The Six Five Team discusses Adobe Earnings for Q2 2023.
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Transcript:
Daniel Newman: Adobe put out their earnings last week and it got a jolt. You can read the numbers, let’s just say they beat top bottom and raised guidance and they showed really strong numbers, strong ARR, 10% up year over year from same quarter, 13% growth of income. So just all good. But what was so big was it appears that the market is looking at Adobe as one of the winners of the generative AI boom. That’s the reaction that the stock saw, the huge jump in price following its earnings kind of said, hey, we hear your story, we get your story. And here’s a short, when it comes to creative, when it comes to the ability to create, there is not a company that has a more compelling story.
And if you’ve seen the demo of some of the generative creation apps that Adobe has, if you’re listening to this, Pat just blew his mind. But it really is a powerful demonstration and when you see it, you’re just like, who else can do this? You take an image and you circle in a little area and then you type “Pat’s head exploding” and it could literally create Pat’s head exploding. And it’s very, very cool. And I mean, in my opinion it’s very early days, but being kind of declared early as a winner, the company’s getting a lot of things like responsibility right, usage rights correct. And so it’s growing across the board and of course its business is all about recurring. So all this revenue, it comes down to the fact that it’s got recurring services, it’s got pricing power because it’s got limited competition and it is seen as a best of breed in its area.
So that’s really in a nutshell what was exciting. Now the company did grow across all its businesses, digital media, document Cloud, digital experience. And interestingly enough, the company also has the ability to grow significantly in its experience Cloud because it also has really interesting generative data about things like web behavior. So while we’re thinking a lot and early on, our excitement is about seeing this kind of generative graphics, we’re also going to see generative intelligence at a big scale with Adobe because it has so much, if not the most critical in intelligence data set about how people shop and do commerce on the web. So kind of exciting across the board.
I don’t mean to be kind of brief into the point on this earnings, but I mean, top bottom raise, cool generative AI, categorically strong across all areas, still want to hear more about Figma. I’m still calling the deal to close despite the fact that a lot of people think it may or may not. I just don’t think there’s a lot of competitive gating for someone else to build that kind of product and that kind of solution to compete. And so Adobe’s kind of becoming a bit of a wild card to be another rise to a trillion kind of business just because it’s so uniquely positioned.
Patrick Moorhead: Are you calling this one Dan?
Daniel Newman: Not yet, not yet.
Patrick Moorhead: Because I want to remind you about this in three months,
Daniel Newman: I’m not doing it yet, but I’m making an early assessment that I do think this one’s got a real shot.
Patrick Moorhead: I believe that this company is in a major inflection right now. It was a little bit slower to Cloudify than let’s say a Microsoft, but what you’re seeing, if you look at the Cloud ARR numbers, they’re really good and they have a very loyal base of people who quite frankly, they’re not going to move to the Cloud for the sake of the Cloud, they’re going to move to the Cloud if it adds them incremental utility. And that’s exactly what they’re doing. So that’s one inflection. And this second one is this layering on of generative AI. And I don’t care how you want to split it, which says, hey, to get the same level of creativity, I’m going to need less people. Or this is a democratizer of creativity, which means the TAM’s going to grow. So any way, any bet you want to make Adobe wins here, I think.
And if you layer on the increased Cloudification of every one of their applications and use cases, I think it’s pretty darn exciting. The Figma thing, I mean, these companies are not even in the same market and you just have to use Figma and then use something like Photoshop to realize they are not even in the same stratosphere. And one of the biggest arguments, which I know regulators are talking to them about is this notion that you could have just build this yourself. Well guess what? Adobe already tried to build this capability and the company has said publicly it’s been a failure, it hasn’t worked. So just these arguments from these regulators that have zero business experience is a little bit frustrating as opposed to spending time on Apple who squeezes all of its suppliers, some into bankruptcy, doesn’t allow third party app stores to come in, it’s really frustrating to me that bad theory versus actual harm that’s being done. But congrats Adobe, you really knocked it out of the park and it’s great to see the credit that you’re getting for all that hard work.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
