Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 2: tim Stenoveek on Bloomberg Radio. I want to talk a
Speaker 2: little bit about a company that kind of moving all
Speaker 2: over the place. Adobe earnings out last night, shares bouncing
Speaker 2: around hied by as much as four and a half
Speaker 2: percent today as low as six tens of one percent
Speaker 2: today as well, the company did give a strong quarterly
Speaker 2: revenue outlook, suggesting that it's seeing a payoff from its
Speaker 2: investment in AI features. The company also did boost its
Speaker 2: annual forecast. I want to bring in a Neil chukovarthi
Speaker 2: President Digital Experience, Worldwide Field Operations at Adobe. He joins
Speaker 2: us from San Jose, California, and Neil, welcome. It's good
Speaker 2: to talk to you again. It's been almost a year
Speaker 2: since we last spoke. How are you good.
Speaker 3: Thank you, Thank you for having me back.
Speaker 2: Yeah, thanks so much for joining us on the program.
Speaker 2: I want to talk a little bit about the stock
Speaker 2: move today because it does seem like investors might be
Speaker 2: missing something here. I did mention that the company boosted
Speaker 2: its annual forecast, gave a strong quarterly revenue outlook. Analysts
Speaker 2: on estimate gave a number that was at the bottom
Speaker 2: of the range, and you came out with numbers that
Speaker 2: said sales will be at the top of that range.
Speaker 2: What are they missing today?
Speaker 3: Look like you said we had a strong quarter. We
Speaker 3: gave a really good guidance for our fiscal fourth quarter
Speaker 3: as well. We are focused on building a long term
Speaker 3: AI platform. We believe that this is a massive transformative moment,
Speaker 3: just like we went from on prem software to SaaS
Speaker 3: software and it will be as a leader in that.
Speaker 3: We believe this is the next big transformation of taking
Speaker 3: advantage of agentic AI and the transformation that's going on
Speaker 3: and bringing the right AI functionality and models through all
Speaker 3: of our software. I mean, our software is pretty much
Speaker 3: ubiquitous as you know, in Photoshop and Acrobat and everything
Speaker 3: we do with experienced cloud as well. And so we
Speaker 3: think that from a long term perspective, we're really well positioned.
Speaker 1: All right, so well positioned, and I think investors were
Speaker 1: pleased initially. But if you look at what the street's
Speaker 1: doing and Neil like you see Piper Sandler lower the
Speaker 1: price target from five hundred to four seventy ubs, lowered
Speaker 1: it from four hundred to three seventy five. Ever, Corsi
Speaker 1: cut the price from four seventy five to four fifty.
Speaker 1: Barclays did raise it from four sixty to four sixty five.
Speaker 1: I guess I'm laying that out because maybe people say, okay,
Speaker 1: but maybe not at this price or this valuation. Should
Speaker 1: investors to some extent in terms of the efforts you
Speaker 1: guys are doing when it comes to AI, maybe temper back,
Speaker 1: pullback in terms of their expectations or how long this
Speaker 1: might take and how long or how much it might cost.
Speaker 3: We are focused on both delivering value over the near
Speaker 3: term as well as the long term to shareholders, and
Speaker 3: obviously go through everything that we're doing for our customers
Speaker 3: and our partners. I understand you know, of course, that
Speaker 3: there are a couple of differing opinions on one where
Speaker 3: it might shake out, given all the transformation that's happening
Speaker 3: with AI and some of this uncertainty around the market.
Speaker 3: But we believe that, you know, we're fundamentally in a
Speaker 3: really strong position. We talked specifically about you know, numbers
Speaker 3: around AI. We actually share two metrics. One is AI
Speaker 3: influenced annual recurring revenue, which costs five million dollars and
Speaker 3: then AI first annual recurring revenue, which you know, earlier
Speaker 3: in the year we had said we had set a
Speaker 3: target of two hundred and fifty million dollars by the
Speaker 3: end of the year, and just in the end of
Speaker 3: the third quarter we had already achieved that target a
Speaker 3: quarter early. So you know, the way we see it
Speaker 3: is we are not only incorporating AI and the best
Speaker 3: of AI models, not only our own Firefly, but also
Speaker 3: third party models like Google and run May and so on,
Speaker 3: making it available to our customers. We believe it's also
Speaker 3: creating values in what we're showing through the monetization. So
Speaker 3: I believe that, you know, over the course of the
Speaker 3: next couple of quarters, the market will work itself out.
Speaker 2: You know, you mentioned the transformation that we're seeing as
Speaker 2: a result of AI. Carol and I are really trying
Speaker 2: to figure out and we ask everybody who comes across
Speaker 2: our desk, what is going what is the future going
Speaker 2: to look like? I mean, I was at this dinner
Speaker 2: last month and Neil and it was all about AI,
Speaker 2: and the topic of conversation that dominated most was like
Speaker 2: what jobs are at risk here? And certainly a lot
Speaker 2: of people talked about coding, but there's also the discussion
Speaker 2: about creatives and to what extent the creative class could
Speaker 2: actually see a hit to these jobs as a result
Speaker 2: of AI tools that are available right now. And I'm
Speaker 2: wondering how you think about that in your strategy, Like
Speaker 2: how do you grow your revenue at Adobe if there
Speaker 2: are potentially fewer people who need this software because it's
Speaker 2: so easy to actually create using AI.
Speaker 3: Yeah, you know, we see that AI will absolutely have
Speaker 3: a transformative impact. But the way it will work, as
Speaker 3: in every transformation, you know, if you think of the
Speaker 3: last three transformations, the Internet transformation, the cloud transformation, the
Speaker 3: mobile transformation, Adobe has been a winnowt in each of
Speaker 3: these transformations, and the software does different things once you
Speaker 3: go through the transformation. We see that in the world
Speaker 3: of AI. What's going to happen is, you know, people
Speaker 3: will embrace AI and people will use it. You know,
Speaker 3: we share a number of twenty nine billion generations that
Speaker 3: were done through our products through the including you know,
Speaker 3: Photoshop and Premiere and so on, or people who are
Speaker 3: already using these products incorporating AI into their work. The
Speaker 3: way we see the future playing out is as AI
Speaker 3: becomes ubiquitous and available through products like ours. What's expected
Speaker 3: in the market will change, so you know, people are
Speaker 3: not going to use just AI and automated because then
Speaker 3: all of it will look alike. You know, your creative
Speaker 3: work always needs to stand out. Every advertisement, everything that's
Speaker 3: produced in Hollywood, even every business presentation needs to stand
Speaker 3: out and standout. Content requires both that human creativity plus
Speaker 3: the power of AI. So we believe that over time
Speaker 3: it will absolutely be essential, but it won't be sufficient,
Speaker 3: and that combination of creativity plus AI is what's going
Speaker 3: to make content stand out.
Speaker 2: How are you.
Speaker 1: Thinking though about how AI will ultimately shake out? And
Speaker 1: I think about you know, open Ai kind of figuring
Speaker 1: out its future and restructuring to give nonprofit a stake,
Speaker 1: but not necessarily just be a nonprofit. You've got Microsoft
Speaker 1: and open Ai. Their non binding agreement will likely ease
Speaker 1: concern about and then to their partnership. But at the
Speaker 1: same time Microsoft is working it seems like focusing a
Speaker 1: lot internally. There's a lot of churn, a lot of movement,
Speaker 1: a lot of money. I mean, how do you make
Speaker 1: sure you are either partnering with the right folks and
Speaker 1: positioning yourself in the right way. Do you hold back
Speaker 1: a little bit to see where the dust settles, the
Speaker 1: AI dost settles.
Speaker 3: H No. I think you have to be in the
Speaker 3: moment in working with everybody like we are, whether it's
Speaker 3: with open EI, with Microsoft, with Amazon, with Google, and
Speaker 3: with the number of the other smaller players like Runway
Speaker 3: and others. We are working with a variety of these players.
Speaker 3: You know, in terms of how it's evolving, there will
Speaker 3: obviously be a couple of you know, LLLM providers who
Speaker 3: will be like the new operating systems of the world,
Speaker 3: so you know, there'll be probably three, four or five
Speaker 3: of them. There will always already be a lot of
Speaker 3: players who specialize in particular areas. Maybe that's video, maybe
Speaker 3: that's a vertical, maybe there's a specific niche that they
Speaker 3: focus on. There will also be a lot of AI
Speaker 3: language models that will run on device, you know, whether
Speaker 3: it's working with like a Qualcom or other providers, there
Speaker 3: will be a lot of on device on computer local
Speaker 3: AI they'll run as well. So it'll be this combination
Speaker 3: of different AI architectures. And one of the things that
Speaker 3: we're doing as a software provider is how do we
Speaker 3: make sure that our next generation of AI architecture can
Speaker 3: work and take advantage of all of these so that
Speaker 3: you know, from a consumer perspective and from an enterprise
Speaker 3: customer perspective, they get the best of both worlds. They
Speaker 3: get the power of the software that does exactly what
Speaker 3: they need, and they get the power of AI.
Speaker 2: We're speaking with Anil chuck Rivart, the President Digital Experience
Speaker 2: Business Worldwide Field Operations AD Adobe, joining us from San Jose.
Speaker 2: I think a lot about price elasticity with products such
Speaker 2: as these, and as we see price increases on the
Speaker 2: consumer side from companies ranging from digital media to SaaS companies,
Speaker 2: how do you think about elasticity and price From your perspective,
Speaker 2: how much can you raise prices?
Speaker 3: We believe it's directly correlated with value, and that's what
Speaker 3: we have done over the last few years. As our
Speaker 3: customers see increasing value and as long as it is
Speaker 3: tied to their business outcomes, will continue to see the
Speaker 3: ability for them to pay higher prices. And so you know,
Speaker 3: in the individual's market, for example, we see that, you know,
Speaker 3: as long as they can amplify their own creativity and
Speaker 3: then that shows up in whatever their own business model is,
Speaker 3: they may be a solopreneur. They may be a freelancer,
Speaker 3: they may be working on behalf of somebody else. As
Speaker 3: long as it shows up in value for them, is
Speaker 3: that increasing value will provide us elasticity. From an enterprise perspective,
Speaker 3: it's really tied to business value as they look at
Speaker 3: their business outcomes in terms of increasing their own agility,
Speaker 3: in terms of their overall efficiency, in terms of being
Speaker 3: able to personalize their customer experiences through better content and
Speaker 3: better data. That will tie to the what they are
Speaker 3: willing to pay for software like hours, So it'll be
Speaker 3: it's all completely correlated with the value we're creating for them.
Speaker 1: Hey, one thing I want to just you know, talk
Speaker 1: a little bit more about your business is how does
Speaker 1: your business get impacted with consolidation the traditional advertising industry.
Speaker 3: What we are seeing the ad platforms is there's obviously
Speaker 3: a lot of interest in a lot of new ad channels,
Speaker 3: whether it is connected TV, streaming, retail media networks. A
Speaker 3: lot of interest there in addition to the traditional platforms.
Speaker 3: So when we talk to enterprise customers, you want to
Speaker 3: do is to say, hey, look now I have you
Speaker 3: know I used to deal with three or four channels.
Speaker 3: I'm now dealing with fifty plus channels. The advantage if
Speaker 3: I can do it right, is I get a much
Speaker 3: better ROI through a cost per click or even being
Speaker 3: able to reach the right audience or even getting the
Speaker 3: full loop of data on what's working and what's not.
Speaker 3: But in order to be able to do that, I
Speaker 3: need to have the right content and the right agility
Speaker 3: to be able to work with fifty plus channels. And
Speaker 3: so that's really what we are offering with our products
Speaker 3: like Adobe gen Studio, which is the end to end
Speaker 3: content supply chain offering and through the Adobe Experience platform.
Speaker 2: And Neil, always love it when you join us. Appreciate
Speaker 2: you taking the time, especially on the first day the
Speaker 2: stock traded after those earnings came out. Anil Chuck Rovarthi,
Speaker 2: President Digital Experience Business, Worldwide Field Operations at Adobe, joining
Speaker 2: us from San Jose, California.
Speaker 1: Thanks again and Neil