ADOBE INC. Q4 FY2024 earnings call

• Record Performance in FY2024: Adobe achieved record revenue of $21.51 billion, 11% year-over-year growth. GAAP earnings per share was $12.36, non-GAAP earnings per share was $18.42, 5% and 15% year-over-year growth respectively.
• AI Innovations: Introduced multiple generative AI models in the Adobe Firefly family, including imaging, vector design, and video. Firefly Power Generation across tools surpassed 16 billion. Adobe Express reimagined creativity for broader customers.
• Document Cloud and Creative Cloud Growth: Document Cloud revenue grew 17% Y/Y in Q4, with AI Assistant driving productivity. Creative Cloud saw strong demand, with Adobe MAX driving video views. Firefly services adoption ramped in enterprises like Pepsi and Tapestry.
• Experience Cloud Strength: Digital Experience business had strong Q4, with $5.37 billion revenue in FY2024. Subscription revenue grew 12% Y/Y. Adobe Experience Platform and native apps book of business surpassed $1 billion, with 48 Fortune 100 companies leveraging solutions. Gen Studio integration brought content and data together for enterprise content production.

Digital Media Segment

• Q4 2024 revenue: $4.15 billion, 12% year-over-year growth. Ending digital media ARR: $17.33 billion, growing 13% year-over-year in constant currency.
• Document Cloud revenue: $843 million, 17% year-over-year growth. Net new Document Cloud ARR: $173 million, ending ARR book of business grew 23% year-over-year in constant currency.
• Creative revenue: $3.30 billion, 10% year-over-year growth. Net new creative ARR: $405 million, ending ARR book of business grew 11% year-over-year in constant currency.

Digital Experience Segment

• Q4 2024 revenue: $1.40 billion, 10% year-over-year growth. Digital Experience subscription revenue: $1.27 billion, growing 13% year-over-year.
• Ending book of business for Adobe Experience Platform and native apps surpassed $1.0 billion in FY2024, growing >40% year-over-year. Strong bookings for Gen Studio solution, including Gen Studio for performance marketing.

• FY2025 Financial Targets: Target total Adobe revenue of $23.30 to $23.55 billion. Digital Media segment revenue: $17.25 to $17.40 billion. Digital Experience segment revenue: $5.80 to $5.90 billion. GAAP earnings per share: $15.80 to $16.10. Non-GAAP earnings per share: $20.20 to $20.50.
• Q1 FY2025 Targets: Total Adobe revenue: $5.63 to $5.68 billion. Digital media segment revenue: $4.17 to $4.20 billion. Digital experience segment revenue: $1.38 to $1.40 billion. Digital Experience subscription revenue: $1.27 to $1.29 billion. GAAP earnings per share: $3.85 to $3.90. Non-GAAP earnings per share: $4.95 to $5.00.

Q: Michael Turn asked about the adoption curve of newer higher-priced Fireflies offerings and how to think about conservatism in the forecast.

A: David Wadhwani discussed the broad set of AI models and their integration into products, with video model expected in market early 2025 to tier creative cloud offerings. Dan Durn mentioned the velocity of innovation and how it contributes to the FY2025 guide based on strong FY2024 momentum.

Q: Alex Zukin inquired about growth drivers from Fireflies and Gen Studio and seasonality in digital media.

A: David Wadhwani talked about the growth algorithm including new users, new products, and value/pricing. Dan Durn emphasized ending ARR book of business as a key indicator and focusing on revenue and EPS rather than quarterly profile.

Q: Kirk Materne asked about Black Monday impact on net new ARR and pricing sensitivity.

A: Dan Durn stated Black Friday/Cyber Monday played out as expected with online shopping trends, and David Wadhwani discussed balancing proliferation and pricing sensitivity across different market segments.

Q: Keith Weiss questioned growth acceleration despite innovation.

A: Shantanu Narayen noted Adobe is executing on proliferation at the lower end with Express and Acrobat, and strong adoption at the high end and enterprise with Gen Studio, expecting continued acceleration.

Q: Keith Bachman asked about consumption contributing to ARR growth in FY2025.

A: Shantanu Narayen mentioned consumption contributing through video offerings, enterprise Firefly services, and premium tiered pricing as ways to drive ARR growth.

Q: Brad Zelnick asked about Firefly services integration and tiered offerings.

A: David Wadhwani discussed leveraging Firefly in new user acquisition and core creative business, with tiering based on feature access and usage limits. Dan Durn talked about enterprise deals and Gen Studio momentum.

Q: Jay Vleeschhouwer asked about RPO growth and tiering concept.

A: Dan Durn expressed confidence in driving business through enterprise deals and innovation, while David Wadhwani explained tiering as a combination of feature access and usage limits.