Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Good afternoon, and thanks for being with us. Joining me today are Adobe's Chair and CEO, Shantanu Narayen; David Wadhwani, who leads Digital Media as President; Anil Chakravarthy, President of Digital Experience; and Dan Durn, Executive Vice President and CFO. This call is being recorded, and we'll be talking about Adobe's financial results for the second quarter of fiscal year 2025. Our press release is available, along with PDFs of our prepared remarks and financial results, on Adobe's Investor Relations website. Everything discussed today, including our financial targets and product plans, reflects information as of today, June 12th, and includes forward-looking statements involving 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. We'll be discussing GAAP and non-GAAP financial measures on this call. Our reported results include GAAP growth rates as well as constant currency rates. Throughout this presentation, unless otherwise stated, Adobe's executives will refer to constant currency growth rates. 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.

Thank you, Steve. Good afternoon, everyone, and I appreciate you being here with us. Adobe has once again posted a robust quarter, with revenue hitting a record $5.87 billion — that's 11% growth compared with a year ago. For the quarter, GAAP earnings per share came in at $3.94, while non-GAAP earnings per share reached $5.06, which works out to 13% growth year over year. Back in March, at our investor meeting, we laid out the company's growth strategy, built around delivering transformative innovation to a wide range of customer audiences: business professionals, consumers, creators, creative professionals, and marketing professionals. With AI acting as an accelerant, the creative opportunity keeps widening across those audiences; it's throwing open the content floodgates, reaching into everyone's imagination, and dramatically scaling up how many creative assets get created, edited, integrated, and delivered. Around the globe, there are billions of business professionals and consumers who want to be creative and efficient at the same time in order to reach their goals. They view AI and conversational interfaces as a more productive path to speed up creative storytelling and to rapidly pull together information from multiple documents. What they want are fast, simple tools accessible on any computing surface, plus an easy on-ramp that lets them try products and subscribe according to the value they get. As demand for creative expression keeps growing exponentially, creativity and productivity are coming together. AI can help them become more creative and productive within their business context. Adobe led the way in creative storytelling through pioneering applications such as Photoshop and Illustrator, and in digital document sharing with the launch of PDF and Acrobat. Our strategy is to bring productivity and creativity to life for billions of users across many different surfaces. Acrobat AI Assistant is changing how people draw value from digital documents, opening up new levels of productivity by shortening the time to insights via conversational interfaces. With Adobe Express, AI lets consumers design and publish engaging content quickly through conversational AI within an easy-to-use, all-in-one application. Our distinctive value proposition lies in integrating these solutions to enable a smoother creation-to-consumption process across mobile apps, web browsers, and desktop offerings. Adobe's monthly active users in these categories have now surpassed 700 million; within the creative and marketing professionals group, creative professionals require best-of-breed applications that let them bring their ideas to life across media types, including imaging, design, video, photography, illustration, animation, 3D, and more. These offerings must extend across every surface and enable seamless collaboration with multiple stakeholders. The next generation of creators is seeking powerful on-ramps via web and mobile platforms. Ideation through AI is a category that's emerging and will grow more powerful by supporting multiple creative models. To capture this content supply chain opportunity, Adobe is delivering a comprehensive creative platform that spans from ideation through creation to mass production and delivery. Adobe Firefly sits at the heart of this creative AI revolution — an on-ramp to creative expression that amplifies the power of Creative Cloud desktop applications. The Firefly app serves as a fresh hub where AI helps with coming up with ideas, making content, and handling production, thanks to Adobe's wide-ranging set of commercially safe Firefly creative models plus a broad ecosystem of models from outside partners. With Firefly, creative pros can produce images, video, audio, and vectors all in one spot, enjoying creative control that's unmatched, refine what they make using Adobe's creative apps, and move those creations straight into production without friction. By backing third-party models — among them ones from Google, OpenAI, and Black Forest Labs — we give creators the freedom to pick whichever AI suits them best, while Firefly maintains our benchmarks around IP safety and transparency; we launched new Firefly options around the world and plan to bring out additional innovation in the coming months. When combined with Creative Cloud apps, the Firefly app gives creative professionals better precision and performance, prepared to assist them anytime and anywhere inspiration hits. New users are being drawn to the Adobe franchise by the Firefly app, as first-time subscribers climbed 30% compared to the prior quarter. Our digital experience segment drew inspiration from our aim to let enterprises deliver this creative output at scale as part of transforming their digital marketing. There's a distinct edge and chance we hold to merge creativity, marketing, and AI so that customer experience orchestration gets delivered. Those in marketing roles must produce a volume of compelling content unlike anything seen before, and fine-tune it to provide personalized digital experiences spanning channels such as mobile apps, email, websites, social media, and advertising platforms. What they want is agility and self-service, plus workflows that are integrated with their creative teams and agencies. For that to happen, enterprises need custom, commercially safe models along with agents built for specific purposes to tackle inefficiencies in the content supply chain. Marketing practitioners, chief marketing officers, and chief digital officers require solutions letting them acquire, engage, and delight customers across many channels and geographies. Adobe's approach is to provide a full marketing technology platform that uses AI to deliver vertical solutions merging content, customer data, and profiles throughout journeys in both B2B and B2C sectors. Across enterprises, Adobe GenStudio and Firefly Services are transforming the content supply chain, giving marketers the power to activate personalized on-brand content at millions of touchpoints. For those in marketing, Adobe Experience Platform along with apps and purpose-built agents are reshaping how customer connection will work going forward by allowing real-time orchestration of content, data, and journeys. What sets Adobe apart is our best-of-breed, industry-leading applications spanning web content management, analytics, customer data platforms, commerce, journey orchestration, and workflow management. Into every one of these solutions we're weaving AI, and in GenStudio we're merging creativity with marketing by uniting creative ideation and production, workflow, asset management, content delivery, and content analytics into one seamlessly integrated offering. Our AI-influenced ARR already brings in billions of dollars, yet our AI book of business — coming from AI-first products like Acrobat AI Assistant, Firefly app and services, and GenStudio for performance marketing — is running ahead of the $250 million ending ARR target before fiscal 2025 wraps up. At this point, I'm going to hand things over to David and Anil so they can talk about the momentum we're seeing across our businesses.

Thank you, Shantanu. Hi, everybody. During the second quarter, digital media brought in $4.35 billion in revenue, representing 12% growth compared to the same period last year. We closed out the quarter with $18.09 billion in digital media ARR, which means ending ARR rose 12.1% versus a year earlier. Strong results continue across our business professionals and consumers segment, where more and more users look to Adobe for offerings that blend creativity with productivity. Just about every business professional and consumer can gain from AI-assisted consumption, visually rich creation, and natively integrated collaboration. Our bets on conversational experiences in Acrobat and generative AI models in Express let users merge these two products in fresh ways, giving them the power to speed up how quickly they reach insight and their capacity to build compelling presentations. A sales professional might pull industry reports about a prospect, rely on AI Assistant to rapidly spot effective sales conversations, and then have Express automatically produce a pitch deck. Someone marketing on social media could ask AI Assistant to help surface buying behaviors inside market research documents, then apply what they learn to make better TikTok videos in Express. By pairing Acrobat with Express, anyone can shift from consumption into creation more quickly, with content that lands harder than it ever could before. Because of this, we see consistent expansion throughout our family of Acrobat and Express products, with combined monthly active user growth speeding up past 25% versus the prior year and surpassing 700 million monthly active users, as Acrobat users lean more on Acrobat AI Assistant to improve how they consume content and on Express to build richer PDFs, customized presentations, and animated designs. Given rising customer appetite for creative functionality via Acrobat, we observed roughly a 3x rise quarter-over-quarter and roughly an 11x rise year-over-year in how much Express capabilities were adopted inside Acrobat. Subscription revenue for the business professionals and consumers group climbed 15% compared with a year ago; we are quickly bringing in the next generation of business professionals and consumers spanning individuals, small and medium businesses, and enterprises. On the student side, we are generating more than a 75% year-over-year rise in students who obtain access to Acrobat AI Assistant and/or Express premium plans. Businesses are also embracing these products strongly, with more than 35,000 new businesses brought on board during Q2. Express on its own welcomed roughly 8,000 new businesses this quarter, which is about 6x growth year-over-year, among them names like Microsoft, ServiceNow, Workday, Intuit, and leading sports leagues including MLB, the NFL, and Premier League. Additional highlights: Acrobat PDF link sharing MAU climbed more than 20% year-over-year, which helps fuel viral adoption. Usage of generative AI features keeps expanding rapidly, as AI Assistant MAU in Acrobat and generative AI MAU in Express each rose more than 3x year-over-year. Acrobat AI Assistant engagement keeps picking up pace, with questions asked almost doubling quarter-over-quarter. The Express ecosystem keeps growing, as partner add-ons increased by more than 25% quarter-over-quarter, alongside new integrations from Google Ads, Vimeo, and Bitly. Notable global customer wins include Cisco, County of Los Angeles, the Defense Information Systems Agency, Macy's, and Ulta Beauty. We are likewise noticing how creative content matters more and more among creative and marketing professionals. There's growing appetite for creative tools that work across different formats — things like imaging, design, photography, video, illustration, and 3D. That's because both people and companies now require eye-catching visuals if they want to cut through a noisy media environment. A lot of these individuals and organizations are adopting AI so they can produce top-tier content faster and more nimbly. Because of this, the Firefly app has become the go-to creative AI hub — for Creative Cloud subscribers and newcomers equally — where they can explore ideas, generate material, work together, and use AI-first workflows spanning every media type. Whether you're a veteran pro or someone creating for the very first time, the Firefly app lets you produce several media formats inside one product, with creative control that's unmatched, and then refine those creations throughout Adobe's creative apps. Our own commercially safe Firefly Foundation Models — covering imaging, video, audio, vector, and design — are what power the Firefly app. During the earlier part of this quarter, we rolled out the new Firefly Image Model 4, built for lifelike images, along with the Firefly Image Model 4 Ultra, built for flawless detail and intricate visuals. On top of that, we made the Firefly Video Model available to everyone for the very first time, which lets creators turn text prompts and images into 4K footage with creative control never seen before, and extend video clips inside tools such as Premiere Pro; beyond running our own Firefly models, the Firefly app now also works with an expanding lineup of third-party models for creative ideation. You get the flexibility to discover the varied aesthetic styles offered by Google's Imagen and Veo models, OpenAI's GPT image model, and Black Forest Labs' Flux image model — with Runway, Ideogram, Fal AI, Luma, and Pika arriving soon. Thanks to the public beta release of the Firefly Board earlier in this quarter, creators can now brainstorm and work together while generating content using Firefly along with our third-party models. To turn this amazing innovation into revenue, we've rolled out a full set of offerings targeting new and existing creators as well as creative professionals across every route to market. The new Firefly app subscription plans suit creators who are just beginning their creative journey, and they're available worldwide now. Creative Cloud Pro — which bundles Creative Cloud All Apps together with the Firefly app — delivers the greatest value for content creation and is available now in North America. Over the coming months, Creative Cloud Pro will arrive in additional geographies. Among other highlights, the debut of the new Firefly capabilities in February keeps generating excitement. Visits to the Firefly app climbed more than 30% quarter-over-quarter, while paid subscriptions almost doubled during that same stretch. Firefly keeps bringing in new users, with first-time Adobe subscribers up over 30% quarter-over-quarter. We introduced Photoshop Mobile and shipped significant updates to our flagship Creative Cloud apps — among them Photoshop, Illustrator, Premiere Pro, After Effects, and Substance at Max London — which together drew more than 350 million video views on social media. Enthusiasm for and uptake of generative AI capabilities — including generative fill in Photoshop, generative remove in Lightroom, generative expand in Illustrator, generative extend in Premiere Pro, video generation inside the Firefly app, and production workflows through Firefly Services — keeps speeding up, with more than 24 billion cumulative generations coming out of Q2. Notable customer victories include Cisco, County of San Diego, DEBT Holding, Fanatics, Infosys, Schwartz Global Sourcing, and Wells Fargo. The world economy runs on creativity, and it's the basis for how marketers connect with their customers successfully across channels. Because of that, we're observing strong enterprise appetite for and take-up of Firefly Services and custom models to automate and scale on-brand content production for marketing use cases. Adobe holds a unique position to spearhead applying AI toward magnifying creativity throughout the entire continuum of content creation. We're thrilled by the momentum visible in both our flagship apps and new offerings across our business professionals and consumers and creative and marketing professionals groups. Our expanding monthly active user base, quickening generative AI usage, consistent arrival of new customers, addition of partner models, and speeding adoption of automation services produced a robust quarter, with digital media revenue reaching $4.35 billion, and we're happy to lift our revenue goal for the year. I'll hand things over now to Anil to discuss how this creative innovation is boosting our momentum with marketing professionals.

Thanks, David. Hi, everybody. Experience Cloud delivered a solid Q2, posting $1.46 billion in revenue for the quarter. Subscription revenue came to $1.33 billion in the quarter, which works out to 11% growth versus a year ago and makes us the biggest provider in our category. Content creation serves as the fuel that powers personalized experiences at scale. Adobe stands alone in bringing together the whole workflow — from creation and production, workflow and planning, asset management, delivery and activation, all the way through reporting and insights. Our customer experience orchestration strategy lets enterprises blend creativity, marketing, and agentic AI to deliver personalized conversational digital experiences in real time on a global scale. Through Adobe GenStudio, we're magnifying the value of cutting-edge Gen AI capabilities across the end-to-end content supply chain. GenStudio streamlines planning, creating, managing, activating, and measuring content for marketing campaigns and personalized customer experiences; we launched GenStudio Foundation, a unified interface that pulls together data from our full suite of content supply chain applications, giving visibility and actionable insights into campaign plans, projects, and assets. GenStudio for performance marketing gives teams the power to produce their own on-brand content, supporting ad creation and activation for Google, LinkedIn, Meta, Microsoft, Snap, and TikTok. We're capitalizing on the momentum behind Firefly services and custom models, tackling other highly sought-after solutions, such as video reframe and support for third-party models for automation and cost efficiency. Together with The Coca-Cola Company, we co-developed a new AI-powered design intelligence system called Project Vision, built on Firefly services and custom models. Project Vision is meant to scale creative output up to 10x faster while addressing the widespread problem of brand guidelines being misinterpreted in AI-powered content. Adobe Experience Platform and native applications sit at the heart of delivering unified personalized customer experiences. With the introduction of AEP AI Assistant, we've broadened the platform's value by letting teams across the business engage with data through natural language, streamlining ingestion, insight generation, audience segmentation, and experience delivery. Building on that momentum, we're now extending AEP with native AI agents that intelligently orchestrate customer journeys in real time; these innovations enable our customers to tap their first-party customer data and deliver more relevant, high-impact advertising experiences rooted in direct customer relationships. The National Football League broadened our global partnership, combining content, data, and journeys to deliver a new level of AI-powered fan experiences. Adobe will make it possible for all 32 clubs to scale personalized fan touchpoints across NFL channels via project management, audience and campaign development, creative production, and performance optimization. At Adobe Summit in March, we rolled out the Adobe AI Platform with an agentic layer to scale customer experience orchestration. We revealed 10 agents purpose-built for creative marketing and technology teams that use Adobe Experience Platform to act intelligently and in alignment with business goals; these agents coordinate across systems to speed up the delivery of exceptional experiences. We recently introduced a product support agent to help enterprises anticipate, troubleshoot, and resolve operational issues. Companies such as Wegmans Food Markets and Dentsu Merkle have already adopted this solution, using it to simplify onboarding and feature rollouts while achieving quicker resolutions and improved efficiency. Additional bright spots include robust appetite for AEP and native apps, with subscription revenue in Q2 climbing more than 40% compared to the same period last year. GenStudio for performance marketing is gaining steam, posting quarter-over-quarter growth above 45%. Firefly services and custom models continue to see sustained interest as components of the GenStudio offering, producing ARR growth of 4x versus a year ago. When AEM Sites Optimizer launched, it drew enormous curiosity from clients such as Qualcomm, keen to leverage its agentic abilities for useful insights and suggestions that enhance their website's performance, usability, and security. Recognition from industry analysts has also come our way, among them being positioned as a leader in the Forrester Wave for collaborative work management for a third time in a row, the IDC Marketscape for worldwide connected TV advertising platforms, and the Gartner Magic Quadrant for content marketing platforms with GenStudio solutions, encompassing Workfront, Adobe GenStudio for performance marketing, Creative Cloud, Firefly, and Express. Notable global customer acquisitions include Aviva, Australia Post, Dyson, Pfizer, Infosys, Major League Baseball, Manulife, Navy Federal Credit Union, O'Reilly Auto Parts, Premier League, SAP, UBS, Ulta Beauty, and Wyndham. Our broadened vision of customer experience orchestration is being put into action to enable enterprises to achieve personalization at scale in the AI era. What enterprises seek is a technology partner and platform that can bring together disjointed solutions and deliver enhanced efficiency and worth. Prominent enterprise names like AWS, Microsoft, SAP, and ServiceNow have thrown their support behind Adobe as their chosen partner for customer experience orchestration. Our worldwide partner ecosystem has been mobilized, covering leading technology and media firms, system integrators, and top agencies, to speed up customer experience orchestration. At the Cannes Lions Festival next week, we will reveal a number of thrilling announcements highlighting the strength of our category-defining solutions and partnerships. We anticipate connecting face-to-face with clients and agency allies during the event. Possessing exceptional scale and a distinct innovation roadmap, we are strongly positioned to sustain our growth. I will now hand things over to Dan.

Thanks, Anil. I'll begin today by giving you a recap of how Adobe did in Q2 of fiscal 2025, calling out the growth drivers throughout our businesses, and then I'll wrap up with our financial targets. During Q2, Adobe brought in revenue of $5.87 billion, reflecting 11% growth versus a year ago both as reported and in constant currency. GAAP-diluted EPS for Q2 came to $3.94, while non-GAAP-diluted EPS reached $5.06, which works out to 13% growth compared with last year. Business and financial highlights for the second quarter encompassed digital media revenue of $4.35 billion, digital media ending ARR of $18.09 billion, up 12.1% from a year earlier, digital experience revenue of $1.46 billion, and cash flows from operations of $2.19 billion — a Q2 record. As we closed the quarter, remaining performance obligations stood at $19.69 billion, an increase of 10% year-over-year, or 11% in constant currency, while CRPO rose 10% both as reported and in constant currency. In our digital media segment, Q2 revenue came in at $4.35 billion, amounting to 11% year-over-year growth, or 12% in constant currency. We ended the quarter holding $18.09 billion in digital media ARR, expanding our ending ARR book of business by 12.1% year-over-year in constant currency. Inside digital media, second quarter growth drivers for business professionals and consumers featured monthly active users climbing more than 25% year-over-year, fueled by PLG optimization of the merged Acrobat and Express freemium funnel. Solid acquisition, usage, and monetization of our AI offerings, such as Acrobat AI Assistant, Acrobat Premium, and Express. Quickening adoption of Express creative functionality via Acrobat, producing roughly 11 x year-over-year growth in monthly active users thanks to rising customer demand. Record mobile app store results for Acrobat and Express together, with ending ARR up more than 40% year-over-year, plus robust uptake of Acrobat and Express among individuals, SMBs, and enterprises across geographies. Inside digital media, second quarter growth drivers for creative and marketing professionals featured expansion of Creative Cloud flagship offerings led by CC All Apps, Photoshop, and Lightroom, with standout strength in emerging markets powered by Latin America, India, and Eastern Europe. Building traction for the recently launched Firefly app web subscription along with Photoshop Mobile offerings. Considerable use of Firefly across our Creative Cloud and Firefly apps, with cumulative generations passing $24 billion as we exited the quarter, and swift acceleration of creative and marketing automation through Firefly Services integrated with GenStudio in the enterprise. Moving to our digital experience segment, during Q2 we delivered revenue of $1.46 billion, equal to 10% year-over-year growth as reported and in constant currency. Digital experience subscription revenue totaled $1.33 billion, up 11% year-over-year as reported and in constant currency. Inside digital experience, second quarter growth drivers for marketing professionals featured industry demand for customer experience orchestration solutions that call for integrated offerings spanning content, data, and journeys, generating greater value from AI-infused prime and ultimate tiered offerings among both existing and new customers. AEP and app subscription revenue grew more than 40% year-over-year. Strong uptake of GenStudio, with ARR growth exceeding 25% year-over-year and rising customer value, keeping customer retention solid. What’s fueling Adobe’s momentum is creativity that serves business users and consumers, plus creative and marketing pros. Within the business professionals and consumers segment, subscription revenue came in at $1.60 billion, up 15% from a year earlier both as reported and in constant currency. On the creative and marketing professionals side, subscription revenue reached $4.02 billion, reflecting 10% growth year over year, or 11% in constant currency. Also, prior subscription revenue tied to these customer groups can now be found in the Adobe Investor Relations data sheet, in the supplementary customer group data, going back to FY 2023. Now moving to the income statement and balance sheet: Adobe’s effective tax rate for Q2 stood at 19.5% on a GAAP basis and 18.5% on a non-GAAP basis. RPO at quarter’s end totaled $19.69 billion, a 10% increase versus a year ago, or 11% in constant currency, while CRPO rose 10% year over year both as reported and in constant currency. Cash flows from operations during the quarter hit a Q2 record of $2.19 billion, and cash plus short-term investments at the close of Q2 amounted to $5.71 billion. During Q2, we signed a share repurchase agreement worth $3.50 billion, and we still have $10.90 billion left under the $25 billion authorization approved in March 2024. Now let me discuss our financial targets, which are based on current macroeconomic conditions. For Q3 of FY 2025, our targets are total Adobe revenue of $5.875 billion-$5.925 billion, digital media segment revenue of $4.37 billion-$4.40 billion, digital experience segment revenue of $1.45 billion-$1.47 billion, digital experience subscription revenue of $1.35 billion-$1.36 billion, GAAP earnings per share of $4-$4.05, and non-GAAP earnings per share of $5.15-$5.20; for Q3, we anticipate a non-GAAP operating margin of roughly 45.5% and a non-GAAP tax rate of roughly 18.5%. Because we delivered such strong results in the first half, we’re happy to lift our FY 2025 targets for total revenue, digital media segment revenue, and EPS, while reaffirming digital experience subscription and segment revenue as well as digital media ending ARR growth for the year. On top of that, we’re on track to exceed $250 million in AI-first direct ARR book of business as we exit the year. For FY 2025, we now aim for total Adobe revenue of $23.50-$23.60 billion, digital media segment revenue of $17.45-$17.50 billion, digital media ending ARR book of business growth of 11.0% year over year, digital experience segment revenue of $5.80-$5.90 billion, digital experience subscription revenue of $5.375-$5.425 billion, GAAP earnings per share of $16.30-$16.50, and non-GAAP earnings per share of $20.50-$20.70; in short, Adobe’s Q2 results and updated FY 2025 targets show outstanding execution and the momentum we’re generating across our portfolio amid a dynamic macroeconomic backdrop. With disciplined investment and a focus on customer innovation, we stay confident in our capacity to deliver strong shareholder value. Shantanu, back to you.

Thank you, Dan. Our momentum is clear from a robust Q2, and it shows how artificial intelligence is being used by us to generate outsized returns within the creative economy. Given both the plan we've pursued and how well we've carried it out, we have every confidence that we can bring value to the customers we already serve while drawing in additional users. It fills me with enormous pride to see our global teams keep building what comes next, setting a higher standard, and making our mission real. Great people keep choosing Adobe, and we are delighted to have recent college graduates and interns joining the effort to transform the world via tailored digital experiences. I appreciate it, and at this point we'll open the floor to your questions. Operator.

All right, sounds good. Hi everyone, I appreciate you fitting in my question. David — and perhaps this is for both David and Shantanu — combining creativity with productivity really does appear to be a recurring theme. Along those lines, it's notable how Express is being adopted more and more inside Acrobat. Could you explain what makes that pairing effective, and what the pricing structure looks like? Is the customer signing up for the two, or only one? Thank you.

Thanks, Saket. Sure. As we've discussed over a long stretch now, demand for creating content — and increasingly content that's visually rich — is simply exploding. The reason this pairing delivers, and the reason Acrobat plus Express genuinely function as a single value proposition for business professionals and consumers alike, comes down to a substantial body of effort on our side, plus research findings, showing that for a great many people, consuming content is in fact where creating content begins. When we introduced AI Assistant roughly 12 months back, as I've noted before, something we began to observe was that while users held conversations with the documents they had open, their immediate next action — or among their final actions — was essentially to ask the AI Assistant to produce a summary for an email, or draft an outline for a presentation, or supply stats for an infographic. So what we've accomplished is pulling these products onto a single surface, making them effectively one product. With Acrobat, you can reach every capability Express offers, along with whatever you receive through freemium there. Going forward, expect to see the two become integrated more deeply and more often, and we've got plenty of exciting news to share on that front during this year's back half.

That's quite useful, thanks.

I appreciate it, and nice work on beating expectations and raising guidance. On the Adobe Stock site, I saw that the amount of video material grew significantly in Q2, and I'd like to know what you're observing there that's pushing contributor-uploaded content upward. And with the recent news about Disney and NBC Universal bringing a copyright suit involving certain AI-generated images, I'm wondering whether you think that could support Adobe's approach of being commercially safe and offering content authenticity, and whether you see any consequences from it.

Appreciate the question. When you boil that question down the way you've framed it, I'd say one of Adobe's fundamental beliefs, both past and present, is that we hold content creators in very high regard; our goal is to ensure we assist them in earning money from what they produce by every means available, since we believe that benefits the industry as a whole. Something we've done across the past several years involves transforming Adobe Stock from a standalone set of capabilities into something woven into everything, so that a larger number of users receive greater value, and with demand for content rising steadily, it sits right there within reach. Whether somebody works in Express, in Creative Cloud, or in Firefly Boards, they can tap into this amazing collection of content that the community keeps producing. More lately, as you pointed out, we broadened that collection by putting money into what we refer to as creative missions, enabling people to upload additional video content, video content in every form for every type of output, be it vertical or horizontal. With that video content corpus expanding, we're noticing considerably more pull-through, and the entire economy surrounding it is functioning well. Regarding your point about the training data set and the way we train and pay creators, this has been among our central convictions from day one: the correct, transparent, and truly the sole commercially safe method of building these models involves using a set of content whose contributors are themselves enthusiastic and eager participants in the process. As lots of you are aware, we've trained our Firefly models on stock and other content we can access. There's a contributor fund we maintain that issues payments to those people. Consequently, we feel we hold a highly advantaged position when it comes to how people pick models. I'd note that particularly among enterprises, we observe many companies choosing Firefly partly for its quality, partly for how controllable it is, but also quite strongly for its commercial safety. Our view is that this is simply the proper way to go about it, and we're confident it's a sound long-term bet for this industry.

Mark, if I could just jump in here — regarding those other services, I believe every one of them has really only scratched the surface when it comes to ideation. My view is that Firefly, backed by support for each of those models, is going to become the ultimate creative destination. And to underscore what David mentioned, within the enterprise, our value proposition really lands, since even when you're just doing ideation, you won't reach for a tool that wasn't built so that the intellectual property is correct for production. That, I think, is where you'll keep seeing our offerings used for scale production, because it's just so unique.

Great, thanks a lot.

Yes, I really appreciate it. David, I was hoping you might be able to just talk us through, say, the first response to the shift involving Creative Cloud Pro, what you're observing there, and then, say, what you could be anticipating when it comes to those shifts in the year's back half, looking at it from a revenue standpoint. Thank you.

Okay, stepping back for a moment — and I think on this point we've actually stayed pretty steady across the past few years when it comes to the central strategy, and we restated it at Summit a few months back — the appetite for content has been nearly impossible to satisfy. A very strong number of individuals are looking to produce richer content. Something we've mentioned before is that in earlier times, Creative Cloud amounted to just one package, either Creative Cloud All Apps or Creative Cloud Pro, essentially pulling double or even triple duty across the whole ecosystem of people who want to make content. Over the past couple of years, we've been very deliberate about widening that lineup of offerings, correct, so we can serve business professionals and consumers through Acrobat and Express. We can serve creators through the fresh Firefly plans we launched not long ago, including Firefly Standard at $10, Firefly Pro at $20, or Firefly Premium, which also provides unlimited access to video generation, at $200 per month. For Creative Pros, we've been steadily building in more and more of these capabilities right inside the tools — the desktop tools they already know, love, and rely on daily. The value they receive from that is huge. We noted that we've now passed 24 billion generations in total. Because of that, we've been able to bring out the Creative Cloud Pro plan, a plan with a higher price, yet far more value is woven into the desktop application ecosystem, and it includes the Firefly application too. When it comes to enterprises, we're witnessing tremendous expansion of Firefly Services and GenStudio for automating that content. That genuinely aligns with what we've described as our monetization architecture of P x Q plus V, correct, where quantity growth originates from business, pro, and consumer. We mentioned how Acrobat and Express are posting robust MAU growth, 25% year over year, passing 700 million. Quantity also originates from the Firefly App. We mentioned traffic rising 30% quarter-over-quarter. We mentioned 2x subs growth there, 30% growth in new users to Adobe quarter-over-quarter for Firefly. On the pricing portion of that equation, we mentioned the added value we now have in Creative Cloud Pro, which gives us some room to align the value we deliver with the pricing. As for value, it centers on Firefly Services and GenStudio. That is truly the growth algorithm. What's worth noting is that along this path, some of it will need time to fully unfold, since on the quantity side we have premium and lower-priced offers, but the early signs are beginning to show. When you actually work through the numbers — and perhaps I'll hand things off to Dan here — once you work through those numbers, what you see is that subscription revenue in our core creative business has been picking up speed across the last several quarters.

Yes, and to add to what was said, David, looking at the supplemental disclosure we made available, you can subtract the subscription revenue for DX and the subscription revenue for creative and marketing professionals, and very quickly figure out the subscription revenue tied to the Creative and Creative Pro audience we serve. What I believe you will find is that in the quarter we're in now, it is expanding 10.1% year over year, an increase from 10% in Q1. If you consider how that acceleration has played out across the last four or five quarters, during the year-ago period, that very same 10.1% would have come in at roughly 7.9%. That works out to a bit more than 2% of acceleration across the last four quarters. The way the strategy is unfolding makes us feel good, and so does our ability to execute against that growth strategy.

Kirk, regarding that separate question you had on the rollout, let me clarify: this all takes effect when a renewal occurs. The positive part is that everything still lies ahead of us in terms of where that takes place; we'll deploy it across enterprise; we'll deploy it across regions. The positive part is that feedback so far has been favorable, though it's still early when it comes to the rollout. That simply reflects the organic strength.

Thanks, everyone.

I really appreciate you taking my question. What I'd like to explore is how you view Gen AI usage overall relative to monetization. During the quarter, it appeared you had yet another period of roughly 4 billion Firefly generations, an enormous figure, yet my sense is that this has stayed fairly steady compared with the prior two quarters. So, two things I want to ask. Does that level make you happy? Is there anything underway to push those generation volumes higher? And regarding that 4 billion, what portion of the monetization journey have you completed? What I mean is, you appear to be enjoying considerable traction with new users coming to the Firefly standalone apps, and you seem on track regarding certain standalone AI targets for the year. Please just walk us through how monetization works alongside the incentives driving that usage.

Yes, Tyler, I'd say beneath those figures there has been quite a bit of re-architecture aimed at ensuring AI genuinely powers things. At the financial analyst meeting, for instance, we discussed AI influence revenue along with AI direct revenue. AI influence revenue has already reached the billions, since that reflects the value customers receive throughout our DX products, Acrobat products, and creative products too. Everywhere you look, AI is unquestionably acting as a helpful tailwind when it comes to adoption. We likewise noted that we're pacing ahead of the $250 million. Enormous opportunity still lies in front of us. Once we have this full offering we continually reference — namely Acrobat, Express, Firefly single app, Creative Cloud Pro, which contains Firefly, GenStudio, and the APN apps — every single one of those, in our view, holds massive potential going forward. AI monetization remains at a very early stage, yet we're extremely far along regarding the amount of innovation we've brought to market. Things feel genuinely great at this moment.

Thanks.