Adobe (ADBE) Q4 FY2025 Earnings Call Transcript

Date: December 10, 2025 | Source: Motley Fool (full verbatim transcript)

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Shantanu Narayen (Chairman and CEO, Adobe): Thanks, Doug. Good afternoon, everyone, and thank you for joining us. In fiscal 2025, Adobe delivered significant AI-influenced and AI-first ending ARR, which accelerated through the year. We achieved record revenue of $23.77 billion and non-GAAP EPS of $20.94, which represents outstanding financial performance. We are leveraging AI to accelerate innovation to anticipate and serve the needs of large and expanding audiences: business professionals and consumers, creators and creative professionals, and marketing professionals. Our vision for business professionals and consumers is to deliver AI-driven quick and easy applications that enable them to be creative and productive, consuming or generating content across multiple media types and channels.

We do this by delivering new conversational and agentic interfaces in Adobe Reader, Acrobat, and Express to provide a freemium integrated experience for billions of users. For creators and creative pros, our vision is to deliver the most comprehensive, power, and precision applications from ideation and creation to production and delivery. We've done an outstanding job of both creating our own commercially safe FIREFLY models as well as seamlessly integrating third-party partner models across Creative Cloud flagship applications like Photoshop, Illustrator, and Premiere.

With the Firefly application, we're giving creators a rich set of generative AI capabilities that allow users to generate with Adobe and partner models, ideate with Firefly boards, and create and edit videos and images through conversational experiences blended with direct manipulation. Along with the Firefly app, we've introduced new products like premium mobile with YouTube integration and Photoshop mobile to further serve creators anywhere they create. We're transforming the enterprise content supply chain by integrating creative applications, workflow management, asset management, Firefly services, and custom models with Firefly Foundry.

We have the most comprehensive vision for marketing professionals, whether they are freelancers or working at an agency or within an enterprise, to create a brand or address the expanding needs of the content supply chain in the era of AI to deliver customer experience orchestration solutions. Adobe Experience Platform and apps power customer engagement and loyalty. Adobe Experience Manager and AgenTic Web Solutions, including LLM Optimizer, Sites Optimizer, and Brand Concierge, deliver brand visibility and discovery. And Adobe Gen Studio enables enterprises to optimize their full contact supply chain to realize true personalization at scale.

FY '25 accomplishments and highlights include establishing ourselves within leading AI ecosystems with partnerships and integrations across AWS, Azure, Google Gemini, Humane, Microsoft Copilot, OpenAI, and others, offering unprecedented access, choice, and flexibility to customers. Leading the way in AI innovation around conversational and agentic interfaces, including products like LLM Optimizer and Acrobat AI Assistant, creating custom models through Firefly services, Firefly Foundry, and GenStudio, as well as infusing AI within our applications, including Photoshop, Lightroom, Express, and Premiere. We continue to leverage inorganic strategies to deliver more value to customers and are pleased with our recently announced intent to acquire SEMRush to help brands enhance their visibility and expand audience reach.

Driving significant new user acquisition across individuals and enterprises, with products including Acrobat, Creative Cloud, Express, and Firefly, achieving total MAU growth of greater than 15% year over year. Accelerating adoption of our AI functionality by enterprise customers further highlights our leadership and their trust in Adobe's ability to deliver AI value seamlessly across workflows. In Q4, globally, we drove record bookings of deals greater than $1 million and achieved over 25% year-over-year growth in the number of customers with $10 million plus in ARR.

I'll now turn it over to David.

David Wadhwani (President, Digital Media, Adobe): Thanks, Shantanu. Hello, everyone. Digital Media had a record Q4, driven by user acquisition and expanded customer value across business professionals and consumers, and creators and creative professionals underpinned by two big areas of innovation: generative AI models and agentic experiences. Digital media achieved revenue of $4.62 billion in Q4 and full-year revenue of $17.65 billion, both of which grew 11% year over year. We exited the quarter with $19.2 billion of digital media ARR, growing ending ARR 11.5% year over year. As it relates to generative AI models, we have continued to develop our own commercially safe FIREFLY models while dramatically expanding our ecosystem of GenAI model partnerships.

The new Firefly Image five model is performing incredibly well with generation quality, native four-megapixel resolution, and industry-leading prompt-based editing capabilities. We also announced advanced model capabilities, including custom model support for Firefly and Creative Cloud customers. Usage and monetization of new Adobe and third-party models is measured and charged through generative credits. Different models, FIREFLY, GEMINI, or FLEX, for example, and different media types, video, and high-resolution images, for example, consume different quantities of generative credits. Generative credits are a great indicator of high-value usage, and credit consumption increased three x quarter over quarter. We also took a huge step forward in Q4 as we showcased the work we've been doing to atomize Photoshop Express and Acrobat capabilities as model context protocol endpoints at Adobe MAX.

In addition to delivering applications, we are providing imaging, video, and productivity functionality in ChatGPT Copilot and other conversational platforms in order to deliver and monetize creative and PDF functionality in new surfaces. Users will be able to work conversationally while still benefiting from the power and precision of Adobe's industry-leading features and direct manipulation tools, making it easier than ever to go from intent to outcome, whether editing a PDF, refining an image, or generating a design. The advances in generative models and agentic capabilities position Adobe well to take advantage of the long-term opportunities servicing business professionals and consumers, and creator and creative professional audiences.

Our vision for business professionals and consumers is to deliver AI-driven, quick and easy applications that enable users to be creative and productive, whether consuming or generating content across multiple media types and channels. The strategy is showing real traction, and we are driving strong business momentum. As users increasingly turn to Acrobat to help them discover insights, synthesize new ideas, and share knowledge. Adobe Xpress made significant advances in Q4 with the introduction of an AI assistant capable of generative content creation and complex editing. Express now supports generative presentations and designs, moving the industry into a post-template world. Express AI assistant is capable of conversationally editing images, flyers, presentations, infographics, and more. Innovations like these have contributed to significant express MAU growth.

Alongside the PDF tools people know and rely on into a unified offer. Customer reception of Acrobat Studio has been strong, with nearly 50% of Acrobat commercial ETLAs renewed in Q4 already upgrading to this offering. Reflecting user enthusiasm for unified document comprehension and content generation. FY '25 business professional and consumer accomplishments and highlights include continued growth of Acrobat Web, which saw MAU increase over 30% year over year, strong adoption of Express and Education, with over 70% year over year growth of students with access to express premium. Over 45 new partners added to the Express in Q4, including Binder, Bootsuite, and Sprout Social.

Over 25,000 businesses purchased Express or Studio for the first time in Q4 alone, accelerating quarter over quarter. And key enterprise customer wins include Allianz, American Automobile Association, Bundeswehr von Duschland, Nippon Life, PwC, Sony, and the US Navy. Turning to creators and creative professionals, our vision is to deliver the most comprehensive power and precision applications from ideation and creation to production and delivery. We continue to succeed in our goal to attract the next generation of content creators, provide creative professionals with game-changing generative AI capabilities, and automate content production at scale in enterprises. We are attracting new creators to Adobe through the Firefly application, which can be purchased through our Firefly standard, pro, and premium subscription plans.

Simply put, Firefly is a one-stop shop for accessing industry-leading models integrated into rich creative workflows at an affordable price. In addition, we're seeing strong adoption of Firefly from Creative Cloud customers as they embrace the growing breadth of AI models and tools seamlessly integrated into creative workflows. We drove two x quarter over quarter growth in first-time subscriptions of Firefly. The release of Premier Mobile in Q4 marks an important milestone in next-generation AI video editing. In partnership with Google and YouTube, we are introducing AI-driven audio and video tools to streamline how creators remix YouTube Shorts, which receive 200 billion daily views. Creative Cloud delivered massive new value at Adobe MAX, including the release of new models for generative fill, upscaling, and prompt editing in Photoshop, reflection removal in Lightroom, turntable in Illustrator, and smart masking in Premiere. We also announced the general availability of Firefly boards, a new ideation surface that brings together everything creative professionals need to explore visual and design concepts with stakeholders using industry-leading models from Adobe and our partners. Use of AI in these applications continues to accelerate, underscoring the impact AI is having on what creative professionals can produce.

As part of the overall content supply chain solution for marketing use cases, we continue to advance automated content production with Firefly services that include video resizing, video reframing, image composition, image harmonization, digital twin generation, and more. We also announced Adobe Firefly Foundry at Max, which delivers enterprises with proprietary foundation models trained on their own content, data, and brand catalogs. Interest in Firefly Foundry has been strong from enterprise marketing teams and media and entertainment companies, where there is increasing desire to produce content faster and more cost-effectively.

FY '25 creator and creative professional accomplishments and highlights include hosting Adobe MAX, the world's largest creativity event with over 10,000 members of the creative community in attendance, with millions more online. The tremendous innovations we showcased earned over 2,000 articles and garnered 820 million video views. Growing our base of creative users across 70 million in Q4, growing over 35% year over year. Accelerating adoption of Firefly services within enterprises, accelerating generative credit consumption in Creative Cloud, Firefly, and Express with over 100 new deals signed in Q4 by individuals and enterprises, which grew approximately three x quarter over quarter. Strength across all routes to market and geographies, with particular strength in SMB, enterprise, and emerging markets.

And key enterprise wins include Coca Cola, Humane, IKEA, JPMorgan Chase, Lowe's, Nintendo, and Sony. Over the last few years, we have extended our lineup to anticipate and serve the diverse needs of creative users. The continued strength of Creative Cloud, generative credits, and Firefly automation underscores the success of this strategy with creative professionals across both individuals and enterprises. The accelerated growth of creative freemium MAU demonstrates success with offerings that target creators, consumers, and business professionals and is already starting to have an impact, as evident in our Q4 results and FY 2026 targets.

I'll now turn it over to Anil.

Anil Chakravarthy (President, Digital Experience, Adobe): Thanks, David. Hello, everyone. Our success serving creative and marketing professionals in the enterprise has been driven by having the most comprehensive vision for customer experience orchestration, enabling enterprises around the world to deliver personalized experiences at scale in the era of AI. Digital experience had a strong close to the year, achieving revenue of $1.52 billion for the quarter, and a record $5.86 billion in revenue in FY 2025. Subscription revenue in the quarter was $1.41 billion, representing 11% year-over-year growth. Adobe delivers a unified AI-powered platform for customer experience orchestration, spanning brand visibility, content supply chain, and customer engagement.

Adobe Experience Platform is a leading customer data platform that serves as the foundation in enterprises for digital customer engagement and brings together new AI-powered apps and agents to drive engagement and loyalty as well as to reduce costs. Our platform operates at scale with over 35 trillion segment evaluations and more than 70 billion profile activations per day. We released six new AI agents powered by AEP agent rator to transform how businesses build, deliver, and optimize marketing campaigns and customer experiences. Subscription revenue for AEP and native apps grew over 40% year over year, demonstrating our continued leadership.

We have the best pulse on digital conversations across search, social media, and LLMs and enable marketers to get a unified view of where online traffic is originating, how to create and promote brands, and drive engagement and commerce. In fact, our most recent Adobe Digital Index data, which is based on online transactions across more than 1 trillion visits to US retail sites, shows that generative AI traffic is up 760% thus far, the 2025 holiday season. Our data shows that AI-powered traffic from LLMs and agentic browsers is rising and requires different approaches to conversion, underscoring the growing importance of the agentic web and our opportunity to provide insights and automation to marketers.

Brand visibility is critical to success in this new agentic web, and Adobe solves customer needs through solutions like Adobe Experience Manager, Adobe Analytics, and the newly available Adobe LLM Optimizer. The pending acquisition of SEMRush, we announced a few weeks ago, brings complementary assets to help us address marketers' growing need for sustained brand relevance in AI search. Over the past decade, Semrush's data-driven search engine optimization and generative engine optimization solutions have earned the trust of industry leaders like Amazon, JPMorgan Chase, and TikTok. Together, Adobe and Semrush will deliver a solution to enable marketers to shape how their brands appear across own channels, LLMs, traditional search, and the wider web.

We anticipate the transaction to close in 2026, subject to regulatory approvals and other closing conditions. Adobe Brand Concierge, which was launched in Q4, is an AI-first application enabling businesses to configure and manage AI agents that guide consumers from exploration to purchase decisions using immersive and conversational experiences. By uniting data, content, and agentic AI in a single experience, BrandConcierge gives businesses ownership of the critical discovery and consideration phase. We are pleased with the significant customer interest and the wins we had for brand concierge in Q4. GenStudio is our comprehensive offering spanning content ideation, creation, production, and activation.

At Max, we introduced new scaled production capabilities through Firefly services, enhanced model customization with Adobe Firefly Foundry, and integration with a growing ecosystem of ad networks. Ending ARR for the Adobe Gen Studio solution grew over 25% year over year as the world's leading brands increasingly turned to Adobe to power their content supply chain. FY '25 marketing professional accomplishments and business highlights include strong customer demand for our newly introduced agentic web offerings with over 50 customers in Q4 for Adobe LLM optimizer, sites optimizer, and brand concierge. Growing international momentum resulting in a record quarter for our enterprise business in our Europe, Middle East, and Africa, and Asia regions.

Expanded ad network partnerships with Amazon, Google, LinkedIn, Microsoft, Snap, and TikTok. Q4 industry analyst recognition, including being named a leader in the Forrester Wave for digital experience platforms, and three Gartner Magic Quadrants including multichannel marketing hubs, B2B marketing automation platforms, and digital asset management. And key global customer wins for the quarter include AstraZeneca, AT&T, Citigroup, Comcast, Costco, CVS Health, Ernst and Young, General Motors, IKEA, JPMorgan Chase, Lowe's, NatWest Group, PwC, Tony, Walgreens, Wells Fargo, and Woolworths Group. Customer experience orchestration continues to be a critical area of investment for companies of all sizes. We are helping brands across the world turn the promise of AI into tangible marketing ROI. As a leader, we're well-positioned to grow our business and help our customers drive customer loyalty, revenue growth, and profitability. I'll now pass it to Dan.

Dan Durn (Chief Financial Officer, Adobe): Thanks, Anil. Today, I'll start by summarizing Adobe's performance in Q4 and FY 2025, highlighting growth drivers, and I'll finish with our targets. GAAP EPS for the year was $16.7 and non-GAAP EPS was $20.94, growing 35% and 14% year over year respectively. We delivered over $10 billion in operating cash flows while investing in AI product innovation. We executed record share repurchases totaling nearly $12 billion, reducing our shares outstanding by over 6% during the year, underscoring our confidence in the company's long-term opportunity.

Digital Experience segment revenue was $5.86 billion, growing 9% year over year as reported and in constant currency. Digital Experience subscription revenue was $5.41 billion, growing 11% year over year as reported and in constant currency. Digital media ending ARR was $19.2 billion, growing 11.5% year over year, exceeding our prior target of 11.3%. Over 75% of Digital Media net new ARR was driven by continued growth in subscriptions and cross-sell and upsell, with the remainder from value-based pricing reflecting the success of our customer acquisition strategy.

Total Adobe ending ARR across business professionals and consumers, and creative and marketing professionals of $25.2 billion, growing 11.5% year over year. Cash flows from operations of $10.03 billion and ending cash and short-term investment position of $6.6 billion. RPO of $22.52 billion exiting the year, growing 13% year over year or 12% in constant currency. And CRPO growing 11% as reported or 10% in constant currency. And repurchasing approximately 30.8 million shares of our stock during the year. In Q4, Adobe achieved revenue of $6.19 billion, growing 10% year over year as reported and in constant currency.

GAAP EPS in Q4 was $4.45 and non-GAAP EPS was $5.5, increasing 17% and 14% year over year, respectively. Q4 business and financial highlights included Digital Media revenue of $4.62 billion, growing 11% year over year as reported and in constant currency. Digital Experience segment revenue was $1.52 billion, growing 9% year over year or 8% in constant currency. Digital Experience subscription revenue was $1.41 billion, growing 11% year over year as reported and in constant currency. Total new AI-influenced ARR now exceeds one-third of our overall book of business as we integrate AI deeply into our solutions and continue to launch new AI-first offerings, which are now included as part of the AI influence metric.

As we've shared over the past year, our strategy is to drive the entire book of business with AI-influenced solutions. Record net new digital media ARR, growth reaccelerated year over year, driven by strong demand for AI-influenced offerings including Creative Cloud Pro, Acrobat, and Express, as well as AI-first products, including Firefly. When combined with the strong net new digital experience ARR in Q4, we delivered record net new total Adobe ARR in the quarter. Record cash flows from operations of $3.16 billion, adding a record $2.08 billion to RPO in the quarter. For Business Professionals and Consumers Group, subscription revenue was $1.72 billion, increasing 15% year over year as reported or 14% in constant currency.

Q4 growth drivers for business professionals and consumers included double-digit ending ARR growth with strength across digital, SMB, and enterprise, and across all geographies. Mobile ending ARR grew greater than 30% year over year. Monthly active users of Acrobat and Express surpassed 750 million, growing 20% year over year. And strong customer reception of Acrobat Studio with nearly 50% of Acrobat commercial ETLAs renewed in Q4 already upgrading to this offering. For the creative and marketing professionals group, subscription revenue is $4.25 billion, increasing 11% year over year or 10% in constant currency.

Q4 growth drivers for creative and marketing professionals included growth in Creative Cloud driven by CC Pro, growth in single apps driven by strength in Photoshop, and Lightroom. Consumption of generative credits in Creative Cloud, Firefly, and Express increased three x quarter over quarter. Significant web and mobile user acquisition across Firefly, Express, Premier, and our other freemium offerings, growing over 35% year over year to greater than 70 million monthly active users. AEP and apps ending ARR grew over 30% year over year. GenStudio solution ending ARR grew over 25% year over year.

And continued success in the enterprise, adding a record number of customers to the group with ARR exceeding $10 million. Total customers with ARR over $10 million grew 25% year over year to over 150. On November 19, we announced the intent to acquire Semrush Holdings for an equity value of approximately $1.9 billion in an all-cash transaction. We expect the transaction to close in 2026, subject to regulatory approvals and other customary closing conditions. We expect the non-GAAP EPS impact of the acquisition to be negligible in the first year post-close and accretive thereafter. Let me now turn to our financial targets, which assume current macroeconomic conditions. Our targets do not include any contribution from SEMRush.

Business professionals and consumer subscription revenue of $7.35 to $7.4 billion. Creative and marketing professional subscription revenue of $17.75 to $17.9 billion. Total Adobe ending ARR book of business growth of 10.2% year over year. GAAP EPS of $17.9 to $18.10. And non-GAAP EPS of $23.3 to $23.50.

This total Adobe ARR book of business growth of 10.2% translates to approximately $2.6 billion of growth, which would be our highest beginning of year guide for total net new ARR. This non-GAAP tax rate is based on a three-year projection and may be adjusted for changes in the future.

Creative and marketing professional subscription revenue of $4.3 to $4.33 billion. GAAP EPS of $4.55 to $4.6 and non-GAAP EPS of $5.85 to $5.9. For Q1, we expect non-GAAP operating margin approximately 47%, a GAAP tax rate of approximately 21.5%, and a non-GAAP tax rate of approximately 18%. In summary, Adobe delivered another outstanding year fueled by strong global demand for our AI solutions across business professionals and consumers, and creative and marketing professional customer groups.

Our disciplined execution and strategic investments position us to extend our leadership as we deliver an ecosystem of AI models, conversational interfaces, and agentic experiences. Looking ahead to FY 2026, we're confident in our ability to deliver industry-leading innovation, double-digit ARR growth, and world-class profitability.

Shantanu Narayen (Chairman and CEO, Adobe): Shantanu, back to you. Thanks, Dan. Our success is fueled by the incredible ingenuity of our global employees, who are passionate about delivering innovation, with relentless execution in service of our expanding customer base. Adobe is well-positioned to seize the immense market opportunities that we are creating, driving continued growth and shaping the industry in 2026 and beyond. Thank you, and we will now take your questions. Operator.

Questions & Answers

Mark Murphy (JPMorgan): Thank you very much, and congratulations on a great finish to the year. Shantanu, down at Adobe MAX, the energy, the enthusiasm was just truly phenomenal. And it felt to us like a breakthrough moment. Talking to customers down there, there was just quite a bit of interest in Firefly Foundry specifically because the customers can end up with this private AI model that will understand their identity and their style. Can you speak to how customers are starting to use Foundry in the early stages and perhaps just what type of economic potential that might be able to unleash for Adobe?

Shantanu Narayen (Chairman and CEO, Adobe): Sure, Mark. From our perspective, for enterprises, the entire content supply chain Gen Studio is really the offering that we wanna provide that takes care of every aspect of their content production. Whether it's the creation part of the campaign, whether it's then creating custom models, whether it's training it at the back end, whether automating it, and then, you know, certainly delivery. And so Firefly services is off to a great start, continues, I think, the prepared remarks. David talked about the hundreds of deals that we're signing in that particular space. And foundry just takes it to a different level in terms of our ability to customize whether it's for a retailer, whether it's for media and entertainment. So, you know, we really view that as a massive opportunity.

David Wadhwani (President, Digital Media, Adobe): As Shantanu talked about, because we have this great position with GenStudio and the content supply chain, we've been hearing more and more from customers that in order to take it to the next level, they need more than what off the shelf models can provide. And as a result, we introduced Foundry at Max. The core value is that we train on their content, their data, and their brand guidelines. We're able to generate images, videos, audio, and three D models. And we operate it as a managed service. So marketing teams can then train on product shots, environment styles, brand guidelines, and media companies actually train on their individual franchises. I'll give you one example from an economics perspective. Let's take a media and entertainment company we're working on. Let's say that organization was spending $10 million with us ARR on our core creative products. We ran a sales process with them for about six months. We were able to sell them Firefly services and Firefly Foundry for about $7 million, so pretty significant step up. We're able to train models within two or three months and now we're running some of those models specifically as managed services for them for ideation and production processes. They're already seeing increased efficiency in content production, and they're now getting into opportunities that are revenue bearing, like increasing the types of content they produce for social shorts, and personalizing more of it for fan engagement with the integration with our real-time CDP.

Shantanu Narayen (Chairman and CEO, Adobe): The vision clearly is that for every single brand, if you're a consumer company or for every single TV show or a movie, we can create a foundry specifically for that particular franchise, as David said, because the ability to help with the automation of that content and production is massive.

Matt Swanson (RBC Capital Markets): Great. Thank you guys so much for taking my question. I had a question, kind of, as we expand the product portfolio and the go-to-market motion of really mirroring up the Creative Cloud and the Experience Cloud. Could you just talk about maybe the ROI focus on kind of justifying the value creation of these new productivity enhancements?

Shantanu Narayen (Chairman and CEO, Adobe): If you take a step back, Matt, there are trillions of dollars that are spent in marketing. Our opportunity is to say we can help you make sure that content is more personalized. The fact is that since we can deliver that through an ad network, and then we understand through our analytics where that is resulting in traffic, where that is resulting in conversion. We're the only company that can close the loop from the creation of a campaign, the execution of that campaign, as well as then looking at what that causes in terms of commerce. So our real value proposition is that as increasingly people are saying, hey, I wanna use AI to create more. We can not only optimize and accelerate the amount of content that they're producing, we're the only company that can then help them say, hey, this caused so much traffic.

Anil Chakravarthy (President, Digital Experience, Adobe): Depending on the industry, 10 to 20% of the total marketing budget is spent on content creation and production. One, we are helping them reduce content production cost. But equally importantly, we're helping them create the content in a much more agile manner and create a lot more content. Therefore, the content supply chain solution that we offer helps them get a lot more effectiveness out of their marketing and better ROI.

Alex Zukin (Wolfe Research): Maybe one question on going back to Semrush acquisition. Can you maybe talk a little bit about what was the strategic rationale and a little more color on that, and maybe how we should think about the synergies from the deal for next year.

Shantanu Narayen (Chairman and CEO, Adobe): If you look at what's top of mind for marketers right now, brand visibility is one of the key areas that's top of mind. How their brands appear, how they're positioned, especially in new channels like the LLMs, whether it's ChatGPT or Google or Perplexity. By bringing Adobe and Semrush together, we'll be able to offer a comprehensive solution for marketers so that whether it is their own media, like their own websites and their mobile apps, whether it is earned media like these LLMs, or across search engines, they have one solution that helps them improve their brand visibility, and make sure that they understand what customers are searching for. And that we are the only ones that can offer a comprehensive solution across their own channels, as well as all of these new channels like LLMs, in addition to search engines.

Keith Weiss (Morgan Stanley): Excellent. Thank you guys for taking the question. Maybe a kind of longer-term focus question. You guys have been clear that the strategy is proliferation first and then kind of monetization. When can we potentially see this sort of grow the totality or stabilize or accelerate the totality of growth at Adobe? Meaning, when do we see a year where ARR growth is stable on a year on year basis or actually improving?

Shantanu Narayen (Chairman and CEO, Adobe): From my perspective, Q4 was a really strong quarter and frankly, starting to be this inflection in terms of the leading indicators, which gives us a lot of confidence. That's why when you look at the total Adobe ARR growth target, which translates to approximately $2.6 billion, that's the highest beginning of the year guide for total net new ARR. In the business pros and consumers, you're seeing the MAU increase. You've seen the fact that we've got this technology in front of a lot of people, we've got usage. On the Creative Pro side, we've seen across all three parts of the business, what's happening in Creative Cloud, what's happening in Firefly as a new app, and Firefly Foundry. So we look at all of the three markets that we serve. We're pleased not just with the strong Q4, but underlying how we've actually changed the underlying part of the business, whether it's on MAU, whether it's infusing AI, whether it's on higher value products, and combining all of that for the enterprise, which we continue to think is a differentiated strategy. So we have to just keep executing, but I think Q4 was an inflection in the early indicators, which we continue to track.

Shelly (for Mark Moerdler, Bernstein): Total Adobe ARR growth this year ended at 11.5%, and next year you're guiding to 10.2%. Could you help us understand what is driving the difference between this year's growth and the guidance?

Shantanu Narayen (Chairman and CEO, Adobe): When we look at it, I think you have to look at it also in terms of the absolute. The target actually shows momentum across all of these audiences. We accomplished approximately $2.6 billion, which actually starts our guide for fiscal 2026 at that level. So I think from our perspective, it's showing the momentum. And to your second question, as we think about the ARR across the business professionals and consumers, as well as the creative and marketing professionals, this is predicated on our confidence associated with all customer groups as opposed to one of them. It reflects the progress that we made on Express and Acrobat, whether it's with AI assistant, whether it's with PDF spaces, whether it's with infusing creativity into that offering, Firefly, Creative Cloud, and Creative Pro, CC Pro offering, Firefly services, and AEP and apps, Gen Studio, brand visibility, as well as the acquisition of Semrush that adds to our offering. So we're pleased with our performance in Q4, and we're excited about the future.

Jake Rubersch (William Blair): Yeah. Thanks for taking the question. And good to see the partnership announced and integration with ChatGPT. David, as you expand to these new services outside of the Adobe ecosystem, how are you thinking about driving monetization of that usage, or converting those users over to your platform?

David Wadhwani (President, Digital Media, Adobe): Our focus has always been around meeting customers where they are. That used to predominantly be focus on search and the web, and now we're seeing this incredible growth with LLMs. They represent, in our mind, a great top of funnel. They let us reach new users that we wouldn't have reached with some of the traditional markets. And it gives us the opportunity to flow them into our full paid plan. So it's a real top of funnel game with a conversion opportunity on the back end of that. And of the maybe more important elements is that as LLMs start embracing these model context protocols, these MCP endpoints, it's no longer that these LLMs are about a prompt to a model and a response. It now gives us the opportunity to have the LLMs actually work with models and APIs. And that plays to a really strong strength that we have as a durable differentiator given the incredible APIs we have across creativity and productivity. So it lets us reach a lot more customers. It lets us atomize the capabilities, double down on the freemium experience. Our creative freemium MAU grew over 35%, and this just continues to drive that. And we're starting to see the tail end of that turn into conversion and show up in our results.

Michael Turrin (Wells Fargo): Hey, thanks very much. Mentioned credit consumption up 3x this quarter. I was just hoping to hear a bit more around what you're seeing from an overall consumption perspective, how third-party models are impacting that and if you're becoming at all more confident in monetizing or forecasting consumption?

David Wadhwani (President, Digital Media, Adobe): We introduced generative credits a few years ago. Customers get credits in a couple different ways. First, all of our plans now come with some base level of credit access, and higher end plans include more credits. Second, when customers deplete their credits, they can upgrade to a higher end plan, and/or they can purchase generative credit add on packs. As we think about the growth algorithm, it's really a multiplier across four different things, and we had major updates for all of these at Max. From an apps perspective, we now have generative capabilities in our Firefly app, our Creative Cloud applications including Photoshop, Lightroom, obviously also in the Creative Cloud Pro offer. From a media types perspective, we've been doing a lot with images, video, audio, design. We've seen a huge inflection in terms of video consumption in particular. In terms of use cases, we've been focused on editing use cases, and we also introduced Firefly Boards around ideation that generates hundreds of images or videos or designs. And last, the models continue to get better with Firefly and our partner models, we're seeing higher resolution outputs and higher density of quality. In addition, we announced a big amplifier to onboarding, which is we have a very attractively priced plan with our Firefly app, it's really an all in one offer. So all of that led to the three x quarter over quarter growth in generation. And as a result, we're starting to see increasing user upgrades to higher price plans and including credit pack add ons. So we're excited, and you saw that in some of the numbers. Our vision here is we'll work with all the great model providers, and we will increasingly be the single destination that everyone comes to access those models.

Keith Bachman (BMO): Yes. Thank you very much. David. I'd like to direct this to you if I could. Just ask you how you're thinking about the components or the construct of growth over the course of FY '26. Specifically on seats within the creator and marketing professionals, has seat growth remained steady within that category? And then the second part, despite growing competition, do you think pricing is still a lever that you can draw on to support growth in '26 and beyond?

David Wadhwani (President, Digital Media, Adobe): A few things. We've spent a couple years with all of you explaining the evolution of the product lineup. We now have an increasing number of freemium offers with business professionals, with the introduction of Express, but also the introduction of Acrobat Studio, which is off to a great start. We have a specific offer for creators with everything we're doing with the Firefly application, and that's another freemium offer, but also has a nice tiered pricing associated with it. We have strong momentum with creative pros, and we continue to see very strong migration over to the Creative Cloud Pro plan, the higher value plan that has more generative capabilities embedded in it. And we have the ability to do all of this automation work associated with Firefly services and Firefly Foundry integrated into GenStudio. So as we look at creativity and how it's seeped into all of these different flows, we feel really good with the freemium MAU up over 35% year over year, and our ability to start converting some of that MAU with the plans that we have in place now with both Express and Acrobat Studio and with everything we're doing with Firefly. We continue to see strong seat growth. We continue to believe that we have a lot of user acquisition ahead of us, and we continue to see a lot of value and pricing opportunity with professionals.

Shantanu Narayen (Chairman and CEO, Adobe): Thanks, David, and thank you all for joining us. What I wanted to again just summarize was not only was Q4 a good strong end to the year, I would say fiscal 2025, we just continue to execute. In particular, I'm pleased with three aspects. The first is certainly our customer groupings as we provide these tailored offerings for business professionals and consumers and creative and marketing professionals. How we've embraced AI and infused AI into all of those offerings, demonstrating that's the value that people look as they increasingly adopt our solutions. And something that we probably talked a little less about: the execution that we have across all routes to market, whether that's what we are doing on digital, what's happening both through the channel as well as our phone, in terms of selling to small and medium businesses, and certainly at the higher end, the strategic partnerships and the relationships that we're creating at the enterprise across our combined offerings. So thank you for joining us. Happy holidays, and we look forward to continuing to execute against our strategy and sharing more with you in the future. Thank you.

Operator: Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.