Adobe (ADBE) Q4 2024 Earnings Call Transcript

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Adobe (ADBE 0.53%)
Q4 2024 Earnings Call
Dec 11, 2024, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Q4 and FY ’24 Adobe earnings conference call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Steve Day, SVP, DX; CFO; and corporate finance; interim head of IR. Please go ahead, sir.

Steve Day — Chief Financial Officer and Senior Vice President, Digital Experience

Good afternoon, and thank you for joining us. With me on the call today are 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. On this call, which is being recorded, we will discuss Adobe’s fourth quarter and fiscal year 2024 financial results. You can find our press release, as well as PDFs of our prepared remarks and financial results, on Adobe’s investor relations website.

The information discussed on this call, including our financial targets and product plans, is as of today, December 11, and contains forward-looking statements that involve risk, uncertainty, and assumptions. Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today’s earnings release and Adobe’s SEC filings. On this call, we will discuss GAAP and non-GAAP financial measures.

Our reported results include GAAP growth rates, as well as constant currency rates. During this presentation, Adobe’s executives will refer to constant currency growth rates unless otherwise stated. Non-GAAP reconciliations are available in our earnings release and on Adobe’s investor relations website. I will now turn the call over to Shantanu.

Shantanu Narayen — Chairman and Chief Executive Officer

Thanks, Steve. Good afternoon, and thank you for joining us. In Q4, we achieved revenue of $5.61 billion, representing 11% year-over-year growth. In our Digital Media business, we delivered record net new ARR of $578 million.

And our Digital Experience business achieved subscription revenue of $1.27 billion, representing 12% year-over-year growth. 2024 was a year of records for Adobe. We achieved record revenue of $21.51 billion, representing 11% year-over-year growth. GAAP earnings per share was $12.36, and non-GAAP earnings per share was $18.42, representing 5% and 15% year-over-year growth, respectively.

We hit several new milestones with our AI innovations, enabling us to add more than $2 billion in Digital Media net new ARR and surpass $1 billion in the ending book of business for Adobe Experience Platform and native apps. The Digital Experience business crossed $5 billion in revenue, making us one of the mission-critical providers of marketing technology in the world. We exited the year with $19.96 billion in RPO and cash and short-term investments of $7.89 billion. 2024 was also a transformative year of product innovation, where we delivered foundational technology platforms.

We introduced multiple generative AI models in the Adobe Firefly family, including Imaging, Vector, Design, and most recently, Video. Adobe now has a comprehensive set of generative AI models designed to be commercially safe for creative content, offering unprecedented levels of output quality and user control in our applications. We reimagined creativity and productivity for a broader set of customers with Adobe Express, the quick and easy create-anything app. The deep integration of Firefly across our flagship applications in Creative Cloud, Document Cloud, and Experience Cloud is driving record customer adoption and usage.

Firefly powered generations across our tools surpassed 16 billion, with every month this past quarter setting a new record.  We enhanced document productivity with AI Assistant in Adobe Acrobat and Reader, unlocking even greater value from the trillions of PDFs around the world. We’ve successfully scaled Adobe Experience Platform and native apps to deliver the fundamental infrastructure required for customer engagement. We’re accelerating automated decisioning and powering audiences, journeys, and channels to deliver truly personalized experiences at scale. We set the stage to drive an AI content revolution by bringing content and data together in Adobe GenStudio, integrating high-velocity creative expression with enterprise activation.

The release of Adobe GenStudio for Performance Marketing integrates Creative Cloud, Express, and Experience Cloud and extends our end-to-end content supply chain solution, empowering freelancers, agencies, and enterprises to accelerate the delivery of content, advertising and marketing campaigns. I’ll now turn it over to David to discuss the momentum in our Digital Media business.

David Wadhwani — President, Digital Media

Thanks, Shantanu. Hello, everyone. In Q4, we achieved net new Digital Media ARR of $578 million and revenue of $4.15 billion, which grew 12% year over year, fueled by innovation in both our Creative and Document businesses. We ended the year with just over $2 billion of net new Digital Media ARR for the first time ever, as a result of accelerated product innovation, record traffic to adobe.com, and engagement on social and mobile, as well as increasing value for enterprise customers through Firefly Services and GenStudio, which bring together our Creative and Experience Clouds.

On the Document Cloud side, PDF continues to be the global standard for digital documents, and Adobe Acrobat is revolutionizing the way people engage with them across mobile, web, and desktop. We took a major step forward in FY ’24 with the introduction of AI Assistant in Acrobat and Reader. AI Assistant and other AI features, like liquid mode and Firefly, are accelerating productivity through faster insights, smarter document editing, and integrated image generation. A recent productivity study found that users leveraging AI Assistant completed their document-related tasks four times faster on average.

AI Assistant is now available in Acrobat across desktop, web, and mobile and integrated into our Edge, Chrome, and Microsoft Teams extensions. In Q4, we continued to extend its value with specialized AI for contracts and scanned documents, support for additional languages, and the ability to analyze larger documents. In Acrobat Web, our integrations with Adobe Express allow users to generate images and quickly stylize content. We saw AI Assistant conversations double quarter over quarter, driving deeper customer value.

In Q4, we achieved Document Cloud revenue of $843 million, growing 17% year over year. We set a record for net new Document Cloud ARR of $173 million, with ending ARR of $3.48 billion, growing 23% year over year. Other highlights include continued growth of monthly active users, which grew over 25% year over year, surpassing 650 million paid and free users; strong top of funnel momentum through Acrobat Web, with monthly active users up nearly 50% year over year; strength in Acrobat Pro single app in both Document Cloud and Creative Cloud offerings; a great back-to-school season with a new AI Assistant offering in education for students. Key enterprise customer wins include Abbott Laboratories, BWI GmbH, Defense Information Systems Agency, Kaiser Permanente, Novo Nordisk, Truist, U.S.

Cellular, and the U.S. Department of State. Creative Cloud also had a strong year, as demand for content continues to grow across mobile, desktop, and streaming platforms. Adobe MAX, the premier creativity conference, showcased our FY ’24 innovation and drove over half a billion video views across all channels.

We have made major strides with our generative AI models with the introduction of Firefly Image Model 3, enhancements to our Vector models, richer design models, and the all-new Firefly Video Model. These models are incredibly powerful on their own, and their deep integration into our tools, like Lightroom, Photoshop, Premiere, InDesign, and Express have brought incredible value to millions of creative professionals around the world. We have brought our Creative and Experience Clouds together through the introduction of Firefly Services in GenStudio, addressing the growing need for scaled content production in enterprises. Firefly generations continue to accelerate and now have crossed 16 billion cumulative generations.

In Q4, we achieved $3.3 billion in revenue, which grew 11% year over year. Net new Creative Cloud ARR was $405 million. Other highlights include adoption of Adobe Express by approximately 4,000 businesses in the quarter and an 84% year-over-year increase in the number of students with access to Express Premium as part of this year’s back-to-school season. Adobe Express saw strong ecosystem growth, with over 180 plugins available in the Express marketplace and integrations into leading social, productivity, and collaboration apps like ChatGPT, Google, Slack, Wix, Box, HubSpot, and Webflow, significantly increasing our customer reach.

The launch of the Firefly Video Model and its unique integration in Premiere Pro in limited public beta garnered massive customer interest. And we look forward to making it more broadly available in early 2025. This feature drove a 70% increase in the number of Premiere Pro beta users since it was introduced at MAX. Enhancements to Firefly Image, Vector, and Design models include four times faster image generation and new capabilities integrated into Photoshop, Illustrator, Premiere Pro, and Adobe Express.