Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Good afternoon, everyone, and thanks for being on the call with us. Joining me today 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.

Thank you, Doug. Hello everybody, and I appreciate you being here this afternoon. During fiscal 2025, Adobe generated meaningful AI-influenced and AI-first ending ARR, and that figure picked up momentum as the year went on. We hit record revenue totaling $23.77 billion alongside non-GAAP EPS of $20.94, reflecting exceptional financial results. AI is what we're using to speed up innovation so we can foresee and meet the demands of large and growing audiences: business professionals and consumers, creators and creative professionals, and marketing professionals. When it comes to business professionals and consumers, we aim to provide AI-powered, fast, and simple applications that let them be creative and productive, whether consuming or producing content across various media types and channels. We accomplish this by rolling out fresh conversational and agentic interfaces in Adobe Reader, Acrobat, and Express, offering a freemium integrated experience to billions of users. For creators and creative pros, we aim to provide the most thorough, powerful, and precise applications spanning ideation and creation all the way to production and delivery. We've excelled at both building our own commercially safe FIREFLY models and smoothly incorporating third-party partner models into Creative Cloud flagship applications such as Photoshop, Illustrator, and Premiere. Through the Firefly application, creators get a rich array of generative AI capabilities that let users generate with Adobe and partner models, brainstorm with Firefly boards, and produce and edit videos and images via conversational experiences mixed with direct manipulation. Beyond the Firefly app, we've rolled out new offerings such as premium mobile with YouTube integration and Photoshop mobile to better serve creators wherever they work. We're reshaping the enterprise content supply chain by bringing together creative applications, workflow management, asset management, Firefly services, and custom models with Firefly Foundry. Our vision for marketing professionals—whether freelancers, agency staff, or enterprise employees—is the most comprehensive, enabling them to build a brand or meet the growing demands of the content supply chain in the AI era by providing customer experience orchestration solutions. Adobe Experience Platform and apps drive customer engagement and loyalty. Adobe Experience Manager and AgenTic Web Solutions, which include LLM Optimizer, Sites Optimizer, and Brand Concierge, provide brand visibility and discovery. And Adobe Gen Studio lets enterprises optimize their entire contact supply chain to achieve genuine personalization at scale. FY '25 achievements and highlights include cementing our position within leading AI ecosystems through partnerships and integrations with AWS, Azure, Google Gemini, Humane, Microsoft Copilot, OpenAI, and others, giving customers unmatched access, choice, and flexibility. We're leading AI innovation in conversational and agentic interfaces, with offerings such as LLM Optimizer and Acrobat AI Assistant, building custom models via Firefly services, Firefly Foundry, and GenStudio, and embedding AI throughout our applications, including Photoshop, Lightroom, Express, and Premiere. We keep pursuing inorganic strategies to bring more value to customers, and we're happy with our recently announced intent to acquire SEMRush, which will help brands improve their visibility and broaden audience reach. We’re bringing in a lot of new users, both consumers and businesses, through offerings like Acrobat, Creative Cloud, Express, and Firefly, and our total MAU rose by more than 15% compared with a year earlier. Enterprise clients are embracing our AI features at a faster pace, which underscores our leadership position and shows they trust Adobe to provide AI value smoothly across their workflows. During Q4, worldwide, we set a record for bookings involving agreements worth more than $1 million, and we saw the count of customers with $10 million or more in ARR increase by over 25% versus the prior year. Strong FY 2025 results came from our customer group approach, the sizable market opportunity, and innovation in our products. That sets us up for our FY 2026 goal of total Adobe ARR growth exceeding 10%, and we’re intent on speeding up that momentum past FY 2026. Now I’ll hand things over to David.

Thank you, Shantanu, and good morning to all of you. In Q4, Digital Media posted its best quarter ever, powered by bringing in more users and by growing the value we deliver to customers — spanning business professionals and consumers as well as creators and creative professionals. Two major innovation thrusts drove this: generative AI models and agentic experiences. For the quarter, Digital Media brought in $4.62 billion in revenue, and for the full year, $17.65 billion — each up 11% compared with the prior year. We closed out the quarter sitting at $19.2 billion in digital media ARR, which represents 11.5% growth in ending ARR year over year. On the generative AI model front, we keep building out our own FIREFLY models, which are commercially safe, even as we broaden our GenAI model partnership ecosystem by a wide margin. Our new Firefly Image five model is delivering outstanding results, thanks to generation quality, native four-megapixel resolution, and prompt-based editing capabilities that lead the industry. Back in October at Adobe MAX, we made a major expansion to Firefly, making it the sole app offering both our own commercially safe models and more than 25 top partner models — among them Google, OpenAI, Black Forest Labs, Luma, Runway, Topaz Labs, and Eleven Labs. Those models have now been folded into our FIREFLY Express and Creative Cloud applications. We also unveiled advanced model capabilities, such as custom model support aimed at Firefly and Creative Cloud customers. We meter and bill usage and monetization of new Adobe and third-party models via generative credits. Various models — FIREFLY, GEMINI, or FLEX, to name a few — and various media types, such as video and high-resolution images, each use up differing amounts of generative credits. A strong signal of high-value usage is generative credits, and credit consumption climbed threefold from one quarter to the next. When subscribers use more generative credits, they can opt to upgrade to higher-value Creative Cloud offerings or purchase Firefly credit add-ons. We also made major headway in Q4 by demonstrating at Adobe MAX the effort we've put into atomizing Photoshop Express and Acrobat capabilities as model context protocol endpoints. Beyond shipping applications, we're delivering imaging, video, and productivity functionality inside ChatGPT, Copilot, and other conversational platforms, so we can deliver and monetize creative and PDF functionality on new surfaces. Users will be able to work conversationally while still gaining the power and precision of Adobe's industry-leading features and direct manipulation tools, which makes getting from intent to outcome simpler than ever — whether that means editing a PDF, refining an image, or generating a design. With these strides in generative models and agentic capabilities, Adobe is well positioned to seize the long-term opportunities of serving business professionals and consumers along with creator and creative professional audiences. When it comes to business professionals and consumers, our vision is to provide AI-driven applications that are quick and easy, letting users be creative and productive as they consume or generate content across a range of media types and channels. This strategy is gaining real traction, and we're generating strong business momentum. We transformed the way users consume and comprehend documents when we launched Acrobat AI assistant in FY '24, and we've since added PDF spaces, which lets individuals and teams build knowledge hubs for collaborating across multiple documents. People aren't just putting PDFs into a single workspace — they're bringing in other file formats and web links too, so a group can collaborate and talk through the material together. Within Acrobat and Reader, use of these AI capabilities has climbed by a factor of more than 4 compared with a year earlier, as more and more people rely on Acrobat to surface insights, pull together new ideas, and pass knowledge along. Q4 brought major steps forward for Adobe Xpress, including an AI assistant that can generate content and handle sophisticated editing tasks. Generative presentations and designs are now part of Express, which pushes the industry past the age of templates. With the Express AI assistant, you can edit images, flyers, presentations, infographics and other items simply by conversing. Breakthroughs such as these helped drive considerable growth in Express MAU. By combining the AI assistant and PDF spaces — which handle conversational consumption and comprehension — with the generative creation strength of Express, plus the familiar, dependable PDF tools, Adobe Acrobat Studio forms one unified offer. Acrobat Studio has been well received by customers: close to 50% of Acrobat commercial ETLAs that came up for renewal in Q4 had already moved up to this offering, which shows how eager users are for unified document understanding and content generation. Among the FY '25 highlights for business professionals and consumers: Acrobat Web kept expanding, posting a MAU gain of more than 30% versus a year ago; Express saw robust uptake in Education, where students with access to Express premium grew by over 70% year over year; more than 45 new partners joined Express during Q4, among them Binder, Bootsuite, and Sprout Social; and upwards of 25,000 businesses bought Express or Studio for the very first time in Q4 by itself, an acceleration from one quarter to the next. Notable enterprise customer wins include Allianz, American Automobile Association, Bundeswehr von Duschland, Nippon Life, PwC, Sony, and the US Navy. Now, looking at creators and creative professionals: our aim is to offer the most complete set of power and precision applications spanning ideation and creation through production and delivery; we keep meeting our objectives of drawing in the next generation of content creators, equipping creative professionals with transformative generative AI capabilities, and automating enterprise content production at scale. Through the Firefly application, which is available via our Firefly standard, pro, and premium subscription plans, we are bringing new creators to Adobe. Firefly comes with an extensive array of generative AI capabilities, letting users generate using Adobe and partner models, brainstorm with Firefly boards, and produce and edit videos and images. To put it plainly, Firefly gives you one place to reach industry-leading models woven into rich creative workflows at a reasonable cost. What's more, we see strong Firefly adoption among Creative Cloud customers as they take advantage of the widening range of AI models and tools built smoothly into creative workflows. First-time Firefly subscriptions grew by a factor of 2 from one quarter to the next. With the Q4 launch of Premier Mobile, next-generation AI video editing reached a significant milestone. Working alongside Google and YouTube, we're rolling out tools powered by AI for audio and video that simplify the way creators rework YouTube Shorts — content that draws 200 billion views every day. At Adobe MAX, Creative Cloud brought substantial fresh value, with launches that included new models for generative fill, upscaling, and prompt editing inside Photoshop, reflection removal in Lightroom, turntable in Illustrator, and smart masking in Premiere; on top of that, we revealed that Firefly boards is now generally available — a fresh ideation surface assembling everything creative professionals require to investigate visual and design concepts alongside stakeholders, powered by industry-leading models from Adobe and our partners. Adoption of AI across these applications keeps speeding up, highlighting the influence AI holds over what creative professionals are able to make. Within the broader content supply chain offering for marketing scenarios, we keep pushing automated content production forward through Firefly services spanning video resizing, video reframing, image composition, image harmonization, digital twin generation, and beyond. We likewise unveiled Adobe Firefly Foundry at Max, giving enterprises proprietary foundation models trained on their own content, data, and brand catalogs. Enterprise marketing teams along with media and entertainment companies have shown robust interest in Firefly Foundry, since the appetite keeps rising to generate content more quickly and at lower cost. FY '25 achievements and highlights for creators and creative professionals encompass hosting Adobe MAX, the biggest creativity event anywhere, with more than 10,000 people from the creative community present in person and millions more joining online. The extraordinary innovations we put on display generated over 2,000 articles and collected 820 million video views. Our creative user base expanded to 70 million in Q4, rising more than 35% year over year. Adoption of Firefly services among enterprises is picking up pace, and generative credit consumption is accelerating across Creative Cloud, Firefly, and Express, with upwards of 100 fresh deals inked in Q4 by individuals and enterprises — roughly a threefold increase quarter over quarter. We saw strength across every route to market and geography, especially in SMB, enterprise, and emerging markets. Notable enterprise wins feature Coca-Cola, Humane, IKEA, JPMorgan Chase, Lowe's, Nintendo, and Sony. Across recent years, we've broadened our portfolio to foresee and meet the varied requirements of creative users. The ongoing momentum behind Creative Cloud, generative credits, and Firefly automation highlights how well this strategy is working with creative professionals, both individuals and enterprises. The quicker expansion of creative freemium MAU shows our offerings aimed at creators, consumers, and business professionals are succeeding, and that's already making a difference, as our Q4 results and FY 2026 targets make clear. All told, we turned in solid business results and set a record for Digital Media net new ARR in Q4, and we're eager about what FY 2026 holds. I'll hand things over now to Anil.

David, thank you. Hi, everybody. The reason we've succeeded in serving enterprise creative and marketing professionals comes down to possessing the broadest vision for orchestrating customer experience, which lets companies worldwide deliver personalization at scale in the age of AI. Digital experience finished the year strongly, posting $1.52 billion in quarterly revenue alongside a record $5.86 billion for FY 2025. Subscription revenue during the quarter reached $1.41 billion, which marks 11% growth versus a year ago. Adobe provides a unified, AI-powered platform for customer experience orchestration, covering brand visibility, the content supply chain, and customer engagement. Adobe Experience Platform stands as a leading customer data platform, acting as the foundation enterprises rely on for digital customer engagement, and it unites new AI-powered apps and agents that fuel engagement and loyalty while also cutting costs. Our platform runs at scale, handling over 35 trillion segment evaluations and more than 70 billion profile activations each day. We introduced six new AI agents driven by AEP agent rator, changing the way businesses build, deliver, and optimize marketing campaigns and customer experiences. Subscription revenue for AEP and native apps climbed over 40% compared with the prior year, showing our ongoing leadership. We hold the best read on digital conversations spanning search, social media, and LLMs, letting marketers gain a unified picture of where online traffic comes from, how to build and promote brands, and how to drive engagement and commerce. Indeed, the latest Adobe Digital Index figures, drawn from online transactions across more than 1 trillion visits to US retail sites, reveal that generative AI traffic has risen 760% so far during the 2025 holiday season. According to our data, AI-powered traffic originating from LLMs and agentic browsers keeps growing and demands different conversion approaches, which highlights the rising significance of the agentic web and our chance to give marketers insights and automation. Success in this new agentic web hinges on brand visibility, and Adobe meets customer needs via offerings such as Adobe Experience Manager, Adobe Analytics, and the just-released Adobe LLM Optimizer. The pending SEMRush acquisition we announced a few weeks back adds complementary assets, helping us tackle marketers' expanding need for lasting brand relevance in AI search. Across the last decade, Sambrace's data-driven search engine optimization and generative engine optimization solutions have won the confidence of industry leaders including Amazon, JPMorgan Chase, and TikTok. Working together, Adobe and Semrush will provide a solution letting marketers shape how their brands show up across owned channels, LLMs, traditional search, and the broader web. We expect the deal to close in 2026, pending regulatory approvals and other closing conditions. Adobe Brand Concierge, introduced in Q4, is an AI-first application that lets businesses configure and manage AI agents guiding consumers from exploration through purchase decisions via immersive, conversational experiences. By bringing together data, content, and agentic AI into one experience, BrandConcierge hands businesses ownership of the crucial discovery and consideration phase. We're happy about the considerable customer curiosity and the deals we closed for brand concierge during Q4. The third pillar of customer experience orchestration happens to be the content supply chain. Chen Studio is our all-encompassing product line that stretches across content ideation, creation, production, and activation. Over at Max, we rolled out new scaled production capabilities via Firefly services, improved model customization using Adobe Firefly Foundry, and added integration with an expanding ecosystem of ad networks. Closing ARR for the Adobe Gen Studio solution climbed more than 25% year over year, since the world's top brands increasingly chose Adobe to drive their content supply chain. FY '25 marketing professional accomplishments and business highlights encompass robust customer demand for our recently launched agentic web offerings, with more than 50 customers in Q4 for Adobe LLM optimizer sites optimizer, and brand concierge. Rising international momentum produced a record quarter for our enterprise business across our Europe, Middle East, and Africa, and Asia regions. We broadened ad network partnerships with Amazon, Google, LinkedIn, Microsoft, Snap, and TikTok, plus Q4 industry analyst recognition, such as being named a leader in the Forrester Wave for digital experience platforms, and three Gartner Magic Quadrants covering multichannel marketing hubs, B2B marketing automation platforms, and digital asset management. And major global customer wins for the quarter feature AstraZeneca, AT&T, Citigroup, Comcast, Costco, CVS Health, Ernst and Young, General Motors, IKEA, JPMorgan Chase, Lowe's, NatWest Group, PwC, Tony, Walgreens, Wells Fargo, and Woolworths Group. Customer experience orchestration remains a vital investment area for companies of every size; we assist brands around the globe in converting the promise of AI into measurable marketing ROI. As a leader, we're in a strong position to expand our business and support our customers in generating customer loyalty, revenue growth, and profitability. I'll now hand things over to Dan.

Thank you, Anil. I'll start things off today by walking through Adobe's results for Q4 and FY 2025, highlighting the drivers behind our growth, and then I'll finish up by sharing the guidance we're putting forward. In FY 2025, Adobe achieved record revenue of $23.77 billion, which represents growth of 11% over the prior year, both as reported and in constant currency. For the full year, GAAP EPS was $16.7, and non-GAAP EPS was $20.94, which were up 3514% compared to a year ago, respectively. We brought in over $10 billion in cash from operations while still investing in AI product innovation. We did a tremendous amount of share repurchases — close to $12 billion overall — and that cut our outstanding share count by more than 6% over the course of the year. That really demonstrates our confidence in the long-term opportunity for this company. On the business and financial front in FY '25, Digital Media generated $17.65 billion in revenue, up 11% from the prior year, both as reported and in constant currency. The Digital Experience segment posted revenue of $5.86 billion, up 9% from a year ago, as reported and in constant currency. Digital Experience subscription revenue was $5.41 billion, up 11% year over year as reported and in constant currency. At year's end, ARR for our Digital Media segment stood at $19.2 billion. That's growth of 11.5% over the prior year, surpassing the 11.3% target we'd set previously. Steady subscription growth, combined with cross-selling and upselling, drove more than 75% of Digital Media's net new ARR. Value-based pricing accounted for the rest, and that blend demonstrates our customer acquisition strategy is delivering results. Across business professionals, consumers, creative professionals, and marketing professionals, Adobe's total ending ARR was $25.2 billion, up 11.5% year over year. Operating cash flow came to $10.03 billion, and we ended with $6.6 billion in cash and short-term investments. At the close of the year, RPO was $22.52 billion, which is 13% above the prior year, or 12% in constant currency. CRPO rose 11% as reported and 10% in constant currency. Additionally, we bought back roughly 30.8 million shares during the year. As of now, $5.9 billion is still available under the $25 billion authorization we received in March 2024. Turning to Q4: Adobe's revenue was $6.19 billion, up 10% year over year, both as reported and in constant currency. Q4 GAAP EPS was $4.45, and non-GAAP EPS was $5.5, up 1714% year over year, respectively. Business and financial highlights for Q4 included Digital Media revenue of $4.62 billion, an increase of 11% year over year as reported and in constant currency. Digital Experience segment revenue totaled $1.52 billion, up 9% year over year, or 8% in constant currency. For the quarter, Digital Experience subscription revenue came in at $1.41 billion. That's up 11% from the same quarter a year ago, and the same 11% holds whether you look at reported figures or constant currency. AI-influenced new ARR now accounts for more than one-third of our overall business, which shows how deeply AI is embedded across what we sell and reflects the steady stream of new AI-focused products we keep launching — these days they all sit inside the AI influence metric. We've been saying all through the past year that our approach is to run the whole company through AI-driven solutions. Digital media net new ARR set a record, accelerating its growth rate versus a year ago, fueled by robust demand for AI-influenced products like Creative Cloud Pro, Acrobat, and Express, plus AI-native ones such as Firefly. On top of the solid net new Digital Experience ARR we posted in Q4, total Adobe net new ARR also set a record this quarter. Operating cash flow came in at a record $3.16 billion, and we grew RPO by a record $2.08 billion during the quarter. Turning to the Business Professionals and Consumers Group, subscription revenue was $1.72 billion, up 15% year over year as reported, or 14% in constant currency. For business professionals and consumers in Q4, the growth came from ending ARR rising at a double-digit clip, with momentum across digital, SMB, and enterprise, and in every geography. Mobile ending ARR grew by more than 30% versus a year ago. Acrobat and Express combined passed 750 million monthly active users, up 20% from the same period last year. And Acrobat Studio has drawn a strong customer response — close to 50% of Acrobat commercial ETLAs up for renewal in Q4 have already made the switch to it. Now for the creative and marketing professionals segment, subscription revenue was $4.25 billion, up 11% year over year, or 10% in constant currency. Inside creative and marketing professionals, Q4 growth came from Creative Cloud gains fueled by CC Pro, plus single app growth fueled by Photoshop and Lightroom. Generative credit consumption across Creative Cloud, Firefly, and Express ran three times higher than the prior quarter. Across Firefly, Express, Premier, and the rest of our freemium portfolio, we drew in a large number of new web and mobile users — rising over 35% versus a year earlier, past 70 million monthly actives. Ending ARR for AEP and apps climbed more than 30% year over year. With products like Firefly Services and Firefly, demand for content automation pushed ending ARR up more than twofold compared with last year. GenStudio solution ending ARR rose more than 25% from a year ago. Enterprise momentum continued as well, with a record number of customers whose ARR is above $10 million. The count of customers producing yearly recurring revenue of more than $10 million rose 25% versus the prior year, surpassing 150. Then, on November 19, we announced our intention to acquire Semrush Holdings through an all-cash transaction carrying an equity value of roughly $1.9 billion. If regulators approve and the customary closing conditions are satisfied, we expect to finish the deal at some point in 2026. During the initial year following completion, we forecast that this acquisition will have a negligible impact on non-GAAP EPS, and afterward it ought to contribute positively to it. I'll now shift to the financial objectives we've established, which rest on the macroeconomic conditions as they exist right now. Not one of those objectives incorporates anything from SEMRush. As is our habit, we reexamined ending ARR once FY '25 concluded. That step raised total Adobe ARR by $460 million, moving it from $25.2 billion to $25.66 billion as we enter FY '26, with fluctuations in FX rates serving as the primary factor. Our investor datasheet now features total Adobe ARR history going back to FY '23. Turning to FY '26, our aims are total Adobe revenue of between $25.9 and $26.1 billion. Business professionals and consumer subscription revenue falling between $7.35 and $7.4 billion. Creative and marketing professional subscription revenue arriving at $17.75 to $17.9 billion. And total Adobe ending ARR book of business expanding 10.2% year over year. Non-GAAP earnings per share ought to come in between $23.3 and $23.50, whereas GAAP EPS is forecast at $17.9 to $18.10. When you examine that 10.2% growth in Adobe's total ARR book of business, it amounts to approximately $2.6 billion in incremental value — and that would represent our most powerful ever start-of-year projection for total net new ARR. We constructed this target around how robustly we closed FY '25, along with continuing momentum across all three of our audiences: business professionals and consumers, creators and creative professionals, and marketing professionals. For FY 2026, our goals presume a non-GAAP operating margin close to 45%, a GAAP tax rate of about 20.5%, and a non-GAAP tax rate of approximately 18%. That non-GAAP tax figure rests on a three-year forecast, and should circumstances shift, it could be revised. Now regarding Q1 FY '26, here's what we're targeting: total Adobe revenue of $6.25 billion to $6.3 billion, subscription revenue from business professional and consumer customers between $1.74 billion and $1.76 billion, subscription revenue from creative and marketing professional customers between $4.3 billion and $4.33 billion, GAAP EPS of $4.55 to $4.6, and non-GAAP EPS of $5.85 to $5.9. In Q1, we anticipate a non-GAAP operating margin of approximately 47%, a GAAP tax rate of roughly 21.5%, and a non-GAAP tax rate of about 18%. To close, Adobe has delivered yet another outstanding year, driven by strong worldwide demand for our AI offerings across business professionals and consumers as well as creative and marketing professional customer segments, increasing 17% and 14% year-over-year, respectively. Because we've been disciplined in how we execute and made the right investments, we're set up to extend our lead even further as we bring out an ecosystem spanning AI models, conversational interfaces, and agentic experiences. Looking ahead to FY '26, we feel very confident in our ability to deliver innovation that leads the industry, ARR growth in the double digits, and profitability that ranks among the best. That growth comes as those areas are climbing 17% and 14% year-over-year, respectively. Shantanu, your turn.

Appreciate that, Dan. What drives our results is the amazing creativity of the people we employ around the world, who care deeply about bringing innovation forward, pairing that with nonstop execution for the benefit of a customer base that keeps getting bigger. Adobe sits in a strong spot to capture the huge market possibilities we ourselves are generating, fueling ongoing expansion and influencing where the industry heads in 2026 and afterward. Thanks, and at this point we'll open it up for your questions. Operator, go ahead. Absolutely, Mark. And I appreciate the comment. I'll kick things off, and then perhaps David can chime in too. And I did notice in your report that you had, you know, sort of the effort you've been putting in behind the scenes regarding customer sentiment. So that's something we value. You know, from where we sit, we simply look at it, and when it comes to enterprises. The whole content supply chain, Gen Studio, is truly the solution we want to deliver that handles each element of their content production. Be it the creation portion of the campaign, be it then building custom models, be it training it on the back end, be it automating it, and then, you know, certainly delivery. And so Firefly services has gotten off to a strong beginning, keeps going, I think, the prepared remarks. David mentioned, you know, the hundreds of deals we are inking in that specific area; and foundry simply elevates it to another level when it comes to our capacity to customize, be it for a retailer, be it for media and entertainment, the capacity to accomplish far more. So, you know, we truly see that as a huge opportunity. When it comes to either a marketing team or the media and entertainment workflow, that lets them produce content, get that content out, localize it. But perhaps, David, you can speak to, you know, a few of the sort of customers and what we're able to do there too.

Right. So, as Shantanu mentioned, thanks to our strong standing with GenStudio and the content supply chain, we keep hearing from customers that going to the next level requires more than off-the-shelf models can deliver. That's why we launched Foundry, which you brought up, at Max — the key idea being that we train on their content, their data, and their brand guidelines, and we can generate images, videos, audio, and 3D models. We run it as a managed service. Marketing teams can therefore train on product shots, environment styles, brand guidelines, while media companies train on their own franchises, be it a movie or a series. They'll train their characters, their sets, their props, their locations, so they can generate the entire thing. Let me offer one illustration from a financials or economics angle. Take a media and entertainment company we're working with; I'm rounding the numbers here, but for a bit of context, suppose that organization was spending $10 million with us ARR on our core creative products that we've been selling with them. We ran a sales process with them and engaged with them for roughly six months. We were able to sell them Firefly services Firefly Foundry for about $7 million, so a pretty significant step up in terms of, you know, our engagement with the customer; we can train models within two or three months, and now we're running some of those models specifically as managed services for them for ideation and production processes. They're already seeing increased efficiency in content production; they can generate more production content, and they're now getting into opportunities that are revenue-bearing, like increasing the types of content they produce for social shorts, and personalizing more of it for fan engagement with the integration with our real-time CDP. And, of course, that's with just a few of their franchises, with more opportunities to expand beyond that; so very excited.

Perhaps just one final point to underscore what David mentioned. Our vision, you know, is unmistakably this: for each individual brand—whether you're a consumer-facing company—or for each individual TV show or film, we can build a foundry dedicated specifically to that unique franchise, as David noted, since the capacity to, you know, assist with automating that content and its production is enormous.

That sounds like a massive unlock. Thanks so much for fielding my questions.

Excellent. Thanks a lot, everyone, for fielding my question. I had a question, sort of, as we grow the product portfolio and the go-to-market approach of really aligning it with Creative Cloud and Experience Cloud. Could you speak to, perhaps, the ROI emphasis on, sort of, making the case for the value these new productivity enhancements generate? Right? Through all your product demos, we've seen how much additional content can get created. So really being able to tie that back to outcomes and really, sort of, why is it beneficial for the enterprise that they possess all these new capabilities?

Well, Matt, if you step back a bit and consider each individual business, I mean, there are trillions of dollars being spent on marketing; and, you know, the chance before us is to truly say we can assist you in making certain that such content is more tailored. I'll also have Anil chime in after this. And distribute it. And the reality is that because we're able to distribute it via an ad network, and then we grasp through our analytics where that is generating traffic, where that is generating conversion, where that isn't. The sole company capable of closing the loop from a campaign's creation, that campaign's execution, and then, you know, actually examining what that produces in terms of commerce. And so, you know, I believe our true value proposition in all of this is that as more and more people are saying, hey. I want to leverage AI to create more; we can not just optimize and speed up the volume of content they're generating, we're the sole company that can then assist them in saying, hey. This produced so much traffic. And I think, you know, we can say more about that as well as it pertains to what we're doing regarding search, LLM, and ROI.

Right, precisely. So, Santil, it varies by sector, but somewhere between 10 and 20% of an overall marketing budget goes toward content — creating and producing it. And that's precisely where the content supply chain comes in; that's what we provide with GenStudio. First, we help them lower the cost of creating or producing content. But just as crucially, we help them generate content far more nimbly and generate far more of it. So a lot of marketers are shifting away from traditional marketing channels toward many of the newer ones — as Shantanu mentioned, digital channels — for paid media and for their own media too. And that calls for much greater agility in producing content. So the content supply chain offering we provide helps them achieve considerably more effectiveness from their marketing and a better ROI.

Hi, everyone. I appreciate you giving me the chance to ask something; Ivan speaking, filling in for Alex. Perhaps one thing regarding returning to that SEMrush purchase. Could you perhaps share a bit about, you know, the reasoning behind it strategically, some additional detail on that, and maybe how we ought to view the synergies resulting from this transaction as we look toward next year. Thanks.

Right. So when you consider what marketers have at the front of their minds today, in the realm of customer experience orchestration, brand visibility ranks among the most pressing concerns. The way their brands show up, the way they're positioned — particularly across emerging channels such as the LLMs, be it, you know, ChatGPT or Google or Perplexity — that is front and center for marketers. So here's something we excel at: by combining Adobe and Semrush, we can deliver a comprehensive solution to marketers, so that whether we're talking about owned media — their own websites and mobile apps — or earned media such as those LLMs, or spanning search engines, they get a single solution that assists them in boosting brand visibility, and ensures they grasp what customers are searching for, what prospects are actually searching or prompting for, and that they show up in the right places, the right way, with their brands. And we're the sole provider capable of delivering a comprehensive solution that does this across their owned channels, along with all these emerging channels like the LLMs, plus search engines.