The operator introduces the Q3 FY'24 Adobe Earnings Conference Call and turns it over to Jonathan Vaas, VP of Investor Relations. Vaas is joined by Shantanu Narayen, Adobe's Chair and CEO, David Wadhwani, President of Digital Media, Anil Chakravarthy, President of Digital Experience, and Dan Durn, Executive Vice President and CFO. They discuss Adobe's third quarter fiscal year 2024 financial results, including revenue of $5.41 billion, GAAP earnings per share of $3.76, and non-GAAP earnings per share of $4.65. Narayen highlights the strength across Creative Cloud, Document Cloud, and Experience Cloud, and the company's 11% year-over-year growth. They also mention the availability of non-GAAP reconciliations on Adobe's Investor Relations website.

Adobe's success is a result of their commitment to innovation and delivering value to their customers. They have launched new products and integrated their technology platforms to enhance creativity, productivity, and digital businesses. Their customer-centric approach to AI sets them apart, with Firefly models available for various tasks and easy integration across their product portfolio. Adobe Express allows for quick and easy content creation for millions of users.

Adobe's AI solutions, such as Acrobat AI Assistant and Adobe Experience Platform AI Assistant, are helping brands automate workflows and personalize customer experiences. The company has seen significant adoption and excitement for these solutions, with over 12 billion Firefly-powered generations across Adobe tools. In Q3, Adobe achieved net new Digital Media ARR of $504 million and revenue of $4 billion, driven by innovation in both Creative and Document businesses. The introduction of AI Assistant has transformed the way people interact with and extract value from PDF documents, with over 70% quarter-over-quarter growth in AI interactions. Adobe is also leveraging generative AI to expand content creation in Acrobat, making it easier to generate content for presentations, emails, and other forms of communication.

Adobe is working on developing richer content creation capabilities, including the use of generative AI, in their Acrobat and Reader applications. They have already seen success with this technology, such as Tata Consultancy Services using Adobe Premiere Pro and AI Assistant to transcribe conference videos and create event summaries in minutes. In Q3, Adobe achieved Document Cloud revenue of $807 million and added $163 million of net new Document Cloud ARR. Other highlights include expanded features for AI Assistant, optimized experiences for mobile, web, and desktop, and increased top of funnel through Acrobat Web. They have also seen key enterprise customer wins and a growing demand for creative expression and design across media types and surfaces.

Adobe is utilizing AI technology to improve the creative workflows in their tools, making it easier for small businesses and large enterprises to engage with prospects and personalize content at scale. They have introduced features like Text-to-Template, Generative Fill, Generative Recolor, and Generative Remove, and are planning to release Generative Extend for video in Premiere Pro. The Firefly Service APIs allow organizations to generate and assemble content at scale, with over 12 billion generations since launch. The new Firefly Video model is commercially safe and integrates seamlessly with their tools, including Premiere Pro. With the release of Adobe Express, an AI-first content creation application, they are expanding their reach across customer segments and have received positive feedback for its ease of use and powerful features.

In Q3, Express saw significant growth with a 70% increase in exports and onboarding of 1,500 businesses and millions of students. Adobe Stock and design templates, along with the Firefly Design Model, help content created in Express stand out. The company also achieved $3.19 billion in revenue and introduced new AI-powered features in Photoshop. Other updates include improvements to Illustrator and strong adoption of Lightroom and Firefly Services. Total API calls tripled quarter-over-quarter.

In the third quarter, Adobe saw growth in its Acrobat Pro single app and Experience Cloud, driven by the increasing adoption of PDF and the demand for customer experience management solutions. The company also announced its upcoming Adobe MAX conference and highlighted its innovations in Digital Media products. Adobe's integration of Experience Cloud and Creative Cloud allows for personalized experiences at scale and strong revenue growth across its categories, showcasing the strength of its business.

Adobe is a trusted platform for global brands to build their content supply chain and deliver personalized experiences at scale. Customers are embracing Adobe GenStudio, which integrates with Experience Cloud and Creative Cloud to streamline content creation and drive efficiency. Vanguard, a financial services leader, saw a 176% increase in quality engagement and millions in savings by using GenStudio. Adobe also released Content Hub, which allows brands to optimize the use of creative assets and increase content velocity. The majority of Fortune 50 companies use Adobe Experience Manager Assets, and there is increasing adoption of Workfront to streamline workflows. Adobe Workfront Planning offers a comprehensive view of all marketing activities and helps teams optimize their planning and execution.

In the third quarter of fiscal year 2024, Adobe saw strong growth in its global brands, driven by the use of Workfront Planning and Adobe Experience Platform. The company expanded its AEP portfolio and received recognition from industry analysts. Key customer wins were also highlighted. Adobe is set to unveil new customer experience management innovations at an upcoming event. The company's performance in Q3 saw record revenue of $5.41 billion, representing 11% year-over-year growth.

The company's focus on both growth and profitability has been a key part of their operating strategy, and their Q3 results reflect this approach. They have made investments in technology, global campaigns, and talent while maintaining strong cash flows and profitability. In the Digital Media segment, they achieved 11% year-over-year revenue growth and added $163 million of net new ARR. The Document Cloud also saw strong growth, with 18% year-over-year revenue growth and a record $163 million of net new ARR. This was driven by usage and MAU growth, third-party ecosystems, demand for subscriptions, and strength in SMBs and enterprise sales.

In the third quarter, Adobe saw a 10% year-over-year growth in Creative revenue, adding $341 million in new subscriptions. This was driven by increased demand for Creative Cloud All Apps, Acrobat Pro, Illustrator, Lightroom, and Photoshop. In the Digital Experience segment, revenue also grew by 10%, with strong subscription revenue growth for AEP, Experience Manager, and Workfront. Adobe also saw success in booking transformational deals and retaining and expanding enterprise customers. On the income statement and balance sheet, Adobe saw a 23% growth in GAAP EPS and 14% growth in non-GAAP EPS, driven by revenue growth and disciplined investment prioritization.

Adobe delivered strong margins and made investments in AI while maintaining an effective tax rate. They also had a significant amount of RPO and cash on hand. For Q4, they are targeting specific revenue and earnings numbers. The company's success is attributed to their product leadership, innovation, diversified business, and financial discipline. Their focus on responsible innovation with customers in mind is a driving force for the company.

Adobe's Content Authenticity Initiative, founded in 2019, has gained over 3,300 members and has been implemented by major companies like Amazon, Google, and TikTok. The US Department of Defense is the first federal agency to use Content Credentials, and Adobe is partnering with Governor Gavin Newsom to improve digital and media literacy skills in California schools. The company's annual Adobe for All conference will celebrate its vision and purpose, and the company's success is driven by its culture, innovative product roadmap, global market opportunity, trusted brand, and dedicated employees. The company had a strong quarter, with unseasonably strong Digital Media ARR growth, driven by factors such as pricing, AI traction, and Document Cloud net new ARR.

The speaker is addressing concerns about the Q4 guide being the lowest it has ever been for net new Digital Media ARR. They acknowledge the confusion and explain that while Q3 was strong, they expect a seasonally strong Q4 with continued innovation driving growth. They also mention the strength of Document Cloud and the expected growth of Creative.

The company's link sharing and reader distribution have been driving the business and will continue to do so in the future. The Creative Cloud business has also been performing well due to a broader set of offerings, including higher-value and lower-priced plans. The second half of the year is expected to be strong, with Q3 being stronger than expected due to some deals closing earlier than usual.

David Wadhwani explains that Adobe's core strategy for AI is to develop a wide range of high-quality, safe, and controllable models for the creative community. They have been consistent in this approach over the last 18 months and have successfully integrated AI into their tools such as Generative Pattern and AI-assisted edits. They have also started integrating it into their enterprise services. This strategy has been working well and they are optimistic about the potential for monetization, particularly with their image, audio, and video models. They are also actively working on solving limitations with current video generation models, such as lack of realism and detail.

Adobe is seeing increased use of generative credits due to their integration into their tools. This has led to better retention and conversion rates. While they have not yet instituted caps on generative credits, they are considering alternative models such as premium AI plans. They are pleased with the innovation that this integration has brought.

The speaker discusses their company's plans for monetization and how they will prioritize proliferation. They also mention the improvements in video capabilities, such as integration with Premiere and the ability to generate scenes with overlays. The speaker is excited about the team's work and the potential for custom models.

The company believes that their unique ability to extend video editing through new data and their differentiated solutions in consumption and subscription models will contribute to their growth in the nonlinear editing market. They also see potential for monetization through their Firefly services and custom models for enterprises.

The speaker responds to a question about competition in the technology space and emphasizes the uniqueness of their products and their strong focus on commercial safety. They also address concerns about the decrease in net new ARR and state that they will provide more information at a later date, but are on track to beat their previous numbers.

David Wadhwani discusses the strong performance of Adobe's Document Cloud business, which continues to grow net new ARR at a high rate. He mentions the foundation of the business as being strong, with a wide platform and 40 years of experience. He also addresses the subscription-heavy nature of the business and the fact that PDF has become the standard for unstructured content.

The company has a strong distribution across different platforms and has seen an increase in the value of unstructured PDF content. They have also shifted their focus towards sharing via links and have developed an AI Assistant that allows for conversation with multiple documents in various formats. They are continuously improving the AI Assistant to optimize results for different document types, with a focus on consumption.

The company is expanding its conversations about documents and creating richer content. They have embedded Firefly in Edit PDF and Convert PDF workflows, making it easier for enterprises to adopt. The Document Cloud is mostly a subscription business, but with AI Assistant now available to subscribers, they expect further transition. The CEO had previously mentioned pouring gas on their go-to-market strategy and running a full-funnel campaign later in the year.

The speaker is asked about the company's commitment to expanding their go-to-market investments. They mention the success of their product, Express, and its built-in AI capabilities. They also highlight features such as native integration of Firefly and style and structure match. The speaker is excited about the design model and its potential for growth.

The company is focusing on using AI to create better content and has expanded their offer set to include Express for Teams, Enterprise, and Education. They are also ramping up their marketing efforts, including traditional methods and social media, to reach a new audience. Additionally, they are increasing their direct sales with an inside sales motion.

Adobe has a strong direct sales motion in enterprises and mid-market, as well as a significant presence on Adobe.com. They have seen strong usage and business momentum, with over 1,500 businesses sold and a successful back-to-school season. They plan to continue investing in long-term initiatives while maintaining good margins. The Digital Experience side of the business has shown strong RPO growth, but the Q4 guide is slightly lower due to unusual seasonality factors.

The company is pleased with the progress of their Digital Experience business and sees a big opportunity in personalization at scale. They have a unique ability to bring together content, data, and customer journeys to deliver personalized experiences. This is helping them in the enterprise market as companies scrutinize their spending. The company is focused on their subscription business, which is growing strongly, and also works with a partner ecosystem to deliver services to customers. The call will end soon, but one more question will be taken about the guide.

In response to a question about any changes in end demand or softness in the market, Adobe CEO Shantanu Narayen stated that the company had a strong Q3 and is continuing to see momentum in the business. He also mentioned the upcoming MAX event and the company's strong performance in revenue, EPS, Digital Media ARR, DX, Subs revenue, and Acrobat. Narayen highlighted the company's innovation roadmap and the exciting initiatives in Express, GenStudio, AEP, Apps, imaging, video, and Firefly Services. He also discussed the use of AI in driving value for customers and acquiring and retaining them.

The speaker is excited about the upcoming MAX event and thanks the listeners for joining the call. They also mention an upcoming Investor Event and hope to see many of the listeners there. The call concludes with thanks from the operator.

This summary was generated with AI and may contain some inaccuracies.