Adobe’s Strategic Innovations Drive Growth in Marketing and Digital Media

Adobe is pioneering a collaborative approach for brands and their agency partners to design marketing campaigns. By integrating self-service capabilities and workflows with creative teams, Adobe is developing custom models and agents that specifically counter the inefficiencies present in the content supply chain. With solutions like Adobe GenStudio and Firefly Services, the company is enhancing creativity, personalization, and operational efficiency.

Combining its Experience platform and applications with Adobe GenStudio positions Adobe as a leader in delivering a comprehensive marketing solution. The firm intends to maximize its ecosystem of partners and agencies, ensuring that businesses of all sizes can effectively sell, implement, and achieve desired outcomes. To facilitate this process, Adobe has accelerated its ‘One Adobe’ deals, integrating various creative and marketing products into a unified enterprise solution. The company plans to continue enhancing its sales capacity to promote its offerings across diverse sectors, including business, education, and government.

Consumers and business professionals are increasingly demanding ease of use on both web and mobile platforms through a freemium model. The thirst for quick, AI-driven creative applications remains strong as users seek to distinguish themselves. The real advantage lies in blending creativity with productivity in a cohesive solution. The integration of Adobe Express and Acrobat represents a significant opportunity for Adobe to streamline the journey from document creation to consumption.

The introduction of an AI Assistant in Acrobat Reader and Express accelerates the deployment of conversational and agent-like interfaces that enhance this combined offering. Adobe anticipates that growth will be propelled by expanded distributions through web and mobile app stores, alliances with significant software providers, and targeted marketing to SMEs and enterprise clients. The company’s infusion of generative AI across its product range is poised to generate an annual recurring revenue (ARR) impact of billions, benefiting customer acquisition, retention, and value enhancement. Currently, Adobe’s stand-alone and add-on AI products—such as Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing—have yielded over $125 million in business revenue as of the end of Q1 fiscal 2025.

Looking ahead, Adobe expects this AI-related business portfolio to double by fiscal 2025’s conclusion. By leveraging its extensive product and technology frameworks in the AI landscape, and tailoring offerings to specific customer groups, Adobe aims to accelerate growth over the next decade. Its focus will remain on business and creative professionals, alongside strategic marketing initiatives. The company plans to reveal more financial insights regarding two new customer groups starting this quarter, with additional details to be shared at the Investor Day during the upcoming summit.

I will now pass the discussion to David, who will elaborate on developments within our digital media sector.

David Wadhwani — President, Digital Media

Thank you, Shantanu. Hello, everyone. In Q1, Adobe generated $4.23 billion in revenue, reflecting a 12% increase from last year. At the close of the quarter, our digital media ARR reached $17.63 billion, representing a year-over-year growth of 12.6%.

We continue to witness robust performance in both Creative Cloud and Document Cloud. The growth in Creative Cloud is driven by widespread adoption of our products and services, especially newer offerings such as Firefly Services. Additionally, the momentum generated by an increasing number of ‘One Adobe’ deals and a growing community of web and mobile users has contributed to this positive trend. Document Cloud has also enjoyed solid organic demand, with ongoing optimizations improving conversions from free to paid subscriptions and the AI Assistant being rolled out in additional languages. Significant achievements were recorded in emerging markets as well.

This momentum marks a strong start to the fiscal year. Today’s world is visually driven, necessitating effective creative expression across all aspects of life. Our users, from business professionals to regular consumers, are eager to create visually appealing content, whether for presentations or social media engagements.

Simultaneously, creative professionals and marketers are competing for superior online presence and personalized customer experiences. They rely on Document Cloud, Creative Cloud, and Experience Cloud to meet their content needs. AI enhancements provide remarkable opportunities for tailored offerings that cater to specific audience demands. Integration between Acrobat, Express, and Firefly delivers significant advantages for business professionals, while creative professionals leverage powerful workflows through Creative Cloud and other innovative applications.

PDF remains the industry standard for digital documents among business users, and Adobe Acrobat is reshaping engagement across platforms. Features like the AI Assistant in Acrobat and Reader are transformative for users—be they sales teams or students—enabling faster insights and smarter document edits. The ability to share links and add comments has enhanced productivity and encouraged broader adoption, leading to a 23% year-over-year increase in active usage of Acrobat and Reader.

Our success with Acrobat illustrates that whether for professional presentations, academic projects, or social media content, users seek intuitive solutions to craft standout visual content. Notably, a considerable proportion of documents created in Acrobat are visually driven—covering marketing materials, presentations, infographics, and more. By integrating Express features directly into Acrobat, we aim to enhance user productivity and streamline the transition from document consumption to content creation.

We’re observing an impressive surge in user demand, with Express usage within Acrobat experiencing a tenfold year-over-year increase. Key advancements for users include multi-language support from the Acrobat AI Assistant, which now encompasses English, French, German, Italian, Portuguese, Spanish, and Japanese. New document-specific features for legal workflows further enhance capabilities, alongside innovative tools in Express such as the automatic video highlight generator and text rewrite options for improved content.

Expanded integration with platforms like Microsoft Edge, Google Chrome, Gmail, and Google Drive, along with a significant increase in link-sharing for enhanced collaboration, has contributed to almost 50% year-over-year growth in Acrobat web monthly active users. Further, the Express ecosystem has broadened to incorporate integrations with Miro, Box, Slack, Webflow, and HubSpot.

Adobe Reports Strong Growth in Creative and Experience Solutions

Adobe has expanded its offerings significantly, now boasting 225 plug-ins, more than double from last year. This growth is attributed to robust adoption by businesses and students alike. In the first quarter, Adobe Express added nearly 6,000 new businesses, reflecting a remarkable 50% growth quarter-over-quarter.

Student access to Express Premium saw an impressive increase of 85% year over year. Major global clients such as AT&T, Delta Airlines, Disney, Ernst and Young, IBM, JPMorgan Chase, Microsoft, Paramount, and Qatar Airlines have chosen Adobe’s solutions. As we celebrate the 35th anniversary of Photoshop, Adobe Creative applications continue to hold a leading position among creative professionals worldwide in areas like imaging, design, photography, video, illustration, and 3D.

The demand for digital tools is rising among new creators seeking freemium web and mobile applications. To cater to these users, Adobe launched a new Photoshop mobile app and enhanced web experience, allowing customers to use Photoshop’s iconic editing functions on iPhones. These updates are bundled with current Photoshop plans, providing users with flexible options to create across various platforms. Remarkably, the launch generated over 30 million social engagements within just two weeks.

The introduction of Adobe Firefly’s video model in February has received strong acclaim from brands and professionals. This generative AI video tool allows users to produce video clips from text or images, control camera angles, create 3D sketches, and design custom motion elements. Major companies like Dentsu, PepsiCo, and Stagwell have started utilizing the video model to enhance their content creation processes. Additionally, Adobe released a new Firefly application, now a comprehensive platform for generating images, vectors, and videos, all while integrating smoothly with existing Adobe apps for seamless production workflows.

Furthermore, the Firefly app allows users to generate videos from keyframes, create 3D designs to refine results, and translate audio and video content into various languages. Adobe has also introduced two new service plans, Firefly Standard and Firefly Pro, with the forthcoming Firefly Premium now in rollout. Notably, user engagement has shown promising trends, with over 90% of paid users creating videos. The expansion of Photoshop on mobile and web, along with the new Firefly application, strengthens Adobe’s suite of web and mobile products, aiding creative imaging and early production.

These developments serve dual purposes: adding value for existing subscribers and offering a smooth freemium onboarding pathway for emerging creators. Initial interest in these new tools has been very encouraging. Notably, the integration of generative AI features shows significant adoption, with Photoshop GenAI active users at around 35% and Lightroom GenAI at 30%. Users have generated over 20 billion assets using Firefly.

New features in Premiere Pro and After Effects are enhancing productivity for editors and motion designers. AI capabilities like Media Intelligence help users find footage quickly with natural language, while multilingual caption support expands reach to global audiences. Adobe is proud to support visionary filmmakers, including Academy Award winners, who are advancing compelling narratives through its Creative applications. Additionally, new functionalities like adaptive profiles and distraction removal in Lightroom and Adobe Camera Raw are reducing repetitive tasks for users. Events like Max Japan have fostered community engagement and introduced significant innovations, including performance enhancements in Adobe Illustrator.

Adobe has witnessed a robust quarter in its enterprise sector, with increasing interest in Firefly Services and custom models for scaling marketing content production. Major brands such as Deloitte Digital, IBM, IPG Health, Mattel, and Tapestry are leveraging this technology, with Tapestry implementing an efficient digital twin workflow using Firefly’s custom models. This combination of creativity and marketing helps drive personalized experiences at scale.

Adobe’s rapid delivery of tailored innovations positions it favorably across various content creation segments, benefiting business professionals, creative experts, and marketers alike. The expanded offerings reach a wider customer base, and Adobe’s strong market strategy and data-driven frameworks are driving growth across both flagship and new products. More exciting capabilities are expected to be revealed at the upcoming Adobe Summit and MAXLondon in April. I’ll now turn it over to Anil.

Anil S. Chakravarthy — President, Digital Experience

Thank you, David. Hello, everyone. Experience Cloud had a solid Q1, reaching revenue of $1.41 billion this quarter. Subscription revenue was $1.3 billion, marking an 11% year-over-year increase.

Our leading solutions, spanning content, data, and customer journeys, empower enterprises to deliver personalized experiences at scale, driving both revenue growth and productivity improvements. In Q1, we experienced typical seasonal bookings while progressing our pipeline as enterprise customers began implementing their crucial 2025 objectives. Adobe Experience Platform and Apps are essential for creating unified customer experiences. The recent addition of AEP AI Assistant magnifies the platform’s value by allowing businesses to leverage conversational interfaces for data management, insights, audience segmentation, and experience delivery.

We are expanding AEP’s capabilities, introducing intelligent orchestration of customer experiences through AI agents integrated within the platform. This empowers customers to optimize their first-party data usage and enhance ad experiences through direct customer connections. Our comprehensive portfolio covers the entire content lifecycle — from creation and production to management, activation, and insights. By merging creativity with marketing through AI, we are enabling our customers to explore the full potential of targeted personalization at scale.

Traditionally, marketing professionals have been limited by the variations of content they can produce and the journeys they can implement. However, with Adobe GenStudio, brands are presented with new opportunities to expand their creative capabilities.

Adobe’s Q1 FY ’25 Results Highlight Strong Revenue Growth and Innovation

Globally, Adobe has been enhancing collaboration between creative and marketing teams to streamline the process from creation to activation. This effort aims to elevate creativity, insights, and efficiency in marketing campaigns. A significant highlight from this collaboration is the robust demand for the Adobe Experience Platform (AEP) and its native applications, which saw Q1 subscription revenue surge nearly 50% year-on-year. The platform also facilitates real-time Customer Data Platform (CDP) collaboration, allowing advertisers and publishers to effectively discover, activate, and measure high-value audiences for more targeted campaigns. This real-time CDP collaboration is specialized for brands looking to connect and work with first-party data.

Advertisers can now assess ad effectiveness directly with leading publishers like NBC Universal and Warner Bros. Discovery. Companies such as Alterra Mountain Company, WaveMaker, Major League Baseball, and Coca-Cola Company have piloted this solution to produce personalized ads that drive performance. Additionally, the launch of the AEM Cloud Service accelerator in partnership with Publicis Sapient could reduce migration labor costs by up to 35%.

Adobe has received notable recognition from industry analysts in significant reports, including the Gartner Magic Quadrant for Digital Experience Platforms and the Magic Quadrant for Personalization Engines. Demand for Firefly Services and custom models as part of the GenStudio solution has been strong, with over 1,400 custom models created since its launch. GenStudio for performance marketing achievements include partnerships with major brands such as AT&T, Lennar, Lenovo, Lumen, Nebraska Furniture Mart, Red Hat, Thai Airways, and Phoenix. Strong collaborations with partners like Google, Meta, Microsoft Ads, and Snap are evident, along with vertical extension apps provided by Accenture, EY, IPG, Merkel, and PwC.

The partnership with Dentsu aims to bring Generative AI capabilities into production for Adobe GenStudio Dentsu Plus clients. Key wins for Adobe include contracts with Delta Airlines, Ford, IBM, Microsoft, PNC Financial Services, and Tyson Foods, reflecting the increasing need for an integrated workflow that combines creativity with marketing. Adobe’s success in this area has been powered by product integration and ongoing innovation between Creative Cloud and Experience Cloud, driven largely by Adobe GenStudio.

Through our One Adobe enterprise go-to-market initiative, customers can deliver personalized, branded content at scale. The strategic integration of our solutions across creativity and marketing remains a distinctive advantage for Adobe. We are excited to announce that Adobe Summit, our flagship Digital Experience Conference, will take place next week in Las Vegas. This event will feature thousands of customers, partners, and developers from around the world as we share our vision on leveraging generative AI and agentic technology for achieving personalization at scale.

Now, I will hand it over to Dan.

Daniel J. Durn — Executive Vice President, Chief Financial Officer

Thank you, Anil. Over the past decade, Adobe’s business has expanded by offering top-tier products within three main categories: Creative Cloud, Document Cloud, and Experience Cloud. Our cloud offerings have evolved to better meet the needs of diverse customer segments. For instance, Acrobat is featured in both Creative and Document Clouds, while GenStudio spans Creative Cloud, Express, Firefly Services, and Experience Cloud.

Organizations looking to engage with One Adobe can now combine creative licenses with marketing automation, alongside the use of Acrobat and Express. Our focus on innovation will support both business professionals and consumers, as well as creative and marketing professionals. Providing clear insights into financial performance across these customer groups will illustrate how well Adobe aligns with its strategic objectives.

Therefore, we will present overall Adobe revenue, along with specific figures for the digital media and digital experience segments. This includes digital experience subscription revenue and aggregated digital media ending ARR. The business professionals and consumers group encompasses all subscription revenues from Document Cloud, Acrobat within Creative Cloud, and Adobe Express also part of Creative Cloud. The creative and marketing professionals group includes all subscription revenue from the digital experience group and the remaining subscription revenue from Creative Cloud in digital media.

In this call, I’ll focus on three key areas: our Q1 FY ’25 results, highlighting growth drivers, financial targets, and our supplemental disclosures. Looking at the quarter, Adobe generated revenue of $5.71 billion in Q1 FY ’25, marking a 10% increase compared to the previous year, or 11% in constant currency. The GAAP diluted earnings per share reached $4.14, while non-GAAP diluted earnings per share were $5.08.

A brief overview of Q1 business and financial highlights indicates digital media revenue of $4.23 billion and digital media ending ARR of $17.63 billion, which is a 12.6% year-on-year increase. Digital experience revenue accounted for $1.41 billion, with cash flows from operations at $2.48 billion. At the end of the quarter, remaining performance obligations stood at $19.69 billion, growing at 12% year-on-year, along with CRPO increasing by 11%. In our digital media segment, Q1 revenue of $4.23 billion showcased an 11% rise year-on-year, or 12% when adjusted for constant currency.

We concluded the quarter with a $17.63 billion digital media ARR, reflecting a 12.6% year-on-year growth in constant currency. Key contributors to Q1 digital media growth included robust demand for Acrobat across various market channels and regions, as well as a successful freemium model driving growth in mobile and web platforms. Improvements in user adoption and engagement with the Acrobat AI Assistant also played a role in expansion, bolstered by new language support and advanced contract intelligence features. Additionally, substantial growth for our flagship creative offerings was driven by a range of applications, Stock services, and imaging and photography enhancements.

The creative web and mobile offerings maintained momentum with a 35% year-on-year growth in paid subscriptions, primarily supported by enterprise demand driven by Firefly Services and the upsell potential linked to generative AI capabilities. Shifting focus to our digital experience segment, we reported revenue of $1.41 billion in Q1, reflecting a 10% increase year-over-year, both as reported and in constant currency. Digital experience subscription revenue reached $1.30 billion, growing 11% compared to the previous year in both reported figures and constant currency.

Key growth catalysts in the digital experience segment included strong performance across content, data, and journey products, with AEP and app subscription revenue rising nearly 50% year over year. GenStudio Solutions exceeded $1 billion in ending ARR, while early momentum in GenStudio for Performance Marketing continued to improve enterprise retention rates. Now, let’s analyze the performance of our customer groups.

The subscription revenue for the creative and marketing professionals group was $3.92 billion, which represents a growth of 10% year-over-year.

Adobe Reports Strong Q1 Revenue Growth and Looks Ahead

Adobe has posted impressive financial results for the first quarter of fiscal year 2025, marking robust growth in its business segments. The company’s subscription revenue from business professionals and consumers reached $1.53 billion, reflecting a 15% increase year over year. In terms of tax obligations, Adobe reported an effective tax rate of 17% on a GAAP basis and 18.5% on a non-GAAP basis.

As the quarter closed, Adobe’s Remaining Performance Obligations (RPO) stood at $19.69 billion, which is a 12% rise year over year and a 13% increase in constant currency. Furthermore, Cash Flows from Operations reached a record $2.48 billion, with an ending cash and short-term investment position of $7.44 billion as of the end of Q1.

Share Repurchase and Financial Projections

During Q1, Adobe entered into share repurchase agreements amounting to $3.25 billion. The company still has $14.4 billion remaining from its total $25 billion authorization granted in March 2024. Looking ahead to Q2 of fiscal year 2025, Adobe set revenue targets: total revenue is projected between $5.77 billion and $5.82 billion, with digital media segment revenue estimated between $4.27 billion and $4.30 billion. For the digital experience segment, revenue expectations range from $1.43 billion to $1.45 billion, while digital experience subscription revenue is targeted between $1.315 billion and $1.325 billion. GAAP earnings per share (EPS) is anticipated in the range of $3.80 to $3.85, and non-GAAP EPS is expected between $4.95 to $5. The company projects a non-GAAP operating margin of approximately 45% and a non-GAAP tax rate of around 18.5%.

Positive Outlook Amid Economic Conditions

Adobe’s strong first-quarter performance underscores the company’s commitment to innovation and its ability to meet the evolving needs of its wide customer base. The leadership is optimistic about maintaining guidance for the fiscal year 2025, reinforcing the belief that the current macroeconomic conditions will support this forecast. The shift toward digital transformation in businesses strengthens Adobe’s position in delivering valuable solutions, particularly as AI technology continues to shape the industry landscape.

Looking forward, the company is excited about future growth opportunities as it aims to help clients maximize the potential of creativity and innovation within their operations. Adobe is eager to share more insights at the upcoming investor meeting at Summit 2025 and welcomes questions from analysts and investors.

Questions & Answers

Operator

Thank you. [Operator instructions] Our first question comes from Brent Thill with Jefferies.

Brent Thill — Analyst

Good afternoon. Shantanu, it seems that AI revenue currently forms a low single-digit percentage of your total annual revenue. Many are curious about when this area will have a more significant impact. What is needed for that? Could you elaborate on Adobe’s AI journey and its projected revenue implications?

Shantanu Narayen — Chairman and Chief Executive Officer

Absolutely, Brent. When we discuss the AI journey, we typically divide it into three key areas: ensuring continuous innovation, tracking usage for value, and monetization. We’re encouraged by progress across all three areas as we’ve engaged with you in the past. A substantial portion of our AI monetization is associated with attracting new customers to our subscriptions, enhancing retention, and encouraging higher-value purchases.

As an example, when customers opt for Creative Cloud or Document Cloud, they are inherently engaging with monetized AI capabilities. In addition, we have introduced new standalone products such as Acrobat AI Assistant and Firefly, which will also come with fresh subscription models. The $125 million in revenue we referenced at the end of Q1 pertains exclusively to this new AI product line, an area we expect to double in the coming period.

Moreover, the release of the Firefly app which includes benefits like video modeling and ideation will create additional avenues for monetization and integration across our product suite. Overall, we’re confident about the potential for both innovation and revenue growth stemming from these initiatives.

Brent Thill — Analyst

Thank you, Shantanu.

Operator

Next, we’ll hear from Brent Bracelin with Piper Sandler.

Brent Bracelin — Analyst

Hi, thanks for taking my question. Good afternoon. I want to dive deeper into the demand trends observed during the quarter. I appreciate the reaffirmation of your 11% growth target for digital media annual recurring revenue for the year. Could you provide more insights into performance trends across Creative and Document Cloud, please?

David Wadhwani — President, Digital Media

Yes, certainly. Digital media ARR reported a growth of 12.6%, aligning with our expectations. The overall demand trajectory this quarter mirrors historical patterns, showing broad-based product demand with noteworthy highlights. For instance, our Acrobat product gained 23% in monthly active users year over year, along with improved user conversions driving business growth.

Additionally, the introduction of the AI Assistant last year has shown impressive results, particularly with a 2x quarter-over-quarter usage growth, contributing significantly to our overall strategy. We’ve also expanded our partner ecosystem, doubling its size over the last year, and added notable names like Miro, Box, Webflow, and HubSpot.

Adobe Experiences Rapid Growth in Business and Creative Markets

Adobe continues to expand access to its products, evidenced by a notable increase in student access. Recently, the company has intensified its student and campus ambassador programs, successfully adding 6,000 new small and medium businesses to the Express product. Additionally, user engagement with Express capabilities within Acrobat surged, showing a staggering 10x year-over-year increase.

Growing Demand in Creative Solutions

On the creative front, Adobe’s advancements are gaining traction. As mentioned by CEO Shantanu Narayen, the introduction of the Firefly video model has been embraced by major companies like PNC, Pepsi, and Dentsu. Alongside the Standard and Pro Firefly offerings, Adobe recently launched a Premium option that includes a more extensive set of generative credits, contributing to various monetization strategies. The debut of Photoshop on mobile and web platforms is also a significant milestone.

Notably, Adobe’s products generated considerable buzz, achieving hundreds of articles and 30 million social engagements. Over the weekend, it was recognized as the focus app on the App Store. Exciting developments in AI have been integrated into both Lightroom for web and mobile, as well as advances within Adobe’s Premiere product.

Upcoming Milestones and Market Momentum

Looking ahead, Adobe is positioned for continued innovation with three major milestones on the horizon: the Summit next week, NAB shortly thereafter, and MAXLondon afterward. These events are expected to highlight the substantial growth in generative outputs, with Adobe surpassing 20 billion generations to date. Currently, the company registers over 1 billion generations per month, with 90% of Firefly app users also producing video content.

Enterprise Market Insights

Anil S. Chakravarthy, President of Digital Experience, emphasized the burgeoning demand for creativity and marketing within the enterprise sector. Every Chief Marketing Officer (CMO) engages with Adobe about how generative AI can revolutionize content supply chain dynamics. The GenStudio offering, which integrates creativity, marketing, and AI, has been a pivotal area of growth, resulting in numerous customer wins and partnerships that will be elaborated upon at the upcoming Summit.

Analyzing Growth Trends

David Wadhwani, President of Digital Media, reflected on the positive trajectory of innovative offerings. Analysts have expressed curiosity about growth rates among different professional sectors. Keith Weiss of Morgan Stanley noted that business professionals and consumer sectors exhibit stronger growth compared to creative and marketing professionals. This could suggest faster sales cycles in business and consumer markets, particularly evident in consumer adoption rates.

Shantanu Narayen acknowledged this insight, highlighting the substantial opportunities within both the creative and enterprise sectors. He indicated that the GenStudio product line, now valued at $1 billion, aims to address the entire content supply chain and will only bolster growth potential in the creative market. Furthermore, he noted Adobe’s expansive user base, with hundreds of millions engaging monthly with the company’s products.

Share Repurchase Strategy

Lastly, when questioned about the company’s share repurchase strategy, Chief Financial Officer Daniel J. Durn confirmed that Adobe had repurchased nearly $11 billion over the past year. This quarter’s repurchase activity indicates an opportunistic approach towards managing financial strength, although Durn did not commit to maintaining the current pace throughout the year.

In summary, Adobe remains committed to fostering growth through innovation and robust market engagement strategies, as evidenced by its expanding user base and strategic offerings.

Adobe Leaders Discuss Growth Opportunities Amid Market Changes

During a recent conference call, Shantanu Narayen, Chairman and CEO of Adobe, reaffirmed the company’s guidance for the year. He emphasized a focus on strong operating margins, robust cash flow, and strategic capital allocation. “We feel good about where we sit, and if there are opportunities to be opportunistic, we will take them,” he stated.

In response to his remarks, Keith Weiss, an analyst, expressed confidence in Adobe’s decision to accelerate their share repurchase program, acknowledging that this action reflects management’s strong belief in the company’s future prospects.

Operator

Next, the operator introduced Kash Rangan from Goldman Sachs. Rangan thanked the panel for the comprehensive disclosure and posed a question to Narayen.

“When you pivoted the company to a new cloud-based business model, there was initial skepticism,” Rangan noted. “However, you proved the total addressable market (TAM) was larger, and the company improved margins as a result. Regarding AI, some argue that companies are merely defending their relevance. What is your conviction on the incremental growth potential from AI, considering your past experiences with major transitions?”

Narayen appreciated the inquiry and highlighted the significance of exploring these themes in the upcoming Financial Analyst meeting. He asserted that AI presents an immense opportunity for both professionals and consumers and hinted at plans to include insights about monetizing creativity and productivity within their user base, similar to prior successes with Adobe Acrobat.

“There are billions of users we can aim to attract,” said Narayen. “We certainly believe there is a massive opportunity. Furthermore, a growing number of creators are engaging with our web and mobile tools, like Photoshop and Firefly. These products aim to nurture the next generation of creators while also benefiting enterprise clients through increased content production and integration into marketing systems.”

“The focus will be on how we can take advantage of this larger TAM,” Narayen added. “In terms of AI’s role, if we don’t capitalize on it, it may lead to disruption, but we’re clearly positioning it as a growth enabler.”

Following this, Rangan asked whether current market uncertainties, including trade wars and tariffs, could affect Adobe’s customer base. “Are they showing signs of hesitancy or confusion?”

Narayen reassured stakeholders, indicating that Adobe operates under diverse market conditions and had ongoing, fruitful discussions with various clients. “We have a seasoned management team ready to navigate challenges. The broader macroeconomic conditions don’t significantly impact Adobe compared to other firms, and we remain optimistic,” he stated.

Kash Rangan — Analyst

Thank you.

Shantanu Narayen — Chairman and Chief Executive Officer

Thank you.

Operator

Next, Mark Moerdler from Bernstein Research posed a question regarding Adobe’s revenue categorization changes. “Can you clarify the changes regarding Document Cloud and Creative Cloud? Is this shift driven by the One Adobe sales strategy?”

Daniel J. Durn — Executive Vice President, Chief Financial Officer

Thank you for the question, Mark. We are increasingly integrating cross-cloud offerings and plan to expand this approach. This strategy allows individuals and enterprises to purchase comprehensive solutions that meet their diverse needs.

By emphasizing our success in bridging productivity and creativity, as well as marketing, we’re highlighting how this strategy supports the company’s forward momentum.

Shantanu Narayen — Chairman and Chief Executive Officer

Furthermore, we’ve received feedback indicating a need to clarify the relationship between Acrobat and our Creative and Document Clouds. This new categorization aims to enhance visibility on our performance moving forward.

Adobe’s Strategic Moves Highlight AI Expansion and Revenue Growth

Addressing the momentum within Adobe’s business, CEO Shantanu Narayen emphasized the effectiveness of the GenStudio solution, which is integrating features of products like Photoshop and Creative Cloud. The addition of Express aims to benefit marketers, while Firefly Services contribute with custom models. This combination is set to enhance enterprise offerings and increase visibility into revenue growth, particularly as they pursue strategic partnerships.

Mark Moerdler — Analyst

That framework sounds clear. Regarding the AI ARR disclosure, can we expect quarterly updates or periodic information? Thank you.

Shantanu Narayen — Chairman and Chief Executive Officer

Expect periodic updates.

Operator

The next question comes from Alex Zukin at Wolfe Research.

Alex Zukin — Analyst

Thank you for taking my question. I want to echo positive sentiment around the recent AI business numbers. Regarding the reported $125 million in AI revenue, can you break down the contributions from Assistant, Firefly, and GenStudio? Specifically, what growth rates might enable you to double this figure by year-end? Also, where do you see stronger demand, creative professionals or business clients?

David Wadhwani — President, Digital Media

Great question, Alex. The AI Assistant has been in the market for about three to four quarters, while Firefly Service has similarly been available for nearly four quarters. GenStudio was introduced in Q4 of last year, influencing the revenue mix. Our current trajectory is promising, indicating that the $125 million is poised to potentially double within the next nine months. This growth highlights the robust scale and momentum behind our innovations.

As we analyze the product advancements, the recent innovations mentioned by Shantanu have led to increased utilization, and we are now moving toward monetization. For instance, Firefly has rolled out imaging, vector, design, video, and voice enhancements, which are off to a strong start. Many enterprises are turning to these models, attracted by their quality, breadth, and commercial safety. The creative control we guarantee, such as structured styling and keyframe settings for video generation, reinforces our competitive position in the market.

All of these developments culminate in a versatile offering within the Firefly platform, featuring various tiers including Standard, Premium, and Pro. The integration within the Creative Cloud suggests potential for further tiering. Collaborating with Anil’s team on GenStudio strengthens our commitment to comprehensive model exposure, emphasizing workflows, integration, and application-focused solutions. This shift in the conversation highlights our competitive differentiation, bolstering our optimism around the ambitious revenue goals we have for the upcoming months.

Shantanu Narayen — Chairman and Chief Executive Officer

I’m pleased you find this insight useful. To clarify, the AI Assistant associated with Acrobat is a separate entity. The bulk of the reported revenue actually comes from Creative solutions. While we include the AI Assistant in Acrobat offerings, it won’t factor into reports unless tied to an Acrobat Premium SKU. So far, Creative remains the predominant revenue driver, although the Acrobat segment is performing well.

Alex Zukin — Analyst

This clarification is very helpful. With recent consolidations in the AI sector, could you share your perspective on balancing organic versus inorganic innovation given your expanding functionality?

Shantanu Narayen — Chairman and Chief Executive Officer

In terms of core creative models, we will ensure the safety and integrity of our offerings, especially within Firefly and product integrations like Photoshop. We support third-party models, which is essential for our enterprise customers. Recent collaborations, such as those with Estee Lauder and Publicis, will further embed our models in their operations. Our strategy remains practical: providing users with effective means to deliver value through our applications, akin to the Photoshop plug-ins of the past. Expect continued support for both proprietary and third-party models within our primary applications.

Operator

The next question comes from Mark Murphy at J.P. Morgan.

Mark Murphy — Analyst

Thank you. Can you provide insight on current advertising activity and consumer spending trends, especially considering recent mixed results from various sectors?

Adobe Reaffirms Fiscal Year 2025 Guidance Amid Economic Turbulence

In response to recent turbulence in major sectors such as airlines and retail, Adobe’s leadership remains confident in reaffirming its fiscal year 2025 guidance. This confidence reflects the firm belief that digital solutions will continue to be a core component of business strategies across industries.

Importance of Digital Transformation

Shantanu Narayen — Chairman and Chief Executive Officer

In a conversation with analysts, Narayen emphasized the ongoing significance of digital transformation, stating that nearly every company recognizes the necessity of digital tools. He noted that irrespective of the current economic pressures facing various sectors, businesses are increasingly focused on how technology can enhance their performance and improve efficiency. “Regardless of severe macroeconomic conditions, firms depend on technology providers to help them achieve their objectives through both growth and operational efficiency,” he remarked.

Future Revenue Projections

Mark Murphy — Analyst

Addressing the anticipated growth, Murphy inquired about the company’s plans to double the Annual Recurring Revenue (ARR) target of $125 million within nine months. He questioned the potential changes in revenue composition, particularly concerning video models.

Shantanu Narayen — Chairman and Chief Executive Officer

Narayen explained that the video model, as part of Adobe’s Firefly app, will play a significant role in future revenue. “We look forward to offering more detailed insights during the upcoming FA meeting, including product growth rates and monetization strategies,” he added.

Firefly App’s Adoption and Market Potential

Saket Kalia — Analyst

Kalia expressed appreciation for the tiered subscription structure offered by the Firefly app and sought insights into expected adoption rates. He asked if previous Adobe products, like Adobe Stock, could provide a framework for understanding potential user uptake.

David Wadhwani — President, Digital Media

Wadhwani underscored the excitement surrounding the Firefly app, attributing its anticipated success to the significant pressures faced by creative professionals. He pointed out that the generative AI features of Firefly are well-integrated and meet user needs effectively, leading to strong adoption. “By making premium features easily discoverable within creative workflows, we expect more professionals to engage with our offerings,” Wadhwani noted.

Additionally, he highlighted the app’s relevance not just for creative experts, but also for emerging professionals. The early adoption rates indicate strong value for both established creators and newcomers. This dual-market potential positions Adobe favorably as it evolves Firefly’s services and monetization strategies.

Closing Thoughts and Future Outlook

Shantanu Narayen — Chairman and Chief Executive Officer

As the call concluded, Narayen summarized key takeaways: “We experienced a robust start in Q1 and are optimistic about our market opportunities. Our focus on nurturing AI capabilities across our products will enhance value and drive growth in fiscal year 2025 and beyond.” He expressed eagerness for deeper discussions at the forthcoming FA meeting.

Operator

Our final participant was the operator, concluding the earnings call on a high note.

Call Participants

• Steve Day — Chief Financial Officer and Senior Vice President, Digital Experience
• Shantanu Narayen — Chairman and Chief Executive Officer
• David Wadhwani — President, Digital Media
• Anil S. Chakravarthy — President, Digital Experience
• Daniel J. Durn — Executive Vice President, Chief Financial Officer

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