Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Good afternoon, and thank you 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 fourth quarter and fiscal year 2024. Our press release, along with PDFs of our prepared remarks and financial results, can be found on Adobe's Investor Relations website. Everything discussed on this call, including our financial targets and product plans, reflects information as of today, December 11th, and includes forward-looking statements that carry risk, uncertainty, and assumptions. Actual results could differ materially from what those statements set forth; to learn more about those risks, please review today's earnings release and Adobe's SEC filings. On this call, we'll cover both GAAP and non-GAAP financial measures. Our reported results include GAAP growth rates as well as constant currency rates. Unless otherwise stated, Adobe's executives will refer to constant currency growth rates throughout this presentation. Non-GAAP reconciliations can be found in our earnings release and on Adobe's Investor Relations website. I'll now hand the call over to Shantanu.

Thanks, Steve. Good afternoon, and thanks for being with us today. During Q4, our revenue came in at $5.61 billion, which was up 11% compared with a year earlier. Over in Digital Media, we posted record net new ARR totaling $578 million. And in Digital Experience, subscription revenue reached $1.27 billion, an increase of 12% year over year. For Adobe, 2024 brought a series of records; revenue hit an all-time high of $21.51 billion, which works out to 11% growth versus the prior year. On a GAAP basis, earnings per share were $12.36, while non-GAAP earnings per share came to $18.42, reflecting growth of 5% and 15% year over year, respectively; our AI innovations helped us reach a number of fresh milestones, which allowed us to bring in over $2 billion of net new ARR in Digital Media and push past $1 billion in ending book of business for Adobe Experience Platform along with native apps. Revenue for the Digital Experience business went beyond $5 billion, establishing us as a mission-critical marketing technology provider globally. As we closed out the year, RPO stood at $19.96 billion, and cash plus short-term investments totaled $7.89 billion. On top of that, 2024 proved a transformative period for product innovation, during which we rolled out foundational technology platforms. Within the Adobe Firefly family, we launched several generative AI models, spanning imaging, vector design, and, most recently, video. Today Adobe offers a full lineup of generative AI models built to be commercially safe for creative content, delivering unmatched output quality and user control inside our applications. With Adobe Express, the quick and easy app for creating anything, we reimagined creativity and productivity for a wider group of customers. Record customer adoption and usage are being driven by deep Firefly integration throughout our flagship applications in Creative Cloud, Document Cloud, and Experience Cloud. Generations powered by Firefly across our tools exceeded $16 billion, and during the past quarter, each month set a fresh record. Through AI Assistant in Adobe Acrobat and Reader, we improved document productivity, extracting still more value from the trillions of PDFs worldwide. By scaling Adobe Experience Platform and native apps successfully, we now deliver the essential infrastructure needed for customer engagement. We're speeding up automated decisioning and enabling audiences, journeys, and channels so truly personalized experiences can be delivered at scale. With Adobe Gen Studio, which unites content and data, we laid the groundwork for an AI content revolution, blending high-velocity creative expression with enterprise activation. By integrating Creative Cloud, Express, and Experience Cloud, the launch of Adobe Gen Studio for performance marketing expands our end-to-end content supply chain offering, giving freelancers, agencies, and enterprises the ability to speed up delivery of content, advertising, and marketing campaigns. At this point, I'll hand things to David so he can talk about the momentum in our Digital Media business.

Thanks, Shantanu, and good morning, everyone. In Q4, net new Digital Media ARR reached $578 million, with revenue hitting $4.15 billion — that's 12% growth versus the prior-year quarter — powered by innovation on both the creative and document sides of our business. For the first time ever, we ended the year above $2 billion in net new Digital Media ARR, reflecting quicker product innovation, record traffic to adobe.com, robust engagement on social and mobile, and rising value for enterprise customers via Firefly Services in Gen Studio, which bring together our Creative and Experience Clouds. On the document cloud side, PDF continues as the global standard for digital documents, and Adobe Acrobat is changing how people engage with them across mobile, web, and desktop. In FY24 we made a major leap by launching AI Assistant in Acrobat and Reader. AI Assistant, along with other AI features like Liquid Mode and Firefly, drives productivity through faster insights, smarter document editing, and native image generation. A recent productivity study found that users leveraging AI Assistant completed document-related tasks four times faster on average. AI Assistant is now available in Acrobat on desktop, web, and mobile, and it's built into our Edge, Chrome, and Microsoft Teams extensions. Through Q4, we continued broadening its value with specialized AI for contracts and scanned documents, expanded language support, and the ability to handle larger documents. Inside Acrobat Web, our Adobe Express integrations enable users to create images and quickly stylize content; we saw AI Assistant conversations double quarter over quarter, which deepens customer value. In Q4, Document Cloud revenue was $843 million, up 17% year-over-year; we hit a record for net new Document Cloud ARR at $173 million, with ending ARR of $3.48 billion, up 23% year-over-year. Other highlights include continued growth in monthly active users, which climbed over 25% year-over-year, surpassing 650 million paid and free users. Strong top-of-funnel momentum came via Acrobat Web, with monthly active users up nearly 50% year-over-year. We also saw strength in Acrobat Pro single app across both Document Cloud and Creative Cloud offerings. It was a strong back-to-school season with a new AI Assistant offering in education for students. Notable enterprise customer wins include Abbott Laboratories, BWI GmbH, Defense Information Systems Agency, Kaiser Permanente, Novo Nordisk, Truist, U.S. Cellular, and the U.S. Department of State. Creative Cloud also had a strong year as demand for content keeps rising across mobile, desktop, and streaming platforms. Adobe MAX, the premier creativity conference, showcased our FY '24 innovation and drove over 0.5 billion video views across all channels. We've made major progress with our generative AI models, launching Firefly Image Model 3, enhancing our vector models and raster design models, and debuting the all-new Firefly Video Model. On their own, these models pack incredible capability, and when woven deeply into products like Lightroom, Photoshop, Premiere, InDesign, and Express, they've brought enormous benefit to millions of creative professionals around the globe. By uniting our creative and experience clouds, we rolled out Firefly Services inside Gen Studio, answering a growing enterprise appetite for producing content at scale. The tally of cumulative Firefly generations continues to accelerate, now surpassing 16 billion. Q4 revenue landed at $3.3 billion, up 11% year over year. Creative Cloud net new ARR totaled $405 million. A few more highlights: about 4,000 companies brought Adobe Express on board this quarter, and the number of students with Express Premium access climbed 84% compared with a year ago through this year's back-to-school period. Adobe Express saw strong ecosystem growth, with over 180 plugins available in the Express Marketplace, along with integrations alongside major social, productivity, and collaboration apps including ChatGPT, Google, Slack, Wix, Box, HubSpot, and Webflow, greatly expanding the customers we can reach. Excitement ran high when we introduced the Firefly Video model and its unique integration in Premiere Pro in limited public beta, and we expect wider availability in early 2025. Since its MAX debut, this capability has driven a 70% increase in Premiere Pro beta users. Enhancements across the Firefly Image, Vector, and Design models deliver image generation that's four times faster, alongside new features embedded in Photoshop, Illustrator, Premiere Pro, and Adobe Express. Lightroom Mobile is seeing strong uptake, with customers gravitating to innovations like Generative Remove and Lens Blur, as well as Quick Actions, which streamlines editing while driving discovery and adoption of premium features. Earlier today, Adobe Lightroom was honored as Mac App of the Year in Apple's annual App Store Awards. With the launch of the new Frame.io V4, managing creative work for video projects gets easier, making end-to-end editing and seamless collaboration possible between editors and their stakeholders. Firefly Services adoption continued to rise, with enterprises such as Pepsi and Tapestry using it to scale content production, thanks to powerful APIs and the ease of building custom models designed for commercial safety. Notable enterprise customer wins include Alphabet, American Express, Coca-Cola, Johnson & Johnson, LVMH, Nestlé, Procter & Gamble, T-Mobile, and the U.S. Department of Defense. Our FY24 AI product launches and business transformation have set us up for another strong year ahead as we reach new audiences, deliver greater value to existing users, and steadily merge our Digital Media and Digital Experience clouds to create differentiated business solutions. We'll get there by accelerating adoption of freemium offerings, including Express, Lightroom, and Acrobat on web and mobile, while widening access to Acrobat AI Assistant, which delivered strong financial results in FY24. We'll also expand our core creative business by continuing to grow AI innovations across our flagship applications and bringing them to web and mobile. Additionally, we're preparing to introduce a new Firefly tier at a higher price point, one that packages our video models into a comprehensive AI offering aimed at creative professionals. Adobe MAX, the Premier Creativity Conference, showcased our FY '24 innovation and drove over 0.5 billion video views across all channels. This creates an opportunity for us to generate income from people who are new to our products, provide added benefits to our existing subscriber base, and raise ARPU. In addition, it accelerates Firefly services further — during FY24, appetite for them proved considerable — by integrating those offerings into Gen Studio, which means enterprise clients gain resources to expand their content production on a massive scale using AI. At Adobe MAX, the Premier Creativity Conference, we highlighted our FY '24 innovations and generated more than 0.5 billion video views across every channel. We are thrilled by the response to what we introduced in FY24, we are impatient to release additional features, and we look forward to delighting customers over the next year. At this point, I'll hand the call to Anil.

Thank you, David, and good morning to all of you. We wrapped up the year on a high note in the Experience Cloud business, with quarterly revenue reaching $1.4 billion and an all-time best $5.37 billion for fiscal 2024. Subscription revenue during the quarter came in at $1.27 billion, which marks 12% growth compared with the same period a year earlier. During the quarter, the book of business for Adobe Experience Platform along with its native apps — Real-Time CDP, Customer Journey Analytics, and Journey Optimizer — moved past $1 billion, and these solutions are now used by 48 of the Fortune 100 companies. The customer experience management market presents a substantial and expanding opportunity. Companies in both B2B and B2C segments are choosing Adobe as their strategic technology partner to speed up customer acquisition, engagement, and retention. Our top-tier solutions across content, data, and customer journeys give businesses the ability to fuel top-line growth while at the same time achieving productivity gains. The AI innovations we've brought to market let our customers speed up delivery of personalized experiences at scale, and they were designed to meet enterprise governance requirements. Adobe Experience Platform AI Assistant lets marketers automate tasks and generate new audiences and journeys. Adobe Experience Manager creates variations and delivers dynamic, personalized content creation natively through AEM, allowing customers to publish more compelling and engaging experiences on their websites. With Adobe Gen Studio, we are reshaping the content supply chain for enterprises; it natively brings together several Adobe applications spanning Creative Cloud and Experience Cloud, such as Express, Firefly, Workfront, Experience Manager, Customer Journey Analytics, and Journey Optimizer. Gen Studio helps agencies and enterprises reach new heights of creativity and efficiency across content creation and production, workflow and planning, asset management, delivery and activation, and reporting and insights. A valuable new piece of the Gen Studio portfolio is Adobe Gen Studio for Performance Marketing, which provides an integrated application for building paid social ads, display ads, banners, and marketing emails using pre-approved, on-brand content. It unites creative teams — who establish a brand's foundational requirements, such as guidelines for brand voice, channels, and images — with marketing teams that must produce many content variations quickly and nimbly; since Adobe Gen Studio for Performance Marketing became generally available at MAX, we've seen robust customer demand. For CMOs, CIOs, and CFOs, Gen Studio addresses how marketing will be transformed in the AI era. Additional highlights include an expanded partnership with Amazon to make Adobe Experience Platform available on Amazon Web Services and to extend our leadership across public clouds. Before long, enterprises will be able to tap the full power of AEP and its native apps on AWS. Integration partnerships with Google's Campaign Manager 360, Meta, Microsoft Advertising, Snap, and TikTok give marketing teams a comprehensive view of campaign performance right inside Adobe Gen Studio so they can optimize the ROI of their ad spend. We also earned strong industry analyst recognition in major reports, among them the Gartner Magic Quadrant for Digital Commerce and the Forrester Wave for Cross-Channel Marketing Hubs. Specifically, Gartner acknowledged Adobe's essential strengths in multi-channel marketing—like our unique capacity to modify customer journeys on the fly according to customer actions. AI advancements rolled out in the premium tiers and add-ons assisted us in securing our biggest bookings quarter to date, featuring major worldwide client victories such as Air Canada, Allianz, American Express, Bank of America, BMW, Centene, CIBC, Cisco, Disney, Fanatics, Gap, GM, JPMorgan Chase, PayPal, Samsung, Tesco, and Wells Fargo. Digital continues to be a vital growth priority for companies everywhere. Adobe Digital Insights, examining trillions of data points, stated that sales on both Black Friday and Cyber Monday reached all-time peaks of $10.8 billion and $13.3 billion, climbing 10.2% and 7.3% compared to last year, respectively; we predict the entire holiday period will reach $240.8 billion, rising 8.4% year-over-year. Thanks to the launch of our fresh products in FY25, Adobe holds a distinctive chance to leverage the scope of these offerings to further refine our unified go-to-market field structure. We're growing our enterprise go-to-market groups to market these combined solutions spanning Digital Media and Digital Experience across the globe beneath the new GenStudio umbrella. We've observed initial triumphs for this approach, which encompassed Express and Firefly services in Q4. As we equip our global field organization in Q1, we foresee quickening of this pipeline over the remaining year and past that; we are certain about sustaining our leadership and momentum through 2025. I'll now hand it over to Dan.

Thanks, Anil. Today's earnings report addresses our Q4 and FY24 results, pointing out the growth drivers throughout our businesses, and I'll wrap up with the financial targets. We take pride in what we accomplished during FY24, producing record revenue, EPS, and operating cash flows while investing heavily in AI product innovation. Fresh AI launches — among them Express, Acrobat AI Assistant, Firefly Services, DX Premium tiers, and Gen Studio for performance marketing — have broadened our product portfolio, fueling proliferation and significant Gen AI monetization. The year ended strongly, with records in Digital Media net new ARR and Digital Experience bookings. In fiscal 2024, Adobe brought in its highest-ever revenue, $21.51 billion, which was an 11% increase compared with the prior year, both on a reported basis and in constant currency. For the full year, GAAP earnings per share were $12.36, and non-GAAP earnings per share were $18.42, representing rises of 5% and 15% year-over-year, respectively. Business and financial highlights for FY24 included $15.86 billion in Digital Media revenue, $2.00 billion in net new Digital Media ARR, $5.37 billion in Digital Experience revenue, $8.06 billion in cash flows from operations, $19.96 billion in RPO at year-end, and the buyback of about 17.5 million shares of our stock during the year. In the fourth quarter of FY24, Adobe's revenue was $5.61 billion, which amounted to 11% growth year-over-year as reported and in constant currency. For Q4, GAAP diluted EPS came in at $3.79, and non-GAAP diluted EPS reached a record $4.81 — year-over-year increases of 17% and 13%, respectively. The quarter's business and financial highlights included $4.15 billion in Digital Media revenue, $578 million in net new Digital Media ARR, $1.40 billion in Digital Experience revenue, $2.92 billion in cash flows from operations, and $1.82 billion added to RPO during the period. In our Digital Media segment, Q4 revenue was $4.15 billion, up 12% year-over-year on both a reported and constant-currency basis. We ended the quarter with $17.33 billion in Digital Media ARR, growing our ending ARR book of business 13% year-over-year in constant currency. On the Document Cloud side, we brought in $843 million, which works out to 17% growth compared with last year both as reported and in constant currency. Over the quarter, net new Document Cloud ARR came to $173 million, and that pushed our ending ARR book of business up 23% year-over-year in constant currency. When we look at what drove Document Cloud growth in Q4, it included strong gains for Reader and Acrobat across web and mobile, as well as extensions such as Edge and Chrome. We also saw demand for Acrobat subscriptions across every customer segment, route to market, and geography. On top of that, adoption and monetization of AI Assistant picked up speed, helped by product improvements and the launch of French and German language support, plus the usual year-end seasonal strength in enterprise. Our creative segment brought in $3.30 billion in revenue, which marks a 10% increase compared to the same period last year, and 11% when you strip out currency fluctuations. Over the quarter, net new creative ARR came to $405 million, which pushed our ending ARR book of business up 11% year-over-year on a constant currency basis. When looking at what fueled Creative Cloud's performance in Q4, several factors stand out: strong appetite for fresh Creative Cloud All Apps subscriptions spanning individual users, teams, enterprise customers, and the education sector. We also benefited from solid traction in single apps like Acrobat Pro, Lightroom, and Photoshop. New subscriptions in emerging markets contributed momentum as well. Additionally, we're noticing interest in Adobe Express from education, SMB, and enterprise segments. And finally, Firefly Services is gaining adoption among enterprise customers. Turning to Digital Experience, fourth-quarter revenue reached $1.40 billion, which was a 10% increase from a year earlier on both a reported and constant-currency basis. Subscription revenue in that segment totaled $1.27 billion, marking 13% year-over-year growth, or 12% in constant currency. The quarter's gains in Digital Experience were fueled by a powerful finish to the year that delivered our biggest bookings quarter ever, along with solid regional performance in areas like the US and EMEA and strength across numerous verticals, financial services among them. Subscription revenue growth was particularly strong, with Adobe Experience Manager, Adobe Journey Optimizer, Real-Time Customer Data Platform, Customer Journey Analytics, and Workfront leading the way. Enterprise clients keep renewing and growing with us at a solid clip, and 85 of the Fortune 100 rely on our Digital Experience offerings. AEP and native apps clearly gained ground — when FY24 closed, book of business had passed $1.00 billion and was up over 40% compared with the prior year. Bookings were robust for our umbrella Gen Studio product, and there's real excitement building behind the new Gen Studio for Performance Marketing release. On taxes, Adobe posted a Q4 effective rate of 15.5% under GAAP and 18.5% on a non-GAAP basis. We finished the quarter with RPO of $19.96 billion, a 16% increase, and CRPO climbed 13% versus the same period a year earlier on an as-reported basis. Operating cash flow hit an all-time high of $2.92 billion for the quarter, and when we closed out Q4, our cash plus short-term investments came to $7.89 billion. In Q4 we signed a share repurchase deal worth $2.5 billion, which leaves $17.65 billion remaining under the $25 billion authorization approved in March 2024. Let me now move on to what we're targeting financially for FY2025. Throughout the fiscal year, we calculate ARR using constant currency, then revalue the ending ARR at year-end. When you compare where foreign exchange rates stood at the close of FY23 versus the close of FY24, the result was a $117 million reduction in the Digital Media ARR balance as we head into FY25, moving from $17.33 billion down to $17.22 billion, and you can see that on our investor data sheet. For FY25 revenue, we're anticipating an approximate $200 million drag caused by currency effects plus a somewhat smaller hit from the ongoing transition away from perpetual offerings toward subscriptions. Our financial targets factor in a continuing plan to roll out additional tiered subscription options along with add-ons. Looking ahead to fiscal 2025, our goals include hitting a revenue range for all of Adobe between $23.30 billion and $23.55 billion, while the Digital Media segment should bring in somewhere between $17.25 billion and $17.40 billion. We expect the book of business for Digital Media ending ARR to expand by 11.0% compared to the prior year. For the Digital Experience segment, revenue is projected at $5.80 billion to $5.90 billion, with subscription revenue specifically landing between $5.375 billion and $5.425 billion. On a GAAP basis, earnings per share should fall between $15.80 and $16.10, and on a non-GAAP basis, between $20.20 and $20.50. Additionally, we're forecasting a non-GAAP operating margin of roughly 46% and a non-GAAP tax rate of about 18.5%. Turning to Q1 of fiscal 2025, our targets include total Adobe revenue between $5.63 billion and $5.68 billion, Digital Media segment revenue from $4.17 billion to $4.20 billion, Digital Experience segment revenue of $1.38 billion to $1.40 billion, Digital Experience subscription revenue in the range of $1.27 billion to $1.29 billion, GAAP earnings per share of $3.85 to $3.90, and non-GAAP earnings per share between $4.95 and $5. For Q1, we anticipate a non-GAAP operating margin of about 47% and a non-GAAP tax rate of roughly 18.5%. To wrap up, I take pride in our exceptional results, which blend strong product leadership, rapid innovation, and financial prudence, setting us up for solid revenue and EPS growth in the coming year. Shantanu, over to you.

Thanks, Dan. During this period, Adobe got acknowledged yet again because of our outstanding culture along with our leadership within the industry — that includes spots on Forbes' World's Best Employers, Fortune's 50 AI Innovators, Fortune's Best Workplaces in Technology, plus The Wall Street Journal's Best Managed Companies list. Over at MAX, we introduced a fresh worldwide effort designed to assist 30 million next-generation learners in building AI literacy, content creation, and digital marketing abilities through Adobe Express so they can succeed in today's workforce, partnering with education partners and schools, nonprofits, and online learning platforms to deliver training, certifications, and career pathways. Unleashing creativity for everyone, speeding up document productivity, and empowering digital businesses — that approach of ours points to an enormous market opportunity we can address. Adobe keeps extending what rests on its solid base of transformative innovation, leadership in category and brand, financial results, and profitable growth. We're bringing Adobe Magic to a growing group of customers around the world while capitalizing on the huge opportunity that lies ahead. There's no better position for Adobe heading into 2025 and past it. Thanks, and now we'll open things up for questions. Operator.

Hi there, many thanks. I'm grateful that you're fielding our questions. David, during your prepared remarks you brought up a handful of items centered on growing innovations, among them newer Firefly options carrying higher price tags plus the possibility of speeding Firefly up by weaving it more deeply into GenStudio. Could you perhaps say more about how you view the adoption curves for those initiatives? Then for part two, Dan, it would help if you could offer whatever thoughts you have on the way these fresher initiatives get folded into guidance — whether some caution is baked in simply because they're new, or how we ought to frame that. Thanks.

Absolutely. Yeah, I'll jump in first. AI clearly has been an enormous priority for us, and honestly, our community has been adopting it at astonishing rates. So we're quite thrilled about the $16 billion — pardon me, not dollars, $16 billion generations we referenced during the prepared remarks. That really stems from the investments we've poured into building the widest array of models. We've discussed imaging vector design previously. Video and audio now exist for us in beta form too; and the core distinction separating what we offer from what the rest of the market offers truly boils down to three items. First is commercial safety, in how we train those models. Second is the tremendous control we embed within the models. And third is the way we unite these models with our products, increasingly, naturally, within our CC flagship applications, but likewise in Express and Lightroom and similar applications, and in Anil's DX products too. So that combination forms a vital piece of our foundation and a lasting edge for us going forward. Now, once we launch the video model, which we anticipate being on the market early next year, that will open up a chance to tier our Creative Cloud offerings further. As you surely realize, generating video carries far greater value than generating images. Consequently, it hands us the means to begin tiering Creative Cloud more aggressively there; beyond that, during this year, we rolled out Firefly Services. That's gotten off to a strong start. Plenty of customers are making use of it. A few we highlighted on the call include Tapestry. They rely on it for content production at scale. Pepsi, for their Gatorade brand, is letting their customers personalize whatever merchandise they purchase, beginning specifically with Gatorade bottles. And these have proven extremely, extremely fruitful for them. We're also watching this be tapped by numerous other organizations for anything from localization at scale to personalization at scale to user engagement or simply raw content production at scale too. And finally, lest it be overlooked amid all this, there's everything we're doing with AI Assistant. Acrobat's AI Assistant has kicked off remarkably well, and we expect that momentum to keep building. So everything here has laid a solid base for us during FY24. It has provided plenty of signal from the customers we serve, and honestly, we've picked up a great deal that we plan to put to use as we refine both the value and the tiering for our customers moving ahead.

Yes, and to expand a bit on what David mentioned regarding our FY25 guidance, we’ve highlighted all the significant innovation currently underway. I’d say the pace of innovation now exceeds any previous point; we mentioned offerings such as Express, AI Assistant, Firefly, premium tiers in DX, and GenStudio. The positive aspect is that these are already driving meaningful contributions to our financial results today, and by projecting the momentum observed in those offerings, forming a view on the upcoming pipeline of innovation, how we deliver that, fully natively integrated within our products, and further expanding the value provided to customers along with the additional segments we can reach. All of this combines to shape our outlook for what 2025 will look like, given the strong start we’ve had and the meaningful contribution in FY24.

I really appreciate it.

Hi, everyone. Thanks for fielding this. So, regarding what you mentioned earlier about AI playing a significant role in the larger expansion story for the business, could you perhaps share your perspective on the growth catalyst coming from Firefly and Gen Studio, and then how that will gradually become apparent throughout the year when it comes to net new Digital Media ARR? Do you expect that to appear more within the DX segment? It would be helpful to hear some detail on that. And, Dan, is there anything we ought to consider because of the updated guidance approach concerning seasonality or linearity for net new ARR within the Digital Media business?

Absolutely, glad to address that. To start, as we said, there's a lot of enthusiasm on our side regarding the FY24 momentum we see and are bringing forward, and we've discussed before how the growth algorithm for the Digital Media business works, so perhaps I can restate some of that; previously we've framed it as P times Q plus V, where P represents new users drawing additional people into the franchise. We keep doing that, clearly, with Express now available. We're witnessing strong expansion there, whether via our phones channel connecting with SMB, or corporate engaging the mid-market, or by collaborating more closely with Anil and the DX business plus the integrations linking Express and the DX business to reach big enterprises. We're active on many fronts to spread Express within education. We've established multiple partnerships we've discussed involving Box, ChatGPT, HubSpot, and others, along with our own offerings such as Acrobat workflows moving from Acrobat and Reader into Express. So we're truly striving to bring more new customers into the franchise, on top of the ongoing expansion in our core creative products. Next, regarding the core creative products, here the price genuinely rises alongside core value since when we bring Firefly models into the equation, we gain the chance to embed them further within the flagship applications. And as I noted before, through the Firefly web application, we can build additional tiers throughout the creative products so individuals land on the appropriate plan for their requirements; and we hold a very optimistic view on video and the wide range of our customer base that will require access to these video models. Once more, keep in mind, they're deeply embedded in our applications, such as Premiere. So we're quite thrilled about the potential that holds for us. Finally, the business value for customers in enterprise or corporate, that's where value-based selling that we perform together with the Digital Experience business truly comes to life. Firefly Services, as I stated, with Gatorade, Tapestry, and numerous others that have joined, everyone in this area is moving toward personalizing that content, and they definitely require a scaled production and automation pipeline to produce additional content. And that's exactly what Firefly Services accomplishes; and since it has reached this degree of escape velocity, we're now embedding it further into the DX products, especially Gen Studio, so it turns into a more comprehensive solution as we enter FY25 and speed that up. And Alex, that's what drives the guide of 11%. If you truly step back, that's among the strongest guides we've provided concerning next year ARR growth. However, something worth remembering is that the makeup of this expansion will look somewhat different in the coming year than it did in FY24. Once again, the formula for growth consists of new users, new products, plus value and pricing. As we move into FY25, new users alongside new products are set to account for a bigger share of the mix. And we're eager to see that foundational base of the business expand and propel the business forward.

And so, to add to what was said there, Alex, and I do appreciate the question regarding how FY25 takes shape. Here is what I can share on that. As everyone is aware, we shifted the guidance methodology as we entered 2025. Guiding based on the ending ARR book of business growth — we simply hold a firm perspective. It serves as a superior signal of the trajectory of business health. David spoke about the growth algorithm, the growth agenda here at the company. New subscribers represent the primary engine of growth, have been, and will continue to be. The second component, cross-sell, upsell. Once people are brought into the Adobe ecosystem, this is something the company has refined a truly strong capability in over time — guiding them through the abundant set of technologies and products we offer so they go deeper into the ecosystem. That is a key element. And finally, David brought up pricing. This concerns how we segment the product portfolio, the value we deliver to our customers. So as we consider the innovation, as we consider the growth algorithm, and as we consider increasingly monetizing the abundant set of innovation we have already introduced to market, along with what is in the pipeline to be introduced to market, the quarterly profile — we see it as less important. Our real desire is to focus on revenue and EPS. Focus on the annual book of business growth. We believe that is the most important way to view the business, and it is also how we, as the management team, operate the business.

Got it. Thanks, everyone.

Yes, many thanks. David, I wanted to ask a follow-up regarding what you just said about bringing in new users and new adoptions—that's clearly hugely important. Could there be price sensitivity here, in the sense that you provide so much value? My thinking is that, since you deliver that much value, pricing ought to be a larger lever, unless sensitivity to price exists. So could you elaborate on that a bit further? It seems like you ought to be able to pursue all three vectors simultaneously, though I realize you'll concentrate more on attracting people and helping them succeed; but I suppose my question is whether there's something on the pricing front I'm overlooking that explains why that isn't happening too. Thanks.

Yes, we've discussed this in terms of proliferation versus near-term monetization and the need to strike a balance between the two. That's something we care about deeply, and we examine it. Consider the lower end of the market, where we've gone in with Express and Lightroom, Acrobat, and incidentally, the web and mobile motion has worked well for us in drawing in far more new users. So you should expect us to keep doing more of that and to launch additional products in that segment in FY25 as well; and there is definitely price sensitivity on that side of the market, both for premium users and for those converted to paid users. And we'll keep making that possible. As for the core business—the business of creative professionals—we're strongly focused on delivering new value that will generate greater segmentation and greater tiering and match value and pricing to what we provide there. So we see enormous opportunity ahead in that area, since the value we deliver and the efficiency we add to the content creation process there is quite substantial. And finally, and definitely not least, as we mentioned regarding core enterprises, that's where we've managed to cross that chasm from a P times Q business to a value sale business. And we can begin to put more automation and workflows in place there too; so it's a combination of these factors. We'll keep balancing. We're clearly monitoring, and we believe proliferation, as we've stated for a while, ranks among the top priorities, because we know that if people begin using our products now, we can keep delivering value for many years ahead, and so that balance is what we aim for, and it's a management judgment call, but we believe we're handling it correctly.

So, one more quick question for Dan. Dan, clearly, Black Friday landed in your first quarter of this current year. Is there anything you can share regarding what that did, if anything, for Creative Cloud net new ARR during this quarter?