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 first quarter of fiscal year 2025. Our press release is available, along with PDFs covering our prepared remarks and financial results, on Adobe's Investor Relations website. Everything we discuss today, including financial targets and product plans, reflects information as of today, March 12, and includes forward-looking statements subject to risk, uncertainty, and assumptions. Those statements could turn out differently in material ways. To learn more about these risks, please look at today's earnings release and 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. Unless stated otherwise, Adobe's executives will reference 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 hand the call over to Shantanu now.

Thanks, Steve. Good afternoon, and we appreciate you all being with us. Adobe delivered a record first quarter, with revenue of $5.71 billion in Q1, which marks 11% growth compared with a year ago. GAAP earnings per share came in at $4.14 for the quarter, while non-GAAP earnings per share reached $5.08, reflecting 13% growth versus the prior year. What these results show is how essential Adobe products remain in fueling the worldwide digital economy. Beyond that, in light of how Q1 went, we're happy to restate our fiscal 2025 objectives. Our flagship Digital Experience conference, Adobe Summit, takes place next week, and there we'll reveal the newest breakthroughs throughout our portfolio. We'll also hold our yearly investor meeting on March 18, and we wanted to give a preview of what we'll say regarding our growth strategy. Over the last decade, Adobe's achievements have stemmed from the explosive expansion of the creative economy along with the customer-driven innovations we've brought to market in Creative Cloud, Document Cloud, and Experience Cloud. Our pioneering products are enabling a constantly widening set of users to envision, build, and produce remarkable content that fuels outstanding experiences. As digital keeps swiftly reshaping work, life, education, and entertainment, Adobe's purpose of transforming the world via personalized digital experiences matters more than ever. AI offers a once-in-a-generation chance to rethink our technology platforms so they can serve a customer base that keeps growing larger and more varied. With creativity as our foundation, we've been advancing our products and go-to-market approaches to address the unique requirements of creative professionals and next-generation creators, marketing professionals, agencies, and enterprises, plus the wider group of consumers and business professionals. We're confident this will produce sustained growth and profitability. Creative professionals and creators require power and precision so they can realize their ideas in any media format. Tomorrow's creators seek the convenience of web and mobile tools alongside desktop capability. They'll gain from diverse AI models for brainstorming and discovering creative directions. Adobe will support this expanding community by providing the most complete collection of web, mobile, and desktop applications, made available via a range of subscription tiers. Alongside Creative Cloud, we'll provide new Firefly Web app subscriptions that connect with and serve as an entry point to our web and mobile products. Although Adobe's commercially safe Firefly models will sit at the heart of this offering, we'll also enable other third-party models to participate in this creative process. The Firefly app will act as the central hub for emerging creative areas such as ideation. We recently launched and integrated our new Firefly Video Model into this offering, which joins the image, vector, and design models already supported; beyond monetizing standalone Firefly subscriptions, we'll roll out several Creative Cloud offerings that feature Firefly tiering. Marketing professionals must generate an extraordinary amount of engaging content and refine it to provide personalized digital experiences across channels, including mobile applications, email, social media, and advertising platforms. They want agility and self-service, along with connected workflows involving their creative teams and agencies. So for that, businesses need models that are customized and safe for commercial use, plus agents built to fix the weak spots in how content gets supplied. Through Adobe GenStudio and Firefly Services, Adobe is changing the way brands and their agency partners work together on marketing campaigns, opening up fresh degrees of creativity, personalization, and efficiency. Putting the Adobe Experience Platform together with the apps inside Adobe GenStudio gives us the most complete marketing platform to make this vision real. Beyond our own direct sales team, we'll tap a partner and agency ecosystem to sell, implement, operate, and deliver business outcomes for companies of every size. One Adobe deals have sped up because we're integrating our creative and marketing products more and more into one enterprise solution; we'll keep putting money into sales capacity to deliver Adobe-wide offerings across business, education, and government. Business professionals and consumers are after ease of use on web and mobile via a freemium model. What they want are quick, simple, AI-first creative applications that define their category and help them stand out. The demand for creative expression keeps rising exponentially, yet the true value lies in combining creativity and productivity into an all-in-one solution. Bringing Express and Acrobat together is Adobe's chance to make the path from creating a document to consuming it smoother than it has ever been. AI Assistant in Acrobat, Reader, and Express will speed up delivery of new conversational and agentic interfaces that add value to this combined offering. Revenue growth will come from distribution across web and mobile app stores, partnerships with major software providers, and a focus on SMB and enterprise sales. Our generative AI innovation runs throughout the breadth of our products, and its impact is shaping billions of ARR across acquisition, retention, and value expansion as customers gain from these new capabilities. That strength also shows up in our AI-first standalone and add-on products like Acrobat AI Assistant, Firefly app and services, and GenStudio for Performance Marketing, which have already delivered more than $125 million in book of business as we exited Q1 fiscal 2025, and we expect that AI book of business to double by the close of fiscal 2025. To sum up, by using the breadth of our products and technology platforms in the AI era and delivering new tailored offerings and solutions by customer group, we will fuel the growth engine for the coming decade. We'll win by concentrating on business professionals and consumers along with creative and marketing professionals, with a unified product strategy and go-to-market; beginning this quarter we will start giving financial visibility into these two new groups and expand on that at our Investor Day at Summit next week. I'll hand it over now to David to talk about the momentum in our digital media business.

Thank you, Shantanu, and good morning to all of you. During the first quarter, our revenue came in at $4.23 billion, representing 12% growth compared with the same period a year earlier. We closed out the quarter holding $17.63 billion in digital media ARR, which lifted our ending ARR book of business by 12.6% versus a year ago. Healthy results continue to show up in both Creative Cloud and Document Cloud. The Creative side was fueled by widespread uptake across our routes to market and product portfolio, with standout momentum in newer products such as Firefly Services, a rising count of One Adobe deals, and an expanding base of web and mobile users. Document Cloud kept experiencing robust organic demand, ongoing improvements to free-to-pay conversion journeys, and AI Assistant becoming available in more languages; across digital media, we posted strong results in emerging markets. These outcomes mark a solid beginning to the fiscal year. Creativity is becoming mainstream, and I'd like to offer additional detail about the audiences we serve. Ours is a visual-first world, one where creative expression now permeates every aspect of life. Business professionals and consumers alike want to craft visually rich, engaging content, be it a presentation, a birthday invitation, or a social post. Meanwhile, creative professionals, creators, and marketers compete on the quality of their online presence and the personalized experiences they provide to customers; they rely on Document Cloud, Creative Cloud, and Experience Cloud to reach their content goals. Looking ahead, thanks to AI advancements, we see tremendous opportunity to serve customers through offerings tailored to specific audiences. Business professionals and consumers are gaining more and more from deep integration among Acrobat, Express, and Firefly, while creative professionals, creators, and marketers are putting money into powerful workflows spanning Creative Cloud, our new web and mobile creative applications, Firefly, and GenStudio. PDF remains the worldwide standard for digital documents among business professionals, and Adobe Acrobat is transforming how people interact with them across mobile, web, and desktop. Capabilities such as AI Assistant in Acrobat and Reader have proven to be a game changer for everyone from sales teams to students seeking quicker insights and smarter document editing. Being able to share links and gather comments has boosted document productivity and helped fuel further adoption; these new capabilities, together with our cross-surface investments, have delivered results, with monthly active usage of Acrobat and Reader up 23% from a year earlier. Our achievements with Acrobat have also revealed that whether it's a sales presentation, a school project, or a social media post, business professionals and consumers want an easy-to-use solution that helps them produce visually compelling content that stands apart from a sea of generic templates. Indeed, a substantial share of all documents made in Acrobat are visual documents, such as marketing content, sales pitches, presentations, infographics, and cover pages. We're making solid headway in meeting this need by embedding Express capabilities as a native experience within Acrobat, aiming to lift productivity and make the path from consuming documents to creating content smoother than it has ever been. Bringing Adobe Express capabilities into Acrobat lets people build more substantial PDFs — complete with AI-made cover pages, infographics placed inside, and personalized imagery — while also giving them the power to produce fully finished animated videos along with other rich digital output. A host of early demand signals are visible to us, since Express usage via Acrobat has climbed 10x compared with a year earlier. Additional bright spots for business professionals and consumers cover Acrobat AI Assistant language support, which now spans English, French, German, Italian, Portuguese, Spanish, and Japanese. There's also Acrobat AI Assistant backing for legal workflows through contract-specific features. Fresh AI tools in Express, such as Clip Maker, which automatically generates video highlights, and Text Rewrite, which helps craft more effective copy. Wider Acrobat connections with Microsoft Edge, Google Chrome, Gmail, and Google Drive, plus robust uptake of link sharing for richer collaborative experiences, have driven roughly 50% year-over-year expansion in Acrobat Web monthly active usage. Broader Express connections now take in Miro, Box, Slack, Webflow, and HubSpot. The Express ecosystem likewise reached 225 plugins, more than doubling over the past year. Solid adoption among businesses and students. Express brought on close to 6,000 new businesses during Q1, amounting to roughly 50% growth quarter-over-quarter. Learners with Express Premium access rose 85% compared with the prior year. Notable worldwide customer wins feature AT&T, Delta Air Lines, Disney, Ernst & Young, IBM, JPMorgan Chase, Microsoft, Paramount, and Qatar Airways. Creative professionals, together with the next generation of creators who earn their living by designing and producing content, concentrate on standing out and bringing their distinctive creative visions to life with pixel-perfect precision. As we celebrate Photoshop's 35th anniversary, Adobe Creative Applications stay the preferred solutions for creative professionals worldwide spanning imaging, design, photography, video, illustration, and 3D. We're also noticing rising demand from the next generation of creators, who seek freemium web and mobile applications as they start their creative journeys. To serve these users better, we introduced a new Photoshop mobile app along with an expanded web experience that brings Photoshop's iconic image editing and design capabilities to the iPhone. Both the mobile app and the all-new web experience come included in existing Photoshop plans, giving longtime Photoshop customers a flexible ecosystem for creating and editing across surfaces. That launch collected over 30 million social engagements within just two weeks. February's release of the Adobe Firefly Video Model, a commercially safe generative AI video model, has drawn very positive reactions from brands and creative professionals, who have already begun using it to make production-ready content. Users can generate video clips from a text prompt or image, employ camera angles to control shots, build distinct scenes with 3D sketches, craft atmospheric elements, and develop custom motion design elements. It's exciting to watch creative professionals across enterprises and agencies, among them Dentsu, PepsiCo, and Stagwell, achieving success with the video model. Also, we just rolled out a brand-new Firefly app — the most complete place there is for making images, vectors, and these days videos, with creative control that nothing else matches and direct hookup to our best-in-class creative apps so you can go smoothly from an idea to production. Beyond creating images, videos, and designs out of text, this app allows you to make videos from keyframes, employ 3D designs to steer generations with precision, and convert audio and video into several languages. Alongside this release we introduced 2 fresh plans, Firefly Standard and Firefly Pro, and yesterday we started rolling out our 3rd plan, Firefly Premium. Engagement from users has been robust, with more than 90% of paid users creating videos. Bringing Photoshop to web and mobile plus shipping the new Firefly app broadens our expanding lineup of web and mobile products, which today covers Photoshop for creative imaging, Lightroom for photography, Express for design, and Firefly for ideation and early production; for our current paid subscribers these apps act as value-added capabilities, and for attracting and monetizing next-generation creators they work as a frictionless freemium onboarding experience; the early interest in these new offerings has us delighted. Additional highlights among creative professionals and creators include ongoing strong uptake of Gen AI in our products, with Photoshop Gen AI monthly active users at roughly 35% and Lightroom Gen AI monthly active users at 30%. Through Firefly, users have generated more than 20 billion assets. New features arriving in Premiere Pro Beta and After Effects Beta are assisting editors and motion designers in beating deadlines through AI capabilities such as Media Intelligence, which lets users locate footage more quickly via natural language, and Caption Translation covering 17 languages, which expands video to worldwide audiences with no effort. It's an honor to watch visionary filmmakers across the globe tell this season's most celebrated stories with Adobe Creative Applications, among them Academy Award winners Anora and Dune: Part Two. We also launched adaptive profiles and distraction removal in Adobe Lightroom and Adobe Camera Raw, which cut down on tedious, repetitive work. MAX Japan united our community and gave us the chance to launch a variety of new innovations, among them performance gains in Adobe Illustrator that speed up things like pan and zoom and loading large files by as much as 10x; the enterprise side delivered another strong quarter, with additional customers adopting Firefly Services and custom models to scale on-brand content production for marketing scenarios, among them top brands like Deloitte Digital, IBM, IPG Health, Mattel, and Tapestry. Take Tapestry: it has put in place a new, highly productive digital twin workflow that uses custom models in Firefly. You'll be hearing more about how pairing creativity with marketing drives personalization at scale in enterprises. Adobe is exceptionally well positioned to capitalize on AI throughout creativity. We're quickly rolling out tailored innovations to serve the entire continuum of content creation for business professionals and consumers, creative professionals and creators, and marketing professionals. The range of things we offer keeps getting wider, and that's bringing in more types of customers. Our amazing strength in going to market, plus an operating model built on data that's been proven, is driving growth for our flagship products as well as the new ones. At Adobe Summit and MAX London in April, we'll be revealing additional product capabilities that are exciting. Now I'll hand things over to Anil.

Appreciate that, David. Hi, everybody. It was a solid Q1 for Experience Cloud, with $1.41 billion in revenue for the quarter. Subscription revenue came to $1.3 billion during the quarter, which works out to 11% growth year-over-year. Our top solutions across content, data, and customer journeys let enterprises worldwide deliver personalized experiences at scale, which helps customers generate both top-line growth and productivity gains. During Q1, we saw typical seasonal bookings and moved our pipeline forward as enterprise customers began executing their critical 2025 priorities. Adobe Experience Platform and its apps are central to enabling unified customer experiences. By adding AEP AI Assistant, we broadened the value and impact of Experience Platform, giving more functions across the business conversational interfaces for data ingestion, insight generation, audience segmentation, and experience delivery. We're now building on that progress and extending AEP so it can enable intelligent orchestration of customer experiences, with AI agents built in natively. We're enabling customers to get more out of their first-party data and to drive more relevant ad experiences grounded in direct customer relationships. Our portfolio covers the whole content supply chain, from creation and production, workflow and planning, asset management, delivery and activation, all the way to reporting and insights. Now we're uniting creativity and marketing through AI to help our customers capture the full potential of personalization at scale. Until now, marketing professionals have been limited by how many content variations they can produce and how many journeys they can deploy. Through Adobe GenStudio, brands worldwide have been working alongside Adobe to bring creative and marketing teams closer, streamline their creation to activation process, and unlock new levels of creativity, insights, and efficiency in marketing campaigns. Additional highlights include strong demand for Adobe Experience Platform and native applications, with Q1 subscription revenue up nearly 50% year-on-year. Release of Real-Time CDP Collaboration, providing a secure environment where advertisers and publishers can jointly discover, activate, and measure high-value audiences for more relevant campaigns. Built on AEP, Real-Time CDP Collaboration is purpose-built so brands can connect and collaborate around first-party data. Users can now measure ad effectiveness directly with publishers such as NBC Universal and Warner Bros. Discovery. Advertisers and agencies, among them Alterra Mountain Company, Group M Wavemaker, Major League Baseball, and the Coca-Cola Company, piloted the solution to deliver personalized and performant ads. Launch of the AEM Cloud Service Accelerator with Publicis Sapient, which can cut the labor cost of migration by up to 35%. Industry analyst recognition in major analyst reports, among them the Gartner Magic Quadrant for Digital Experience platforms and Gartner Magic Quadrant for Personalization Engines. Strong demand for Firefly Services and custom models as part of the GenStudio solution, with over 1,400 custom models since launch. GenStudio for Performance Marketing wins at leading brands such as AT&T, Lenovo, Lumen, Nebraska Furniture Mart, Red Hat, Thai Airways, and University of Phoenix. We're seeing really strong momentum in our partnerships, with GenStudio for Performance Marketing helping to support ad creation and activation across Google, Meta, Microsoft Ads, Snap, and TikTok, and several partners — Accenture, EY, IPG, Merkle, and PwC among them — are offering vertical extension apps. We also have a partnership with Dentsu aimed at moving Gen AI from the playground into production for our shared customers, through Adobe Gen Studio dentsu+. We landed key global customer wins, including Delta Air Lines, Ford, IBM, M.H. Alshaya, Microsoft, PNC Financial Services, and Tyson Foods. Those wins speak to how global brands' requirements keep evolving — they want an integrated workflow that spans creativity and marketing. This success comes from product integration and innovation across Creative Cloud and Experience Cloud, delivered more and more through Adobe GenStudio. Our One Adobe Enterprise go-to-market engine lets customers deliver personalized, on-brand content at scale. Having integrated enterprise solutions across both creativity and marketing is a unique strength for Adobe. Next week we're excited to host Adobe Summit, our flagship Digital Experience conference, in Las Vegas, where thousands of customers, partners, and developers from around the world will join us; we'll share our vision for how brands can use generative AI and agentic technology to achieve personalization at scale, and we look forward to highlighting a number of product innovations. I'll now hand it over to Dan.

Thanks, Anil. Over the past 10 years, Adobe's operations have expanded by providing top-tier offerings organized into 3 clouds: Creative Cloud, Document Cloud, and Experience Cloud; at the same time, we've kept broadening cross-cloud solutions to more effectively address various customer segments. Illustrations include Acrobat, which appears in both Creative Cloud and Document Cloud; GenStudio, which encompasses Creative Cloud, Express, Firefly Services, and Experience Cloud; organizations seeking to interact through One Adobe and merge creative licenses with marketing automation; and growingly, Acrobat and Express; we hold that Adobe's prosperity will stem from innovation benefiting both business professionals and consumers as well as creative and marketing professionals. Disclosing metrics and the monetary results throughout these customer segments will offer a transparent picture of Adobe's performance relative to our approach. Consequently, we will present total Adobe revenue, digital media and Digital Experience segment revenue, Digital Experience subscription revenue, and digital media ending ARR in aggregate instead of per cloud, plus subscription revenue for business professionals and consumers and creative and marketing professionals. The subscription revenue shared will chiefly encompass revenue from SaaS, managed services, and term offerings. The business professionals and consumers category will comprise all subscription revenue from Document Cloud, Acrobat subscription revenue and Creative Cloud, and Adobe Express subscription revenue and Creative Cloud, every one of which belongs to digital media. The creative and marketing professionals category will comprise all subscription revenue from Digital Experience, along with all of the leftover subscription revenue from Creative Cloud in digital media. On today's call, I'll address 3 primary topics: our Q1 FY2025 outcomes concentrating on essential growth drivers, monetary objectives, and our supplemental disclosures. Now, shifting to the quarter; during the first quarter of FY25, Adobe generated revenue of $5.71 billion, reflecting 10% year-over-year expansion or 11% in constant currency. GAAP diluted earnings per share in Q1 stood at $4.14, while non-GAAP diluted earnings per share came to $5.08. Q1 business and financial standout items comprised digital media revenue of $4.23 billion, digital media ending ARR of $17.63 billion, rising 12.6% year-over-year, Digital Experience revenue of $1.41 billion, cash flows from operations of $2.48 billion, and as the quarter closed, remaining performance obligations totaled $19.69 billion, up 12% year-over-year, with CRPO increasing 11%. Within our digital media segment, we posted Q1 revenue of $4.23 billion, amounting to 11% year-over-year growth or 12% in constant currency. We concluded the quarter with $17.63 billion of digital media ARR, boosting our ending ARR book of business 12.6% year-over-year in constant currency. In the first quarter, the drivers behind digital media growth covered a lot of ground. Acrobat saw robust expansion across every route to market and every geography. Acrobat web and mobile also grew, thanks to the freemium funnel plus app store optimizations. Adobe Express gained ground, powered by top-of-funnel improvements, PLG journeys spanning Acrobat and Express, and B2B customer onboarding. Adoption and engagement of Acrobat AI Assistant were strong, lifted by feature expansion such as added language support and contract intelligence capabilities. Creative flagship offerings grew on the strength of all apps, stock, imaging, and photography. Creative web and mobile offerings kept up their momentum, with ending paid subscription growth of 35% year over year. The enterprise side showed strong momentum as well, driven by Firefly Services and the ongoing upside from the upsell motion of generative AI-enabled offerings. Now to our Digital Experience segment: in Q1, revenue came in at $1.41 billion, up 10% year over year as reported and in constant currency. Digital Experience subscription revenue reached $1.30 billion, an 11% increase year over year as reported and in constant currency. Q1 Digital Experience growth drivers included momentum for product offerings spanning content, data, and journeys, AEP and app subscription revenue up nearly 50% year on year, GenStudio solutions exceeding $1 billion in ending ARR book of business, early momentum in GenStudio for Performance Marketing along with adoption in pipeline, and better overall enterprise retention. Let me move to how our customer groups performed. Subscription revenue for the creative and marketing professionals group was $3.92 billion, a 10% rise year over year as reported. Subscription revenue for the business professionals and consumers group was $1.53 billion, a 15% rise year over year as reported. Adobe's effective tax rate in Q1 came to 17.0% on a GAAP basis and 18.5% on a non-GAAP basis. RPO at quarter's end stood at $19.69 billion, an increase of 12% year over year, or 13% in constant currency, while CRPO rose 11% year over year, or 12% in constant currency. Cash flows from operations during the quarter hit a Q1 record of $2.48 billion, and our ending cash and short-term investment position as we exited Q1 was $7.44 billion; during Q1, we entered into share repurchase agreements totaling $3.25 billion, and $14.4 billion is currently left of the $25 billion authorization granted in March 2024. I'll now shift to our Q2 FY25 financial targets. For Q2 FY25, our targets are total Adobe revenue of $5.77 billion-$5.82 billion, digital media segment revenue of $4.27 billion-$4.30 billion, Digital Experience segment revenue of $1.43 billion-$1.45 billion, Digital Experience subscription revenue of $1.315 billion-$1.325 billion, GAAP earnings per share of $3.80-$3.85, and non-GAAP earnings per share of $4.95-$5. For Q2, we anticipate a non-GAAP operating margin of roughly 45% and a non-GAAP tax rate of roughly 18.5%. The year has started well, and assuming today's macroeconomic conditions, I'm glad to reaffirm our full-year guidance for fiscal year 2025. The strong results this quarter show how Adobe's focus on innovation, held for a long time, keeps meeting the rising needs of our wide customer base. With companies putting more emphasis on going digital, our distinctive offerings and track record of successful market execution leave us in a strong spot to create value and unlock creative potential. Moving forward, we see promising chances to fuel our customers' expansion as we keep defining what comes next in the age of AI. We can't wait to connect with all of you at our investor meeting during Summit 2025 next week. Thanks so much — at this point we're ready to open the floor for questions. Operator.

Hello there. Shan, suppose you were to isolate the AI-related portion of your business — for this entire year, that would represent a low single-digit % of overall revenue. I imagine plenty of people are wondering: at what point will this grow into something more significant? What kind of timeline are we talking about? And what needs to happen to get there? Perhaps you could just take us through the AI journey and explain how that ultimately turns into revenue.

Absolutely, Brent. When you look at the bigger picture, our AI efforts have consistently been framed around three components. Innovation comes first. Then comes monitoring how much it's used while making sure there's value and monetization. Across each of those three areas, I'd say we're quite happy. We've also had discussions with all of you previously. A large portion of AI monetization is likewise occurring through drawing subscribers in, keeping them around, and getting them into higher-value price SKUs. When a customer purchases Creative Cloud or purchases Document Cloud, what they're doing in essence is monetizing AI. Beyond that, Brent, our goal was to provide a sense of the fresh standalone offerings we've launched. We discussed bringing out Acrobat AI Assistant and making it available in multiple languages, Firefly, and ensuring a new subscription model tied to it on the web, Firefly Services aimed at the enterprise, plus GenStudio. That $125 million book of business we referenced as we exited Q1 pertains solely to that new book of business. Once more, that's something we stated we'd double. Regarding the effect on the broader business as well, it has played a substantial role. If you extend this scenario further and consider what investors should anticipate, I think given the new Firefly app that's launched, this is a web offering with a new subscription capability for the video model, plus the ability to include ideation within it. Picture it as subsequently bringing together Photoshop Web, Express Web, and every one of the other products. That entire set is additional upside too. You'll witness considerably more innovation in that space, and you'll witness considerably more monetization in that space. Once more, the final point I'll likely make, Brent, is that the entire aim was to begin setting it up and then, again at the FA meeting, keep broadening the explanation of where that stands. On balance, I'd say, whether it's innovation, having our own models, weaving it through all our products, completely new revenue streams such as GenStudio in the enterprise, and then usage plus monetization, I feel genuinely positive about it.

Great. Thanks, Shan.

We appreciate you fielding that. Good afternoon to everyone. I'd like to dig deeper into how demand flowed through the quarter. It's helpful that you restated the full-year guidance of 11% growth for digital media ARR. Could you share additional detail on what you observed during the quarter in both Creative Cloud and Document Cloud? Thank you.

Sure, glad to do that. To repeat, digital media ARR grew 12.6%, matching what we had anticipated, and the mix likewise came in where we expected. Stepping back to consider demand and how the quarter actually unfolded, the pattern matches what history shows us, and we've observed demand spread broadly across the products, with a handful of standouts worth mentioning. To begin with, when it comes to business professionals and consumers, this is clearly an enormous market, with billions of users that we're pursuing. What we're aiming for with our approach is ensuring productivity — providing a productivity answer spanning consumption through to creation; that's exactly what Acrobat and Express are doing for us. Momentum in these businesses was considerable. We noted that Acrobat's monthly active users rose 23% year-over-year. Conversion among those users is getting stronger, and that has been fueling the business. AI Assistant, which we launched last year, naturally keeps performing very well, and it's clearly supporting that approach of quicker consumption plus conversational experiences. Usage of AI Assistant grew 2x quarter-over-quarter. Naturally, against that backdrop, Express has proven to be an excellent product. As it stands, the product is simply fantastic to use. We've also invested heavily in it from a marketing angle, as well as through partnerships. Our partner ecosystem doubled over the last year. It now features new names such as Miro and Box and Webflow and HubSpot; we have 85% more access, 85% year-over-year growth in students with access to it. Our student and campus ambassador programs have been scaling up. We brought 6,000 additional small-medium businesses onto the Express product too. Even inside Acrobat, where our efforts have expanded, demand is rising much more. We saw 10x year-over-year engagement of Express capabilities from Acrobat users. We feel really good about that audience group. Turning to the Creative Pro and Creator side, Shan, you already brought this up, but the Firefly Video Model being used by Dentsu and PepsiCo and Stagwell. Firefly new offerings ranging from standard to pro. Only yesterday, we rolled out Premium, which delivers a considerably bigger set of generative credits, and each of those amounts to new monetization models. We launched Photoshop Mobile and web. We saw hundreds of articles, 30 million social engagements; over the weekend we were just listed as the focused app on the App Store; we saw some excellent new advances for AI arriving in Lightroom, web, and mobile. Premiere likewise saw some excellent advances on the AI front. Lots of momentum in that business. One thing that's genuinely thrilling is that alongside all the innovation we've been doing — as Shantanu mentioned — we've got three major milestones on the horizon: Summit is next week, NAB comes soon after, and then MAX London follows closely behind. That's beginning to become visible. Naturally, we've discussed generations; we passed 20 billion generations. At this point we're producing over a billion generations each month. Among those using the Firefly app, 90% are also creating video as part of that. We additionally observed robust enterprise growth. I'm not sure, Anil, whether you'd like to chime in.

Right, precisely. I'll just build on your point — within enterprise, there's substantial appetite for bringing creativity, marketing, and AI together. Each CMO we speak with, and every agency we collaborate with, is quite keen on understanding how generative AI might reshape the way the content supply chain operates; through the GenStudio product, which merges creativity, marketing, and AI, we've experienced enormous momentum, and we recorded multiple customer wins along with several agency partners; we're eager to reveal much more about this at Summit.

We're off to a really strong start, I'd say, when it comes to innovation and new offerings, and you should expect to see new tiers and offerings roll out over the coming months.

Look forward to talking to you next week. Thanks.

Great. I appreciate you fellows fielding my question, and I'm grateful for the extra details you shared. To me, it's quite compelling to see things split between the creative and marketing folks on one side and the business people plus consumers on the other. Picking up where the previous question left off — and please set me straight if I've got this backwards — I take it as a fairly optimistic signal that the business professionals and consumer segment is expanding faster, while creative sits at 15% and the creative and marketing professionals trail somewhat. My reasoning is that for business professionals and consumers, those offerings ought to move through the sales cycle more quickly, especially where consumers are concerned, and get adopted sooner. With the creative and marketing professionals, the wider solution you're attempting to sell would take more time to close. So my question is whether my read on this is accurate. Do you notice anything suggesting that the creative and marketing professional segment — through your pipeline or the activity you're observing — might eventually match the pace we're seeing from business professionals and consumers?

Keith, what I'd say is that a big part of what we were trying to do was begin giving you some visibility into how things look across those customer groups. And in a way, when folks ask how we're actually generating creative output, the truth is that if you look at the GenStudio family of offerings — which we've now described as a billion-dollar book of business — AEP and Apps is likewise a billion-dollar book of business. And the creative professional side is really about the whole content supply chain. So when it comes to that growth rate, as we bring on additional subscriptions such as the Firefly app subscription, bring in more video, bring in more capability in what GenStudio does, that growth rate too reflects a very large untapped opportunity. People keep asking us about how strong the creative market is and how strong that market is inside the enterprise; our view is that it's a big TAM, and we'll say more. I think your framing is correct — namely that the $5 billion book of business we assembled for digital marketing is genuinely supporting the content and creative economy; that's why we wanted to give you a window into it. The metrics tied to that are subscription and various kinds of offerings. On the other side of the ledger, as you point out, what we aimed to do was show that the investments we've made in both Acrobat and Express keep ensuring distribution when we consider monthly average users. Taken together, Adobe has hundreds of millions of people who use our products on a monthly basis. Those will really be the initial metrics and signals for how Express and Acrobat keep growing. I'm glad the extra disclosure was useful to you; that was the point. Regarding Brent's earlier question, I also wanted to clarify something. We are not labeling every dollar of revenue we see in Digital Media and Digital Experience as AI revenue. Compared with what I've observed from any other company in our space, we've actually been happy with how much of it — whether that's additional tiers of AI within Digital Experience or what we're seeing across Acrobat and in the creative professional space — has shown good adoption of AI. That was the other purpose, to begin showing that so we can discuss it further at the FA meeting.

Great. Could I squeeze in one final question for Mr. Durn? It's wonderful to watch you folks capitalize on the dip in the share price by stepping up the buyback, which accelerated during this quarter. Is that rate of repurchasing something you can keep up for the whole year, or was that more of a one-off bump?

Well, Keith, stepping back and looking at the past 4 quarters, we've bought back close to $11 billion. We've consistently said that whenever chances come up to act opportunistically, we'd seize them. That's, I think, what happened in Q1. Our perspective on the financial picture for the entire year is solid. Glad to reaffirm guidance, but we'll achieve that through robust operating margins, robust cash flow generation, and by being robust capital allocators all year long. We're pleased with our position. Should chances arise to be opportunistic, we'll take them.

Thanks. We certainly sense a real show of support in the possibilities we see lying in front of us.

Alright, it's really encouraging to watch you all back up your words with action by speeding up that buyback of shares. That certainly makes a difference.

Hello there, and thanks a lot. I really appreciate the disclosure, the color, and all the accompanying details. Shantanu, I'd like to ask you something. When the company shifted toward a new business model by way of cloud, at first, skepticism ran high. After that, you demonstrated to us that the TAM was in fact bigger within the new creative-meets-cloud cycle. The company managed to speed up throughout that transition and deliver even stronger margins by widening the TAM as a consequence. As you examine AI at this moment, one bearish case someone might raise — which I don't buy into — is that you're on defense, and that AI amounts to a cost of remaining in business and staying relevant to your creative base. Given that you've already lived through this one major shift, and you carry plenty of experience, how do you see it — where does your conviction stand regarding just how genuinely incremental AI can be for your growth? Might we be at a comparable crossroads, positioned to enter the following cycle? It's in fact a larger TAM — not to speak for you — but possibly even, if I may be so bold, the chance to accelerate from the solid growth we've witnessed up to now. Many thanks.

Kash, the thing I like about that question is that it's exactly what we were hoping to put out there ahead of the FA meeting. As David explained, the chance with business professionals and consumers — I believe you'll begin to notice, and we'll say more during the FA meeting — is that there are billions of people we can welcome in for creativity and productivity, and we'll discuss further how, given our distribution and our monthly average users, we turn that into revenue a lot like we've done with Acrobat. It's a huge, huge opportunity, we firmly think. The same holds for creatives, in my view. More creators are coming in. Let me give a small taste of what David is going to cover, which is that if you consider the web and mobile products we offer to draw additional people onto our platform as creative professionals and next-generation creators, far more people want to join that profession than at any point before; with offerings such as Photoshop on web and mobile plus the Firefly app, the aim is plainly to demonstrate how, as a subscription service, bringing in the next generation of creators will act as a tailwind. Once you combine all of this in the enterprise — I mean, ideally what you also notice within the extra disclosures is that enterprises remain a significant portion of our business and a significant portion of our growth, since to achieve personalization at scale, as Anil mentions, more content will be generated. More content will be placed into ad systems and social media. Once again, I think that sets things up to show how it's a bigger opportunity. If you view it not merely through how long we've been marketing, but through the lens of, hey, that's a content business for us in the enterprise, we will once more lay out how that can only become a growing opportunity. There's no doubt in my mind that all three of these will in fact speed up when it comes to the TAM; after that we need to innovate and execute on it. Because of AI, I'm even more enthusiastic about the bigger opportunity, no question; we've discussed this, Kash. Should you fail to capitalize on AI, it becomes a disruption; in our own situation, the goal is obviously to demonstrate how it's a tailwind.

Great. Just one more quick thing, and if I may, a question about a commitment; given all the market turbulence around trade wars, tariffs, and so on, what's your sense of how your customer base will act? From what you're hearing when you talk with them, does it look like everything stays on track, or are they somewhat bewildered by the situation and holding off? Many thanks. That's all from me.