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00:00Adobe Max is critically important, not just for your company, you know, for a very large ecosystem of developers and creatives, you know, small shops, individuals.
00:13I'm trying to find the thing that everyone has in common, and that is probably the relevance of agentic AI right now, which you are recognizing in the first instance through Adobe Express.
00:25You know, is that the signal here? Adobe Express is recognition of something much bigger happening in agentic.
00:34Well, at first, it's great to be on the show. And Adobe Max is really about celebrating creativity.
00:41And if you think about the importance of creativity and the importance of design, you know, certainly we believe that everybody has a story to tell.
00:50And enabling them to tell that story is something that's in the DNA of Adobe.
00:56But it's not just creative professionals. It's marketers. It's consumers. It's business professionals.
01:04Every single individual, we believe, has the opportunity to use technology to be more creative, to be more expressive.
01:12And Adobe Express is just one of the various innovations that we will be demonstrating today to help push the envelope forward in terms of how people can use generative AI to be able to tell their story with different modalities.
01:27What those groups want is conversational experiences, irrespective of the platform that they're using.
01:33You know, we will get into the models that you've worked on in-house and via third parties.
01:39But in the context of the agentic offering, how big a leap was that for Adobe to come up with such a product?
01:46I think it's been an amazing leap by our product teams.
01:49And if you think about creativity and decompose what creativity is about, first, it's about ideation.
01:57How do you have a certain idea that you want to explore for a different media type?
02:02Then how do you create it?
02:03And ultimately, how do you deliver it?
02:06And where generative AI, I think, you know, first blossomed was the ability to describe what's in your head with a prompt and then have the computer be able to start that creative process.
02:18So generative AI was first really about a simple prompt that creates an image or creates a video or increasingly creates audio or any other multimedia type that you want.
02:30I think where we've really pushed the envelope is not just in the ideation part, but then in the authoring and in the applications.
02:39And how can you combine the power of ideation, what we can do with models, and frankly, the products that every single person loves to use, whether it's Express, whether it's Photoshop, whether it's Acrobat, and make that come to life.
02:53And so I think it's really bringing together all of these different elements from models, from prompt engineering, and from the authoring applications that people love.
03:04And lastly, as you point out, previously, I think this was all about the, you know, proficiency that people had with our applications.
03:11And now adding this different modality of having a conversational interface and having the application have the ability to provide the semantic understanding of what you're trying to do, that's truly groundbreaking.
03:25In the context of models, the debate is to work on this in-house with the advantages that you feel you have, or look to third parties and get best in class.
03:37You have Firefly Model 5. That would signal to me, in-house is the route that you looked at most closely.
03:46Well, you know, I think when you think about Adobe and what we had to do with models, the first thing is, you know, we're an intellectual property company.
03:54So understanding the power of these models, what they're capable of, and how you can control them to accomplish the output that you want, that was incredibly important to Adobe.
04:04And so Firefly had two real things that we innovated around.
04:08The first was, how do you create these best-in-class models that were designed to be commercially safe?
04:15We represent the creative community.
04:17It's incredibly important for us to be able to train the models on content that we had license for and to understand the power of these models.
04:25So we started off with Firefly.
04:27We've integrated that within our products.
04:29Actually, the usage of features that, you know, come from Firefly, like Generative, Phil, and Photoshop are perhaps the most oft-used features in our products right now.
04:40But if you think about it, you are going to have multiple models.
04:44And for us, each of these models will have a different personality, a different style, a different match.
04:50And so support for third-party models enables us to bring the power of all these models to our creators in one easy-to-use interface.
04:59And so when you think about ideation and if you have this creative exploration that you want to do, by supporting different models, we're actually bringing the power of all these models at the fingertips of our customers.
05:13But Firefly continues to be a really important strategic initiative for us for many reasons.
05:19One, as I said, we're designing them to be commercially safe.
05:23Two, we're actually enabling any enterprise who has their own data where they want a proprietary custom model for them to be able to create.
05:32So if you're Coca-Cola or if you're Nike or if you're Disney, you have all this incredible content and you want to create a custom model.
05:39Well, Firefly is a great on-ramp for that.
05:41And last but not least, we have this technology that we call Firefly Foundry.
05:45And what Firefly Foundry allows a company to do is leverage the billions that we've invested, all the incredible IP that we have, to be able to create a controllable model for them.
05:57So Firefly image is just one part of this entire ecosystem that we've built.
06:02I want to get to whether inside Adobe, inside the company, this is a philosophical debate, or if it's simply driven as a practical one, cost, data, speed.
06:13You know, you talked about commercially safe.
06:16How much weight would you put on that argument in a world where, at least from what we see, you know, the copyright concerns are fading a little bit?
06:25Well, you know, from our perspective, as the company that's the preeminent provider of creative technology in the world, we take the responsibility that we have to represent the entire community and the industry very seriously.
06:41If you are a high-end filmmaker today, you are still protecting your intellectual property zealously.
06:47If you're an artist who is concerned about your likeness being used without your permission, which impacts their ability to monetize it, that is, you know, an incredibly important strategic issue for them as well.
07:02And so, you know, the first part for Adobe is, in addition to delivering innovation, are we really focused on being the responsible company that we are and representing the entire community?
07:13I think, to your point, we also see that in the ideation part, perhaps not in the production part, people are a little bit more comfortable saying, we want to just see what these models enable us to do, because that might trigger some ideas.
07:27And so I think you're seeing a lot of the third-party models more in ideation than you're seeing in production, because that's when people are like, do we have the rights to use this in the intellectual property that we will then claim as our own?
07:40And so, you know, I think Adobe is the only company that has the entire offering and, you know, provides the appropriate interface to our customers, so the customers can decide what they're comfortable with.
07:52But we have to represent the creative community in terms of having the choice to use something that's designed to be commercial.
07:59So I will go to the existential question, which is how Adobe succeeds and differentiates itself in a world where, particularly, like, I suppose on both ideation and production, you have midway and you have runway, mid-journey, and you have runway that are offered as free tools, as an example.
08:19And what's so interesting about that is that you recognize content from those platforms I named quite widely across social media, the Internet.
08:29Well, firstly, the success of Firefly represents clearly the fact that we are doing an incredible job on behalf of our customers.
08:37I think in order to answer that question, you really have to think about it in terms of the different customers that we serve.
08:44If you're a marketer who's creating this content in order to be used in a creative campaign or to place an ad, it's incredibly important that you use the power and precision in the tools that Adobe provides.
08:58And the models is just an on-ramp to this entire process.
09:02It may be used at the beginning part of the process, but 95% of that content creation is still happening in tools where Adobe is the best in terms of the creative professional.
09:13If you think about it in terms of a business professional, you again want to make sure that ease of use and the ability to do all of this ideation to delivery in a quick step also happens in a tool.
09:25So, you know, my absolute belief is that these models are a great on-ramp, but at the end of the day, even these model companies will realize, unless they have an interface that people are using, their ability to monetize it is going to be significantly hampered.
09:42If you take a step back, I think everybody is so focused right now on training and the creation of these models, and that's where the investment is.
09:51Until that moves to inference and you're starting to see, you know, the usage of that, all of this investment is not going to be monetized and you're not going to get a return.
10:00So, you know, I'm very confident that Adobe is already at the path where it's the inference, it's the usage, it's the workflows, it's the actual value that we provide to customers that's going to be the long-lasting value.
10:14And I think you're seeing that across different industries because the people making money on inference are the people who are providing the software, the tools, the workflows.
10:24You took me exactly to where I wanted to go. How big is your training operation in-house and what kind of pressures are you under securing compute capacity to achieve what Adobe wants to?
10:35Well, you know, we're really fortunate in that, you know, we have incredible partnerships with all of, you know, the major hyperscalers.
10:44So if you think about the work that we do, whether it's with NVIDIA on chips, whether, you know, with Microsoft on Azure, whether it's Google with GCP, as well as Amazon with AWS, they're all providers of technology to us.
10:59And, you know, we spend a lot of money on it, but we're fortunate. Now, if you're an engineer, you're always wanting for more GPU chips.
11:06I mean, you know, that's sort of the new way in which I have a workload. Give me some capacity.
11:11Correct. But, you know, we're fortunate in that we were very early to acquire a lot of these GPU and workloads.
11:18And, you know, while engineers are... I haven't met an engineer yet in my life who doesn't want to do things faster and quicker, but we have great capacity and great partnerships in this particular space.
11:30And you'll continue to see today at Max and tomorrow how we're going to be announcing more partnerships with all of these hyperscalers because they're just as interested in Adobe being successful because then it's transferring to inference.
11:44So you're taking us now to end markets. We actually started the conversation by talking about how at Max you have creatives, the marketing industry, the advertising industry.
11:56What signals are you getting as all these people gather about the health of those end markets?
12:01And now that you have all of these new technology offerings, their willingness to pay for them?
12:06Well, you know, if you continue to look at Adobe's results, I mean, we report record results every single, you know, quarter, which just shows the underlying health of the business.
12:16I mean, we are the largest provider of creative tools, and we continue to believe that the opportunity ahead of us is greater than the opportunity that we've had.
12:26I think what we've done particularly well, Ed, is we've segmented our products.
12:30So at the high end where people want the creative professional wants power, they want precision, but they also want to be able to take on more jobs.
12:39So with AI, if we can accelerate the creative process so they can take on more jobs.
12:44And, you know, I haven't met a creative professional who wants to take a few hours to do something that they can do in a few minutes.
12:50So we're providing great value to them, and they're more than happy to say, if you can make me more productive and help me make a better living, then we, you know, are willing to give you money.
13:02At the marketing side, people want to create these campaigns with agility.
13:06What we have with the product called GenStudio, which allows an entire organization to say everything from workflow to this content creation to activation and understanding the analytics of what content is actually working.
13:20At the end of the day, every CMO that I know, as long as you can demonstrate the ROI of marketing spend, that's the ammunition that they need to go talk to their CEO and CFO
13:31and demonstrate why whatever they are doing for customer acquisition or customer retention is working.
13:37On the business professional side, everybody just wants to be more productive and more creative.
13:42And so having this variety of products that are priced differently and having the appropriate metrics where maybe at the consumer level,
13:51what we are doing with Acrobat and Express is really all about, you know, proliferation and monthly average users.
13:58For the next generation of creators, the people we call creators, having Firefly, which is an all-in-one AI ideation all the way through delivery platform,
14:10you know, that's best in class is the right one, and with Creative Cloud for Creative Pro.
14:15So, you know, we're really pleased with how we've segmented the products.
14:18We provide the right value, very little friction for people to try to use our products, and that's what we have to continue to do.
14:26So you present a picture, a human-generated picture, of a business in rude health.
14:33Do the markets give you enough credit for that?
14:36Well, I think it's fair to say that, you know, the stock price right now I don't think represents,
14:41because there's a question about software at large that I think is misunderstood.
14:46When you look at how profitable we are, the growth prospects that we have, models are going to be an on-ramp.
14:54And what we have to do at Adobe is just to continue to focus on driving the innovation,
14:59on demonstrating the metrics that are powering this underlying business,
15:04the early metrics and adoption of all of this technology.
15:07And that gives me great confidence that the innovation that we're doing, innovation is alive at well at Adobe,
15:14as well as it's being recognized by our customers.
15:17So, you know, we recognize that inference is where the action is.
15:23We're skating to where the puck is, and, you know, I think the stock will take care of itself.
15:27But it's certainly undervalued right now, which is why we're buying back a lot of our stock.
15:31Let me address this head on. Wall Street does not see Adobe as a place where AI innovation is happening.
15:40And you just said, you know, when inference comes, you will be there.
15:44What's the counter argument to the statement that I just made?
15:48I actually think Wall Street has recognized that AI and Adobe and the way we've innovated has actually been stellar.
15:58I think they're wondering where the monetization of training and inference.
16:03I think this incredible focus on chips and the infrastructure for training is where the action is right now.
16:11And, you know, my belief is that it will switch to inference.
16:14So I would actually dispute the fact that they are not recognizing the innovation that we're providing.
16:20But I think they're waiting to, you know, see how that accelerates on the inference side.
16:26There has been some news I'm duty-bound to ask you about.
16:30There was a report at another publication that you looked at some M&A with the British name Synthesia.
16:37I invite you to comment on that.
16:39But also then take the opportunity to talk about your M&A strategy more broadly.
16:45If the report on Synthesia is accurate, you can tell me, then that speaks to our debate earlier on in-house versus third-party capabilities.
16:54Well, first, Ed, you have to take a step back.
16:57And, you know, at Adobe, we have so much organic innovation that's happening that we continue to be incredibly excited about it.
17:05At the same time, every company on the planet has to look at inorganic opportunities all the time because, you know, that's the way in which we can deliver more value to our customers.
17:15And when you take the platform approach that Adobe has done, even if you look at the history of Adobe, we have grown through organic innovation and inorganic acquisition.
17:24I'm not going to comment on any specific rumors, but we're always looking at technology.
17:29We're always looking at people, you know, where their intellectual property and the culture fits in with Adobe.
17:35And we will always be, you know, very prudent and fiscally responsible as we think about M&A.
17:42Let's end by reflecting a little bit on the company's history.
17:46My parents' generation relationship goes back to the invention of the PDF in the early 90s.
17:54Mine premier editing videos when I was at university.
17:58When people gather for Macs, what is the Adobe of today that they're confronted with that you want them to see and that you want them to take away from their time with you?
18:12Well, Ed, even for me personally, I had actually started a company that was doing photo sharing on the web in the early 90s.
18:22And so what brought me to Adobe at that point was, you know, the realization that Adobe had this incredible brand, passion and vision, you know, to change the world through creativity and digital experiences.
18:37You know, what we want the entire creative community today to reflect upon is that we believe that our opportunities ahead of us are greater than ever before,
18:47that we continue to be focused on innovation, that the breadth of creativity from individual consumers all the way to the largest enterprises in the world has never been larger.
19:00And we want them to consider Adobe their trusted party and partner to help them, you know, bring their creative ideas to life.
19:08And so, you know, we're not going to rest until we have billions of people, you know, like the generations prior to us, continuing to acknowledge that Adobe is the premier partner in the creative space.
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