The Six Five Team discusses Adobe Q3 2023 Earnings, Goes GA with Generative AI Products.
If you are interested in watching the full episode you can check it out here.
Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.
Transcript:
Daniel Newman: Yeah, well I’ll definitely start off with the earnings here. This is another company that’s seen a very strong run up over the past several months with some huge estimates and price targets on the company. It’s been one of the biggest beneficiaries in the market on generative AI and AI. The company has done some things really well. I think as it’s pertained to responsible AI under its leadership, it’s shown real promise there. In terms of showing potential generative AI capabilities outside of text, it’s one of the companies that’s most adequately demonstrating what’s going to be possible.
This is a company that really breaks into experience media and it’s got documents and all three businesses were performing, but it was another company that saw around double digits 9%. It’s performance was steady, state, and stable, Pat. I think part of what’s happening now is we’ve had all this exciting period where tech was bidding growth and now what we’re starting to see is the AI super high, meaning this euphoria that we’ve seen around AI is starting to normalize as people are starting to want to understand better company’s ability to execute revenue against their AI promises. The good news for Adobe is I do believe the company has the products, has the services, not just in documents and images, but also in its CDP and CRM side and its experience cloud. When it comes to retail, when it comes to digital journey, this is one of the most sophisticated companies on the planet with some of the most robust capabilities and that’s why pretty much every major company on the planet that’s built digital commerce experiences builds on Adobe.
With that in mind, the one other thing that’s lingering out there, Pat, is you realize it was like a year ago today, the Figma announcement was made. It’s been a year.
Patrick Moorhead: All been very quiet, hasn’t it?
Daniel Newman: The deal has not been done. There are a number of probes I stand by in my assessment that this deal should get done. It is not the biggest issue. It certainly hasn’t come up as a… Adobe’s not a gatekeeper according to the DMA. The ability to build a collaborative application for creativity doesn’t seem to me like something that we necessarily need regulated. I really do hope that that finds legs. I think it was a great deal for private markets, great valuation. In this era we need a healthy public-private relationship where the companies can feel that if they build a successful business, they can exit to a public company and actually close the business. I’ll pause there because I talked a lot about the earnings. There’s some generative announcements. Do you want to chime in on the earnings at all or do you want to jump in and take the generative stuff.
Patrick Moorhead: Yeah, I want a little bit in the earnings. No, listen, in this world of pretty much all over the pace in pandemonium, they had a beat on the top and a beat on the bottom, which I think is really impressive. Single digits on creative ARR isn’t great particularly with all of these new features, but it literally just went GA for them to capture revenue. The document ARR of 17% is a lot more impressive. Think of signatures, think of, I pay for PDF licensing to go in and edit and create those. That’s it. That’s all I got, buddy.
Daniel Newman: That’s all you got. Well, you know what? Let’s basically just make sure we’re clear to everybody out that it’s asking, the commercial releases to a number of the Firefly web applications in some of their gen AI studio went GA this week. I think, Pat, the next two to three quarters, we need to watch for adoption. We need to understand who’s paying. We need to understand what kind of incremental revenue this creates. By the way, this sounds like Dan the Broken Record, because I’ve been saying this now for two or three quarters. The world wants to not just hear about what your AI does, but they want to understand why people are going to spend more money because you have AI capabilities. Adobe has the potential to show that. By the way, so does the company we’re going to talk about next.
Patrick Moorhead: Yeah, there’s two ways companies are looking at generative AI, right? There’s the offense play, which is, “Hey, we’re going to go in, significantly increase capability, take market share, charge more, reduce costs,” and the other is defensive. I think you can look at Adobe in two ways. There were these crazy startups. Dan, you love to send those out on Twitter. Here are the 2,700 different tools you can use for AI. Mid journey is a great example that they could have disrupted Adobe. But to Adobe’s credit, if I look at the feature list of what they came out with Firefly, it’s very basic. I think that’s perfectly fine, and it will go up. But the fact is it’s GA, they can make revenue on it. They’ve tested it with enough customers. Their beta program was off the fricking rails. Everybody wanted to use this thing.
I like what I see. If nothing else from a defensive perspective in that they’re a lot less likely to get disrupted by an upstart on this. The feature set isn’t incredibly long. For instance, there are some tools that my daughters use in their marketing departments that will take a podcast like ours, pick the soundbites that are important and automagically create a video. Stuff like that is not available, but hopefully we’ll get it. Good stuff. Adobe not being disrupted. Now, it’s time to show that you can disrupt and take share, drive revenue, increase ASP, and take rate as we move forward.
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.
