are available to customers who have not opted in, but e-mails are only allowed for customers, who opted in. So when you do a segment analysis for an e-mail campaign, the platform will only give you those customers with -- based on the profile, it will give you only those customers, who meet all the criteria that you specified, plus those who have opted in. It will not -- so it's kind of privacy by design or privacy built into the platform. And so that's super important. So to answer your question, that's what makes it technically very complex is you have a lot of attributes that you have to take into account and you have to build it and surface only those that make sense. If you make it too much of a programming exercise, a marketer cannot use it. So the beauty of the platform and the apps that we built on is how do you simplify it enough that a typical marketer, growth marketer, a performance marketer can use it without having to really code it, right, whether based on SQL queries and so on and so forth. And that is -- that's one of the big differentiating advantages of the platform.

Got it. Got it. Makes sense. Maybe operator, we can unmute select Aziz Malik at Alta Park. Aziz, I think you might still be on mute. I think you might be able to unmute yourself actually.

There we go. Just a couple of questions on AEP and the broader cross-sell opportunities. So on AEP, one, how do you think about monetizing that? Is that kind of a separate SKU? Or do you monetize it via the applications built on top like the RTCDP? My second question on AEP is have you shared the number of customers that are using it today?

Yes. So we monetize it through the apps. That's exactly right. So the apps are the Real-Time CDP, the Customer Journey Analytics and Adobe Journey Optimizer are the 3 apps built on it. But we're also adding a lot more integration. We just, as I mentioned, the commerce one is coming, which we've done this -- that's -- you can now -- commerce is one of the apps that will be integrated with the AEP. So we monetize the apps, and obviously, the platform comes along. So I think in terms of number of customers, last we disclosed -- we can share you with what we had last disclosed. Obviously, it's not current. We didn't disclose it at this Analyst Day. But the last disclosure we had, we were well over 300 customers. And so obviously, north of that now.

And then my second question on the broader cross-sell opportunity. I appreciate that kind of 10% of customers are using 4-plus products, which seems like a huge growth runway looking forward. What's the -- is there going to be like a most common kind of product journey for customers to move from, call it, 1 or 2 products today to that 4-plus category? And is there anything you're doing, especially with like AEP and the apps built on top from like a packaging perspective, maybe to drive more product adoption?

Yes, absolutely, we do. So yes, some of the most common customer journeys are, for example, if you are an analytics customer, the Adobe Analytics customer like traditionally through Omniture. Now you want -- that was, as Saket mentioned earlier, that was for web analytics and a lot of customers use it. But you want the customer journey, the entire picture of the customer journey across all these channels. That's a very common approach. A second very common approach is customers, who have our content management products, who are looking at, say, hey, I have the content management. I'm using Adobe Experience Manager to manage the website, but I don't want to have multiple content repositories. I want that to be the content repository for everything, whether it's a mobile app or whether it is content that's being surfaced through campaigns, for example, and so on. That's what we call the content supply chain. That's a natural expansion that we see. And the third is customers who have had -- we've had traditionally through Marketo or Adobe campaign, who are the customer journeys installed base, which is thousands of customers. They are all looking to say, hey, I want to make these campaigns more effective. In the past, the word for those used to be batch and blast, right? You collect as many e-mails as you can and send as many e-mails out as you can and hope for a good click-through rate. But now, that whole thing is now how do I make it more personalized, more timely? And that is all through the integration with the platform.

Excellent. Maybe we can go back to Jeff Corey. I think, Jeff, you've got a follow-up.

Great. Yes, I have 2 quick follow-ups. So one, just at a high level, when you think about kind of the longer-term arc of what this business can evolve to, I was curious of your thoughts on 2 dimensions. So one, we've seen kind of an ecosystem build around the B2B side of things and these account-based marketing companies, private companies like 6sense and demand-based and so on, and around that kind of a whole go-to-market stack that Zoominfo and others talk to us about, how do you think about that part of the market? And then secondly, we now have between Salesforce, HubSpot and Freshworks, we've got 3 examples of sort of marketing sitting in alongside both sales and service. Do you think that's within the scope of this business, not like next year, but over the course of time? Or do you define kind of the TAM differently given that the heritage of the company is on the creative side?

Yes. So yes, we look at the TAM slightly, too. It's obviously a very broad TAM that you can approach from many different dimensions. The biggest vector of growth for us is this convergence of digital marketing and customer experience. So if you really look at major brands, if you look at, for example, CVS, Aetna, their -- Michelle Peluso is the Chief Customer Officer. If you look at FedEx, Brie Carere, she used to be the Chief Marketing Officer. She became the Chief Customer Officer. So it's a trend that we see across companies where big brands, the marketing idea of marketing is moving from one way, mass communication of brand value, a value proposition, to 2-way customer engagement and more personalized marketing and customer experience with converging. To me, that's a huge trend that's going to impact every company because I think this idea of sort of mass marketing where basically the Chief Marketing Officer was -- their main superpower was branding, and that's going to move from branding to customer experience. It's already starting to evolve so -- a couple of examples I shared. The biggest opportunity for Adobe is what is the underlying -- who is the underlying main strategic partner? And what is the underlying set of applications and data-driven platform that enables that transformation from sort of 1-way mass marketing to 2-way personalized customer engagement with marketing as a part of that? And I believe that we are the best positioned to serve that market. So some of the other markets that you mentioned, kind of overlap with it in different parts, right? So the B2B market, for example, a B2B CMO is going to have the same kind of thing. I mean, especially in their case, they will not only have this transition of marketing becoming more customer engagement, they also need to figure out how marketing and sales work together. And we have done that historically, went through Marketo and many of our other systems, we have done that very closely. So we will serve the B2B CMO and the B2B Chief Customer Officer. And down market, I think we will definitely go down to the mid-market. We don't currently have any plans to go to the small business, which is where you see the HubSpot's of the world where it's sort of either a front office or back office. I mean, you got to pick one, right, to be successful. And we don't -- that's not the target of what we serve. But any company, which has a marketing team and a CMO or a VP of Marketing, is a legitimate target for us, right, because by then, that means they are looking at -- they're big enough that marketing is important, or a Chief Customer Officer.

Fantastic. One other question for you. There's a growing pool of companies that have either come public or coming public in this part of the market. And it would be great just to get your framing of the market and the segmentation so we can kind of put them in the right spots. Obviously, Braze has come public. Klaviyo is probably the next one. And then there's companies like Attentive and ActiveCampaign over time. Should we think of those as sort of in that SMB universe that wouldn't overlap with you? Or how would you help us map the subsegments of the marketing cloud market?

Yes. I think I would go back to our categorization, data insights and audiences, content and commerce, customer journeys and marketing workflow. Definitely, customer journeys is an active area, and you mentioned a couple of companies, and they are up in the enterprise area as well. So we do have -- some of those companies, we'll compete with in that area. So -- but I think, yes, there are a lot of down market companies that are looking at serving small business and so on. So that's not a direct competitor. But certainly, as they are in the enterprise and mid-market, we'll be competing with them. I think the key is how much of -- how much can they serve, right? How broad a footprint do they have? Because one of the big trends that we believe, especially as the Chief Marketing Officer's role expands to Chief Customer Officer. The fragmentation they deal with in data and content and stitching all this together, it's just -- it's a huge tax on them. I think while something might look nice to run a couple of campaigns and so on, suddenly, you're like, hey, it's so disjointed and I've become a system integrator internally, right? And people are trying to avoid that.

Thanks, Jeff. Maybe I'll just go back to the inbox. I guess, Anil, just maybe to bring it back to margins for a second. And Jonathan, great -- just a reminder of just the 5 points of margin expansion we've seen over the years, a lot of that has come from DX. I guess maybe a longer-term question on margins for you, Anil. Do you think about any rules of thumb in this business, whether it's something like a Rule of 40, right, or I don't know, expense growth versus revenue growth, open ended, right? Like how do you sort of think about planning for profitability, future profitability in the business long term?

Yes. I mean obviously, I won't share any specific targets or numbers. But I think the potential is absolutely there for this alone to be best-in-class when you think of the combination of growth and margins, right? So which -- we've seen the trend already. And obviously, as part of Adobe as a whole, as Jonathan mentioned, we're way better than best-in-class, I think. So I think that's -- we definitely have the opportunity to continue that. What I would say is, I see this as, especially as larger customers start to look at the portfolio of what's possible. There's still a huge amount of fragmentation just in MarTech. And then if you broaden the category to customer experience tech, there's even more fragmentation. I think the, sort of the tipping point, which we have not seen yet, and I assume that the tipping point is probably a couple of years away, is when -- just like any other major market, the ERP market, the CRM market, the supply chain market and so on, is just like any other major enterprise software market, there's going to come a tipping point when suddenly customers go, there is 0 point in trying to get all these little companies doing small things and stitching them together because it's just -- we got dragged into the mud of data engineering, and it's months before you can see value. And it's just -- I think that tipping point is probably somewhere between now and the next couple of years, right? I think when the tipping point hits, I think we'll see a phase shift for our DX business.

Got it. Got it. Very helpful. I've got one last question I want to ask Anil as we've just got about 5 minutes left. But Aziz, maybe we can take a follow-up from you before we go there.

Yes. Just 2 separate questions. One is on Figma, just given all the talk around kind of content supply chain, it makes -- it's obviously a natural fit on the creative side of the business, but do you see Figma as -- like how do you think about the Figma opportunity on the DX side of the business and kind of bringing Figma into marketers, especially around trying to collaborate and manage the content supply chain? And then my second question is really have you seen the competitive landscape or the competitive dynamics between Adobe DX and Salesforce evolve over the last, call it, a year or so?

Yes. I mean on the first one, obviously, we're continuing to operate as separate companies, and we don't do any -- we haven't done any product planning with them or any such thing. I mean that's obviously -- goes through all the process of approvals and so on. But at a high level, if you think of what customers use Figma to produce, which is typically digital products, interactive products. If you think of any web page or website, the natural evolution of a website or a Digital Experience is to go from -- it started with static web pages to more personalized web pages, but still a lot of static content, to more -- to a digital product. I mean a bank, for example, it may have started out as a brochure for, hey, this is -- these are all the products we offer, to now most of our big banking customers really have digital products, and the online mortgage app is a digital product. If you are looking to, for example, you have a -- you're looking to stop a check, for example, they want to be able to let you do that completely online without talking to anybody. And that's a digital product and the experience for that and all of that, whether it's in line with their compliance rules, all of that, that's a digital product. That's the kind of digital product that's produced by Figma. So now you think of what we do, whether it's analytics or the content management around it or the personalization around it and so on, so you can start to sort of imagine the tie in that's possible between the businesses. So yes, so I think the second question you had, we -- obviously, we have -- we see Salesforce as a major competitor. But we also -- it's interesting. Of the 4 major categories that I described that we are in, they actually are just starting out in the data insights and audiences. They just announced their CDP, the Genie, or I should say they just announced the fourth version of their CDP, and maybe next year, it will be the fifth version, I don't know. I lost count. So I think they are definitely well behind in that area. Content they don't really play. I mean, commerce, we compete with them, obviously. They have commerce as well. We compete on customer journeys, but we also integrated. I mean Marketo's #1 integration in Salesforce, right? I mean for the question that Jeff asked, for example. And we really don't compete with them on marketing workflow because they don't really have that presence. So yes, in aggregate, we do compete. And -- but there are clear areas where we compete. And I think the strength of Adobe are pretty clear in those categories.

Anil, maybe just in the interest of time, I think we've probably got time for one last question. I really wanted to ask this question. It's something I'd love to ask kind of the leaders of different segments in the companies that I cover. As you think about the -- it's an open-ended question, right? As we think about the DX business in 3 years, let's say, what are some of the milestones that you want to say the DX business has achieved in that time? And to be clear, I'm not looking for specific numbers or anything like that. But perhaps anecdotally, what are the things that you want this business to do long term, whether it's customers or whether it's products or whether it's people? Open-ended.

Yes. I mean -- so thank you for -- first of all, I mean, thanks for a great conversation overall. But I think of the future, a couple of things. One key milestone is this idea of the content supply chain that we have talked about integrating the Creative Cloud and Experience Cloud. We have a lot of customers in common. I want to just see a lot many more examples. Just like we shared with you so many examples of the transformational accounts built around our Adobe Experience Platform, I believe that in the next couple of years, we'll see a complete transformation of how content is produced, all kinds of content, whether it's a TV ad or whether it is TikTok content or YouTube content and so on, how that is produced and used by brands around the world, I think there's going to be a sea change in that. And I think in the next couple of years, we'll have some really good stories to share. They're obviously in the early stages right now. So that's one milestone. Second milestone from my perspective is, I think, we'll start to see a lot of customers openly talking about how this is, not just us talking about them, you'll see a lot of them talking about us as the foundation for digital transformation, customer experience and how that is the next generation of investments that they are making. I think that's a key milestone from my perspective. And the third one, I do think that we've shared a lot of U.S.-centric examples. We have a number of -- we obviously shared a few examples like Real Madrid and so on, BMW, the international examples, but I think this phenomenon is global. And I think we'll see as much traction internationally as we see in the U.S. So those would be the 3 things over the next 3 years that I think we'll definitely see.

Got it. Got it. Very helpful. Well, with that, I think we're just over time. Anil, Jonathan, thank you so much for being with us here today. Very valuable discussion, and really look forward to learning more about the business and just building on some of the stuff that you've shared from Analyst Day, all very helpful.

Thank you for inviting us, Saket.

Thanks.

Absolutely. Thanks, guys. Enjoy the rest of your day. Thanks for everyone joining on the call.