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You're listening to Bloomberg Business Week with Carol Masser and tim Stenoveek on Bloomberg Radio. I want to talk a little bit about a company that kind of moving all over the place. Adobe earnings out last night, shares bouncing around hied by as much as four and a half percent today as low as six tens of one percent today as well, the company did give a strong quarterly revenue outlook, suggesting that it's seeing a payoff from its investment in AI features. The company also did boost its
annual forecast. I want to bring in a Neil chukovarthi President Digital Experience, Worldwide Field Operations at Adobe. He joins us from San Jose, California, and Neil, welcome. It's good to talk to you again. It's been almost a year since we last spoke. How are you good.
Thank you, Thank you for having me back.
Yeah, thanks so much for joining us on the program. I want to talk a little bit about the stock move today because it does seem like investors might be missing something here. I did mention that the company boosted its annual forecast, gave a strong quarterly revenue outlook. Analysts on estimate gave a number that was at the bottom of the range, and you came out with numbers that said sales will be at the top of that range. What are they missing today?
Look like you said we had a strong quarter. We gave a really good guidance for our fiscal fourth quarter as well. We are focused on building a long term AI platform. We believe that this is a massive transformative moment, just like we went from on prem software to SaaS software and it will be as a leader in that. We believe this is the next big transformation of taking advantage of agentic AI and the transformation that's going on and bringing the right AI functionality and models through all
of our software. I mean, our software is pretty much ubiquitous as you know, in Photoshop and Acrobat and everything we do with experienced cloud as well. And so we think that from a long term perspective, we're really well positioned.
All right, so well positioned, and I think investors were pleased initially. But if you look at what the street's doing and Neil like you see Piper Sandler lower the price target from five hundred to four seventy ubs, lowered it from four hundred to three seventy five. Ever, Corsi cut the price from four seventy five to four fifty. Barclays did raise it from four sixty to four sixty five. I guess I'm laying that out because maybe people say, okay,
but maybe not at this price or this valuation. Should investors to some extent in terms of the efforts you guys are doing when it comes to AI, maybe temper back, pullback in terms of their expectations or how long this might take and how long or how much it might cost.
We are focused on both delivering value over the near term as well as the long term to shareholders, and obviously go through everything that we're doing for our customers and our partners. I understand you know, of course, that there are a couple of differing opinions on one where it might shake out, given all the transformation that's happening with AI and some of this uncertainty around the market. But we believe that, you know, we're fundamentally in a
really strong position. We talked specifically about you know, numbers around AI. We actually share two metrics. One is AI influenced annual recurring revenue, which costs five million dollars and then AI first annual recurring revenue, which you know, earlier in the year we had said we had set a target of two hundred and fifty million dollars by the end of the year, and just in the end of the third quarter we had already achieved that target a
quarter early. So you know, the way we see it is we are not only incorporating AI and the best of AI models, not only our own Firefly, but also third party models like Google and run May and so on, making it available to our customers. We believe it's also creating values in what we're showing through the monetization. So I believe that, you know, over the course of the next couple of quarters, the market will work itself out.
You know, you mentioned the transformation that we're seeing as a result of AI. Carol and I are really trying to figure out and we ask everybody who comes across our desk, what is going what is the future going to look like? I mean, I was at this dinner last month and Neil and it was all about AI, and the topic of conversation that dominated most was like
what jobs are at risk here? And certainly a lot of people talked about coding, but there's also the discussion about creatives and to what extent the creative class could actually see a hit to these jobs as a result of AI tools that are available right now. And I'm wondering how you think about that in your strategy, Like how do you grow your revenue at Adobe if there are potentially fewer people who need this software because it's so easy to actually create using AI.
Yeah, you know, we see that AI will absolutely have a transformative impact. But the way it will work, as in every transformation, you know, if you think of the last three transformations, the Internet transformation, the cloud transformation, the mobile transformation, Adobe has been a winnowt in each of these transformations, and the software does different things once you go through the transformation. We see that in the world of AI. What's going to happen is, you know, people
will embrace AI and people will use it. You know, we share a number of twenty nine billion generations that were done through our products through the including you know, Photoshop and Premiere and so on, or people who are already using these products incorporating AI into their work. The way we see the future playing out is as AI
becomes ubiquitous and available through products like ours. What's expected in the market will change, so you know, people are not going to use just AI and automated because then all of it will look alike. You know, your creative work always needs to stand out. Every advertisement, everything that's produced in Hollywood, even every business presentation needs to stand out and standout. Content requires both that human creativity plus
the power of AI. So we believe that over time it will absolutely be essential, but it won't be sufficient, and that combination of creativity plus AI is what's going to make content stand out.
How are you.
Thinking though about how AI will ultimately shake out? And I think about you know, open Ai kind of figuring out its future and restructuring to give nonprofit a stake, but not necessarily just be a nonprofit. You've got Microsoft and open Ai. Their non binding agreement will likely ease concern about and then to their partnership. But at the same time Microsoft is working it seems like focusing a lot internally. There's a lot of churn, a lot of movement,
a lot of money. I mean, how do you make sure you are either partnering with the right folks and positioning yourself in the right way. Do you hold back a little bit to see where the dust settles, the AI dost settles.
H No. I think you have to be in the moment in working with everybody like we are, whether it's with open EI, with Microsoft, with Amazon, with Google, and with the number of the other smaller players like Runway and others. We are working with a variety of these players. You know, in terms of how it's evolving, there will obviously be a couple of you know, LLLM providers who will be like the new operating systems of the world, so you know, there'll be probably three, four or five
of them. There will always already be a lot of players who specialize in particular areas. Maybe that's video, maybe that's a vertical, maybe there's a specific niche that they focus on. There will also be a lot of AI language models that will run on device, you know, whether it's working with like a Qualcom or other providers, there will be a lot of on device on computer local AI they'll run as well. So it'll be this combination
of different AI architectures. And one of the things that we're doing as a software provider is how do we make sure that our next generation of AI architecture can work and take advantage of all of these so that you know, from a consumer perspective and from an enterprise customer perspective, they get the best of both worlds. They get the power of the software that does exactly what they need, and they get the power of AI.
We're speaking with Anil chuck Rivart, the President Digital Experience Business Worldwide Field Operations AD Adobe, joining us from San Jose. I think a lot about price elasticity with products such as these, and as we see price increases on the consumer side from companies ranging from digital media to SaaS companies, how do you think about elasticity and price From your perspective, how much can you raise prices?
We believe it's directly correlated with value, and that's what we have done over the last few years. As our customers see increasing value and as long as it is tied to their business outcomes, will continue to see the ability for them to pay higher prices. And so you know, in the individual's market, for example, we see that, you know, as long as they can amplify their own creativity and then that shows up in whatever their own business model is,
they may be a solopreneur. They may be a freelancer, they may be working on behalf of somebody else. As long as it shows up in value for them, is that increasing value will provide us elasticity. From an enterprise perspective, it's really tied to business value as they look at their business outcomes in terms of increasing their own agility, in terms of their overall efficiency, in terms of being able to personalize their customer experiences through better content and
better data. That will tie to the what they are willing to pay for software like hours, So it'll be it's all completely correlated with the value we're creating for them.
Hey, one thing I want to just you know, talk a little bit more about your business is how does your business get impacted with consolidation the traditional advertising industry.
What we are seeing the ad platforms is there's obviously a lot of interest in a lot of new ad channels, whether it is connected TV, streaming, retail media networks. A lot of interest there in addition to the traditional platforms. So when we talk to enterprise customers, you want to do is to say, hey, look now I have you know I used to deal with three or four channels.
I'm now dealing with fifty plus channels. The advantage if I can do it right, is I get a much better ROI through a cost per click or even being able to reach the right audience or even getting the full loop of data on what's working and what's not. But in order to be able to do that, I need to have the right content and the right agility
to be able to work with fifty plus channels. And so that's really what we are offering with our products like Adobe gen Studio, which is the end to end content supply chain offering and through the Adobe Experience platform.
And Neil, always love it when you join us. Appreciate you taking the time, especially on the first day the stock traded after those earnings came out. Anil Chuck Rovarthi, President Digital Experience Business, Worldwide Field Operations at Adobe, joining us from San Jose, California.
Thanks again and Neil