Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Good afternoon, and thanks for being with us today. Joining me are Adobe's Chair and CEO, Shantanu Narayen; David Wadhwani, who serves as President of Digital Media; Anil Chakravarthy, President of Digital Experience; and Dan Durn, Executive Vice President and CFO. This call is being recorded, and during it we'll go over Adobe's financial results for the third quarter of fiscal year 2023. Our press release, along with PDFs of our prepared remarks and financial results, is available on Adobe's Investor Relations website. Everything we discuss today, including our financial targets and product plans, reflects information as of today, September 14, and includes forward-looking statements subject to risks, uncertainty and assumptions. Actual results could differ materially from what those statements set forth; to understand these risks, please review the factors covered in today's press release and in Adobe's SEC filings. Today we'll cover both GAAP and non-GAAP financial measures. Our reported results include GAAP growth rates and constant currency rates. Throughout this presentation, unless otherwise stated, Adobe's executives will refer to constant currency growth rates, with the exception of per share amounts. Reconciliations can be found in our earnings release and on Adobe's Investor Relations website. I'll now hand the call over to Shantanu.

Thank you, Jonathan. Good afternoon, everyone. Adobe delivered yet another record third quarter, with revenue reaching $4.89 billion, which marks 13% growth compared to the same period last year. On a GAAP basis, earnings per share came in at $3.05 for the quarter, while non-GAAP earnings per share stood at $4.09 — reflecting increases of 26% and 20% year over year, respectively. Fueling this performance is an extensive and inventive product road map. The improvements we're rolling out throughout Creative Cloud, Document Cloud and Experience Cloud allow us to draw in a continuously expanding user base while providing greater value to those customers we already serve. The thrilling news we shared yesterday builds on that road map. Now that our generative AI features are commercially available and built natively into Adobe Creative Cloud, Adobe Express and Adobe Experience Cloud, we are opening up a fresh chapter of AI-powered creativity for millions of customers worldwide. Across our portfolio of apps and services, we're making generative AI a reality, producing remarkable results and boosts in productivity. Thanks to our extensive datasets, we can build foundation models in areas where our domain knowledge runs deep. During the 6 months following launch, Firefly has captured the imagination of people everywhere, who together have created more than 2 billion images. We see tremendous opportunity to reinvent the content supply chain for every business by connecting our clouds, which makes it possible to deliver personalized, compelling customer experiences. Our approach — making creativity accessible to everyone, boosting document productivity and empowering digital businesses — is propelling our growth in every geography. Through the innovative technology platforms and services we provide, we keep strengthening our industry leadership and pleasing an ever-expanding universe of customers. At this point, I'll hand things over to David, who will tell you more about our momentum in the Digital Media business.

Appreciate that, Shantanu. Hi, everybody. During Q3, our net new Digital Media ARR came in at $464 million, alongside revenue totaling $3.59 billion, representing 14% growth compared to the same period last year, powered by momentum across both the Creative and Document segments. Looking at Creative, we're seeing an explosion in digital content creation and consumption spanning every creative category, customer segment and media type. Creative Cloud is the leading platform for creativity, offering a full range of products and services that span every discipline—imaging, photography, design, video, animation, and 3D. We're excited about the momentum we're seeing with our flagship creative products and with Adobe Express, our AI-first, all-in-one creativity app that enables anyone to design and share standout content fast, easily, and enjoyably. Yesterday's announcements spotlighted several milestones in our creative business. First, after an unprecedented beta that produced more than 2 billion images, Adobe Firefly models and the Firefly web app are now available commercially. Firefly supports text prompts in more than 100 languages and allows users around the world to generate content intended to be safe for commercial use. We're going to continue developing and releasing additional Firefly foundation models in domains where we have strong data resources and know-how — things like imaging, vector, video, design, 3D and beyond. Next, features powered by Adobe Firefly have become natively embedded across multiple Creative Cloud applications, including Generative Fill and Generative Expand in Photoshop, Generative Recolor in Illustrator, plus Text to Image and Text Effects in Adobe Express; because of these deep integrations, customers get more creative capability than at any point before, enabling them to try things out, brainstorm and produce in completely novel ways. And third, Adobe Firefly for Enterprise has reached general availability, which means companies can let their creative teams as well as knowledge workers put AI-generated content to use with confidence. Adobe is going to give customers the ability to build custom models with proprietary assets so they can produce branded content. We'll also provide access to Firefly APIs, which lets customers bring Firefly's capabilities into their own workflows for content creation and automation. And finally, we introduced subscription plans that include new generative AI credits, with the goal of enabling wide access and adoption among users. Generative credits work as tokens, allowing customers to transform text-based prompts into images, vectors and text effects, and additional content types will come later. Free and trial plans come with a modest monthly allotment of fast generative credits, which will introduce a large pool of prospects to what Adobe's generative AI can do, growing our top of funnel. Subscribers on the paid Firefly, Express, and Creative Cloud tiers are getting an extra batch of fast generative credits. After they burn through that set allotment of generative credits, there's an option to purchase subscription packs that add more fast generative credits. In Q3, Creative ARR rose by $332 million, and revenue came in at $2.91 billion, which is a 14% increase compared with the same period last year. On the business side, notable developments include bringing Firefly into Photoshop and Illustrator. The beta versions of Photoshop and Illustrator have been downloaded by more than 3 million users. Adobe Express has launched broadly and handles editing plus publishing of designs, videos, images, PDFs, presentations and other content. Express features Firefly-driven Text to Image along with Text Effects. We've seen Express get picked up by millions of people across the globe. New AI and 3D features have arrived in Premier Pro and After Effects — Enhance Speech and Text-Based Editing in the former, and a fresh 3D workspace in the latter. The Text-Based Editing feature in Premier Pro took home the 2023 Hollywood Professional Association Award for Engineering Excellence. With the new Lightroom mobile, you get a direct link to the camera roll plus a streamlined interface, so editing on the go becomes easier. For the Stock business, Q3 was a record quarter, driven by the introduction of new video assets in Adobe Stock and strong product-led growth initiatives. Among the customer wins worth noting are Amazon, Havas, Paramount, SAP, Southern Graphics, Take-Two Interactive and U.S. Department of Energy. Because we're constantly adding new apps and bringing out fresh features across our creative lineup, we announced updated pricing for certain Creative Cloud subscriptions in the Americas and Europe, starting November 1, 2023. Acrobat and PDF continue to fuel the Document Cloud business while also acting as a growth driver for Creative Cloud. Whether it's a contract for a sale, a legal filing or a form for back-to-school, seamless document workflows that work across any device and platform are more essential than ever for all of us to remain productive both in the office and at home. Document Cloud provides document productivity and automation spanning web, desktop and mobile. During Q3, Document Cloud revenue reached $685 million, up 15% year-over-year; we generated $132 million in net new Document Cloud ARR, and ending ARR rose 22% year-over-year in constant currency. On the business side, we saw significant growth in monthly active users across web, mobile, and third-party embedded app ecosystems — which reflects both our widening top of funnel and the traction of our product-led growth strategy. Mobile also performed strongly, underscoring how valuable Acrobat is as a must-have productivity tool on phones and tablets. More people adopted Acrobat and Acrobat Sign through increased link sharing, which supports better collaboration and approval processes. We also improved PDF workflows across Acrobat and Express, so creating eye-catching PDFs is now much simpler. In addition, we launched the Adobe PDF Electronic Seal API — a cloud-based, end-to-end offering that lets enterprises apply electronic seals to PDFs at scale. Among the customers we won were Citibank, GlaxoSmithKline, Emerson Electric, Morgan Stanley, and Volkswagen. Our enthusiasm for the upcoming Figma purchase hasn't faded — it's going to reshape what creativity and productivity look like down the road. Talks with regulators are still ongoing, and we feel good about the strength of our position. Adobe MAX is almost here, and we're eager to share it with you — it's the largest creativity event anywhere in the world, happening in Los Angeles next month. We'll welcome 10,000 members of our global community in person, plus hundreds of thousands more who'll join online. Inspiring creators will speak, and we'll unveil fresh updates across Creative Cloud, Firefly and Express. In closing, we're delighted both by the speed at which new ideas are reaching our Digital Media lineup and by the steady progress we're making on multiple growth opportunities. Now, over to Anil.

Appreciate that, David. Hi, everybody. Each organization views digital as a chance to fuel growth led by experience. Having invested time alongside clients worldwide, one thing stands out: they're putting priority on spending for customer experience management technology so they can boost acquisition, engagement, retention and operational efficiency. We're generating revenue expansion in content and commerce, customer journeys, data insights and audiences plus marketing workflows, powered by the Adobe Experience Platform, which shows how robust our business is. Companies everywhere collaborate with Adobe to speed up personalization at scale via generative AI. Through unveiling Adobe GenStudio, we're transforming the whole content supply chain by making the creation-to-activation process simpler using generative AI features and intelligent automation. Now, marketers and creative teams can produce and adjust commercially safe content, which raises both the scale and speed at which experiences get delivered. During Q3, we kept up solid momentum in our Experience Cloud business, reaching $1.23 billion in revenue, which equals 11% growth year-over-year, since more and more enterprises pick Adobe as their reliable partner for customer experience management. Subscription revenue came to $1.1 billion, marking 13% growth year-over-year. Adobe Experience Cloud provides predictive, personalized, real-time digital experiences, spanning acquisition through monetization through retention. We're seeing robust enterprise uptake of Adobe Experience Platform and native apps, such as Real-Time CDP, Adobe Journey Optimizer and Customer Journey Analytics; take, for instance, the Coca-Cola Company, which uses Adobe Real-Time CDP and Adobe Journey Optimizer to unite 98 million customer profiles around the world into one CDP so it can rapidly roll out personalized campaigns and experiences. smart Europe, an all-electric automotive brand, relies on Adobe Experience Cloud to give customers the option to personalize their vehicle purchases by integrating Adobe Workfront, Adobe Creative Cloud and Adobe Experience Manager. Business highlights include: solid momentum throughout AEP and native apps, with the overall book of business exceeding $600 million in the quarter. Adobe Journey Optimizer's book of business grew by more than double compared to last year as customers increasingly push omni-channel personalization and engagement. Ongoing innovation in Adobe Experience Manager, with AEM assets now natively integrated alongside Firefly and Express, letting any employee in an organization create and reuse stunning on-brand content. Expansion of our Workfront business, which shows our capacity to meet the workflow and collaboration requirements of enterprise customers and agencies. In Q3, we brought Havas onto the expanding roster of top agencies standardizing on Adobe for their content supply chain. Widened our strategic partnership with Amazon. Because of customer demand, we'll jointly provide AEP on AWS, and Amazon will roll out Experience Cloud throughout their enterprise. Adobe's leadership in content management systems earned recognition in 3 industry analyst reports, among them the IDC MarketScape for Full-stack Content Management Systems, the IDC MarketScape for Hybrid Headless CMS and the Forrester Wave for Content Management Systems. Adobe also got named a leader in the Gartner Magic Quadrant for Digital Commerce, along with the IDC MarketScape for omni-channel marketing platforms for B2C enterprises. Among the notable client victories are Amazon, Blue Cross Blue Shield of Florida, Dollar General, Havas, Intuit, the IRS, Jet2.com, Lufthansa, Macy's, MSC Cruises, Novo Nordisk, and SAP. Even with tighter examination of enterprise IT budgets, these organizations and others keep putting customer experience management solutions at the top of their priorities. With our offerings, businesses can pursue two objectives at once: bringing in new customers and taking care of current ones, which produces profitable growth. Thanks to our distinctive solutions, history of innovation, and capacity to generate ROI for firms in a range of sectors, Adobe is in a strong position to continue succeeding. We anticipate finishing the year on a high note. Now I'll hand things over to Dan.

Thank you, Anil. To kick things off today, I'll walk through how Adobe performed during the third quarter of fiscal 2023, point out the drivers of growth across each of our businesses, and then wrap up with the financial targets we're aiming for. What Adobe delivered in Q3 shows what sets us apart — pairing expansion with profit; in fact, here at Adobe, instead of framing things as choosing between growth or profitability, we describe it as an and statement. Delivering both growth and profitability isn't anything new to us — we've been doing it for a very long time, and it sits at the heart of how we operate. It all begins with setting priorities, innovating, and staying sharply focused on execution. That approach comes through clearly in our Q3 results. We're putting money into technology platforms, worldwide campaigns designed to bring in and engage millions of customers, and hiring the most talented people our industry has to offer. At the same time, Adobe is producing better-than-expected margin and earnings, which shows just how special a company we are. During Q3, Adobe brought in revenue of $4.89 billion, representing 10% growth year-over-year, or 13% on a constant currency basis. GAAP diluted earnings per share came to $3.05, a rise of 26% year-over-year, while non-GAAP diluted earnings per share reached $4.09, up 20% year-over-year. Additional business and financial highlights were: Digital Media revenue of $3.59 billion, net new Digital Media ARR of $464 million, Digital Experience revenue of $1.23 billion, cash flows from operations of $1.87 billion, RPO of $15.72 billion as we exited the quarter, and the repurchase of roughly 2.1 million shares of our stock over the quarter. Within our Digital Media segment, Q3 revenue came to $3.59 billion, representing 11% growth year-over-year, or 14% on a constant currency basis. We brought in $464 million of net new ARR during the quarter — our best Q3 ever — and exited with $14.60 billion of Digital Media ARR, up 15% year-over-year in constant currency. Creative revenue reached $2.91 billion, representing 11% growth year-over-year, or 14% in constant currency. We brought in $332 million of net new Creative ARR during Q3, with solid demand across our offerings. Drivers of Creative growth in the third quarter were: new user growth spanning geographies, customer segments and creative offerings, fueled by innovation and targeted campaigns that draw on insights from our data-driven operating model; excellent top of funnel performance stemming from viral community excitement and the success of our product-led growth strategy, which pushed traffic to Adobe.com; single app subscriptions for Photoshop, driven by interest in the magic of Firefly, Generative Fill and Generative Expand; yet another great quarter for value-added services, including strong customer demand for Adobe Stock; continued customer adoption of Acrobat CC; solid engagement and retention across customer segments; and enterprise success driven by transformational ETLAs spanning the entire Creative portfolio, including CC All Apps for creative teams, Express for knowledge workers, Frame for collaboration, and Adobe Stock and Firefly for content. Adobe posted Document Cloud revenue of $685 million, representing 13% growth year-over-year, or 15% in constant currency, and we brought in $132 million of net new Document Cloud ARR during the quarter. For Document Cloud in Q3, the factors behind growth were: we did well bringing in new customers via our Reader and Acrobat web funnels plus distribution partners, and Acrobat Web monthly active users climbed more than 70% versus the same period last year; there was solid appetite for Acrobat subscriptions across all customer segments and geographies, fueled by targeted offers; monetization from Acrobat mobile was strong, with ending ARR rising above 30% year-over-year in constant currency thanks to product innovation and conversion; and we saw B2B traction, with robust unit demand for our Team offering via reseller and direct routes to market. Now to our Digital Experience segment. During Q3, revenue reached $1.23 billion, reflecting 10% growth year-over-year, or 11% in constant currency. Subscription revenue for Q3 came to $1.10 billion, which is 12% growth year-over-year, or 13% in constant currency. The drivers of Digital Experience growth in the third quarter were: appetite for our Adobe Experience Platform and native applications, such as Real-Time CDP, Customer Journey Analytics and Adobe Journey Optimizer. During Q3, subscription revenue for AEP and apps climbed 60% year-over-year; content and commerce remained strong, with Adobe Experience Manager still setting the standard for enterprise content management; our Workfront business expanded as workflow and collaboration prove essential to an enterprise content supply chain solution; retention rates were robust this quarter as we keep concentrating on value realization for our Digital Experience customers; and transformational platform deals kept up their momentum, with large enterprises adopting our end-to-end suite of applications. On a GAAP basis, Adobe's effective tax rate for Q3 was 19.5%, and 18.5% on a non-GAAP basis. The GAAP tax rate landed below what we expected because of tax benefits tied to the vesting of share-based payments during the quarter. RPO at quarter's end stood at $15.72 billion, up 11% year-over-year, or 13% after adjusting for a 2% FX headwind. Our ending cash and short-term investment position as we exited Q3 was $7.52 billion, and cash flows from operations during the quarter totaled $1.87 billion. During Q3, we signed a $1 billion share repurchase agreement, and we still have $3.15 billion left from our $15 billion authorization granted in December 2020. Taking into account current macroeconomic conditions and year-end seasonal strength, for Q4 we're aiming for total Adobe revenue between $4.975 billion and $5.025 billion; Digital Media net new ARR of roughly $520 million; Digital Media segment revenue between $3.67 billion and $3.70 billion; Digital Experience segment revenue between $1.25 billion and $1.27 billion; Digital Experience subscription revenue between $1.11 billion and $1.13 billion; a tax rate of about 18% on a GAAP basis and 18.5% on a non-GAAP basis; GAAP earnings per share between $3.10 and $3.15; and non-GAAP earnings per share between $4.10 and $4.15. Q3 was an excellent quarter for Adobe, and I'm extremely pleased with how the company is positioned to keep delivering for our customers and investors. We look forward to our investor meeting at Adobe Max on October 10, where we'll take a deep dive into our AI innovation. Hope to see you there. Shantanu, the floor is yours once more.

Thanks, Dan. Our outstanding Q3 performance at Adobe reflects how exceptionally our team has executed. Not long ago, we lost John Warnock, our cherished co-founder. The genius and the breakthroughs John brought forward transformed the world. He ranked among the finest inventors of this era and served as a source of inspiration for the tech sector. Though his absence weighs on us heavily, I take great solace in knowing how deeply proud John was of the ongoing innovation Adobe keeps bringing to market. As a person who shares John's devotion to product and innovation, I feel tremendously invigorated by the technology platforms we're rolling out, with AI sitting at the core across our 3 clouds, all aimed at delighting customers. Our brand, our technology and our gifted workforce put us in position for a robust finish to the year and sustained expansion in the decades ahead. The finest days for Adobe lie before us. Thank you. We'll now open the floor to questions.

Great quarter, everyone. Dan, I've got a margin-related question for you — really more of a puzzle we've been chewing on. Everyone keeps saying that running generative AI costs a fortune, that inference and training carry really steep price tags. Your team has had a beta going for some time now, with 2 million images generated, and a lot of capability is already baked into the product. Yet your operating margins have climbed, and gross margins are higher than they were a year ago. So how do you pull that off? Where exactly are those expenses landing, so to speak? Looking ahead, once these capabilities are fully released to everyone, how do you expect generative AI to affect gross margin or margins more broadly?

Yeah, thanks Keith. You're right that this company has a very powerful innovation engine. There were plenty of exciting announcements this week. Still, we've spent a year now working to bring Firefly and the magic of generative AI to life. From an innovation perspective, we're only beginning. For the past 6 months, the beta has been live. And as you mentioned, our customers have produced more than 2 billion images. I realize everyone's aware of this, and we managed to achieve it while still turning in solid margins. But if you zoom out and consider these technologies, we're putting money in on the cost-of-goods side — things like inferencing and content — and on the research-and-development side, including training and building foundation models. David touched on this during his prepared remarks: the image model within the Firefly family has launched, and additional media formats are coming to market too, which means our investments are meaningful. Returning to the way I framed things in my prepared comments, there's a core operating philosophy that has guided this company for years: growth and profitability. Our focus will be on setting priorities, pushing innovation, and carrying out our plans with discipline. That approach is evident across every one of the company's financial results. Looking ahead at how things shape up, I'd point back to the moment we first established our fiscal 2023 targets — baked into them was an operating margin of 44.5%. When you look at the guidance we just gave for Q4 — we've got four fantastic new products, those technologies are now woven throughout our lineup, and there's all the backing we'll provide as we launch them at our MAX conference in L.A., again, to keep momentum growing among our customers — built into that guidance is an operating margin of roughly 45.5%. Given where we stand at the head of this industry, steering the transition currently underway, that mid-40s number is, from our perspective, the right range to use when considering the company's margin structure as we continue pushing this technology forward and maintaining our leadership. We look forward to the Q4 earnings call, when we'll provide further detail on our fiscal 2024 targets.

Keith, let me take about half a minute to build on that point, because folks like you putting money in want certainty that we aren't holding back on tomorrow. We're putting money into 3D instruction, into video, into fresh imaging and vector formats. So here's what gives us confidence: even as that spending keeps going, thanks to the close eye Dan and his group keep on the rest of our costs, we can keep pushing revenue higher along with cash flow and EPS. That combination, I'd say, sets us apart.

Absolutely. That's really impressive, everyone.

I'm sorry to hear about John Warnock's passing. You have my sympathies. Still, congratulations on the quarter. When we consider the pricing structure for generative AI offerings, which rest on consumption, do you believe these — or rather, how much do you expect the generative AI products to contribute incrementally to the company's future growth trajectory? Then one more for Dan: regarding your Q4 guidance, are you factoring in — it appears largely unchanged from what the Street had expected previously. Aren't we including any room to demonstrate what the generative AI products are capable of? Since they appear mostly additive relative to what was assumed back when you initially provided guidance in fall of last year.

Kash, perhaps David and I can address the first portions of that question. And once more, for everyone listening, to recap the new offerings we've launched, we've said we have a Firefly subscription. So you're able to use a free trial with a certain number of credits, and afterward, you can subscribe to Firefly. We have Adobe Express, which now comes with an allocation of Firefly; we definitely have the Creative Cloud products along with Photoshop and Illustrator that include it. We have generation credit packs, and we have GenStudio for the enterprise, to be able to handle that. So first, I simply wanted to ensure you all recognize the enormous innovation we're delivering tied to that. And as you're aware, one thing we've done is really concentrate on both bringing in new users, which will be propelled across all those offerings, and also on the price increase, since there's an allocation connected to it for current customers, they'll begin to notice that when they roll over and must renew their subscription. So I just wanted to establish that, and then perhaps I'll have David say a bit about each of these and how we expect that to unfold.

Absolutely. Thank you, Shantanu. As Shantanu mentioned, we examine how this affects the business through a pair of perspectives: bringing in new users, which comes first, and then the chance to keep expanding the current customer base. On the side of acquiring new users, we've consistently stated this over the years: our emphasis remains on proliferation. We think there's a huge audience available to us. Net user additions and subscribers stay our main priority. So the aim with proliferation is delivering the appropriate value to the appropriate audience at the appropriate price. When I consider the 4 new offerings Shantanu introduced, I'd say 2 of them are positioned to potentially arrive on the sooner end of that. To begin, on the individual side, Express; it has now been available for more than a year; and the latest version of Express represents a huge leap forward regarding what it can do, covering everything from speed to handling a wider range of tasks past design into video and illustration, into PDF and document workflows. So we've introduced an enormous amount of fresh value, including generative AI within it; so we believe Express will serve as an early signal of the success we're discussing. The next one involves our efforts in the DME business together with Anil and the DX business focused on enterprises, so GenStudio, and allowing the wide base of marketers to truly leverage Express alongside the Creative Studio teams who use Creative Cloud to genuinely speed up their usage and production of content. So in the scope of near-term contributors, we believe that will prove quite significant. We also anticipate that we — while doing this and bringing in new users, we anticipate many new users arriving through the free plans, and that will require some time to build up. We'll welcome them into the Adobe family, have them engage with the products and elevate them toward greater value gradually. So above all, proliferation for new users. The next piece concerns the customer base. And in this area, we're — essentially, the pricing adjustments, just to remind everyone, they carry a gradual effect. We'll kick them off toward the end of Q4, and it will — we're going to launch it in select geographies only. After that, we're going to roll it out carefully across additional countries throughout the coming couple of years. And then of course regarding enterprise customers, the timing for renewals will likely require roughly 3 years because of the multiyear contracts we currently have. All things considered, we view this as a genuinely pivotal point for the way we'll expand the business, though it will require a few years to fully unfold, and we're quite enthusiastic about what it means in terms of attracting new customers into the franchise.

And Kash, perhaps to pull everything together here, regarding the figures we provided for Digital Media ARR — since you raised that question back at the start of the year, keep in mind that our guidance, I believe, was $1.65 billion. When you look at where things stand now, even with what we've guided for Q4, that's roughly $200 million above that figure — around $1.86 billion, or something along those lines — and that follows the $100 million we guided for Q3 and Q4 back when we gave Q3 guidance. So our confidence remains very strong, and we're enthusiastic about the road map.

Nice work on a strong quarter and guidance. Anil, my question's actually directed at you. Clearly, there's plenty to discuss regarding Firefly within the Digital Media segment, and that's plainly a revenue chance. What I'm curious about is how you view the generative AI road map, or the revenue potential, over in the Digital Experience side of things. We've discussed the content supply chain, I realize, but how are you thinking about what generative AI means for your business going forward?

Thanks, Saket. Shantanu and David covered the Adobe GenStudio already, and that has us quite excited. As you mentioned, this is a unique chance for enterprises to genuinely produce personalized content and also drive efficiencies via automation and efficiency; and considering the whole chain enterprises move through — from content creation to production workflow, then activation through DX across all the apps on our platform — we have a unique chance to accomplish that. We've already deployed it inside Adobe for our own Photoshop campaign, plus we're collaborating with a number of agencies and customers on this. So with Adobe GenStudio, this represents a big net new opportunity for us. We're also developing generative AI for additional DX applications too. And at the October investor meeting, we'll provide more details. But we see a comparable opportunity with generative AI to unite the ability for many users across marketing departments and organizations to leverage the Adobe Experience platform and apps, and it will serve as a copilot to speed up the use cases they bring to life; so we'll say more about that during the investor meeting.

Saket, I think it's worth giving Anil and the team a great deal of credit for what they truly got done in Q3 too. The Q3 wins in the Enterprise really brought in many pieces of GenStudio, in both the Digital Media and the Digital Experience. So of course, with the transformational deals we're discussing, a major portion of that comes from the synergy between the 2 clouds; I just wanted to make that point as well.

And if I could just quickly mention one more item regarding the GenStudio efforts that Anil's team has been working on, we have already been putting it to use inside the Digital Media business to launch a number of the campaigns that came out during this quarter. So this is one of those situations where it's wonderful to witness the effect it's delivering for our own business, and that turns into a strong pitch for other businesses as well.

I'd also like to say congrats on a great quarter. Looking at Firefly, the volume of images created over a 6-month span is honestly quite impressive. I'm curious whether you can share more detail, maybe monthly active users or another figure, that would further assist everyone in assessing the gains Firefly is bringing to engagement, to the top of funnel, and so on.

Sure. Glad to discuss it; the past few months have been extraordinary. What I mean is, we've shared a couple of points. The first is that the viral buzz we witnessed around Firefly on social media has been extremely helpful, and it has definitely generated considerable top-of-funnel opportunity for us. Beyond that, something that thrilled us was that after we brought it into our Creative Pro apps, mainly Illustrator and Photoshop, we recorded more than 3 million downloads of those betas, the beta applications, which is unlike anything we'd ever experienced. That shows you how eager the existing customer base is for the generative features we offer too; and finally, something we're quite enthusiastic about and of course monitor very closely is what this accomplishes in terms of opening the door to new users who normally wouldn't come to Adobe; and both Express and Firefly, especially the combination of Firefly and Express, has truly sped that up. So it's been great to observe us not only generating enthusiasm among the current base but also seeing millions of additional users arriving who typically wouldn't have come to Adobe for a product and then beginning — and starting their Adobe journey via Firefly and Express.