Adobe Summit 2024

By Patrick Moorhead - April 1, 2024

The Six Five team discusses Adobe Summit 2024

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Transcript:

Daniel Newman: Listen, Pat, by the way, just on your intro, just remember no investment advice, people. We’re not doing that. Okay, I want to talk about the investment summit at Adobe or the investor event is maybe the right way to explain it. So I call it the Money Slides. Look, there’s a lot they got announced. So broadly speaking, Adobe is building this content supply chain. And this is really interesting because we’re entering this generative AI era where the idea of saying, “Hey, I want to create a coffee mug that says I am a unbearably cool dad and I want to figure out a way to shoot this in 2000 different rooms with 1000 different color variations and I want to be able to test it on 500 different websites in 300 different languages in 15 different geographies. And I want to be able to do that in days, hours, minutes, not years, months, weeks.” This is what’s going on.

And so Adobe is really, really interestingly positioned for this because you got this what I would call super disaggregated, fractalized marketing technology stack, and we are entering the era where people want to streamline this. You’ve got a content supply chain, you’ve got companies that have, usually many agencies, many marketing teams trying to do a single thing. And anyone that’s ever tried to do marketing, whether it’s in our companies, a smaller business, all the way up to a large enterprise knows it just seems to take too long. And so, Adobe is out there to fix this with generative content studio, they had their new Gen Studio, which is really their most prolific end-to-end product and solution. That’s what they announced here.

Now, they didn’t really address video yet, but it sounds like they’re going to, they did address a lot about content rights and ownership, which is very interesting. And again, they had so many announcements, but what I wanted to focus on what I called the Money Slides. So the Money Slides were what we had when Shantanu presented to us their CEO at the investor event inside of Adobe Summit. And basically there’s three focal points that I leaned into and you can follow my little tweet stream here, but how the company is going to meet its expectation. It is raising its $205 billion TAM to $293 billion between just now and 2027. First of all, I love the fact that they did a shorter window of time to explain to investors, it’s great when people are putting 15 or 10 years into the future for TAM. It’s better to me when it’s something that’s digestible. Most people can’t survive the week, the month, let alone thinking three years out, five and 10 is even worse. So where does their growth come from?

First of all, they’ve got three clouds, very clearly demarcated. This is what I think Gen Studio can help tie together because I think their creative, their experience clouds really are a left to right function of delivering the marketing experience. Having said that, they also have the document cloud. So people have done things like sign and PDFs that they’re used to. That’s another really big part of the business. What they’re going to do though is A, they’re going to drive more revenue from their current customers, which is my favorite thing to do. And two, they’re going to expand their offerings. Last year they had six and a half billion images generated with their Firefly product. That’s their generative AI image generator, which is a super cool product. And then their Gen Studio, which I’ve talked about a couple of times.

The second focal point though is that they’re going to expand the TAM, which I mentioned 293 billion. The third is they’re going to build an ARR machine. This is really an interesting thing, pat, that I don’t think most people understood about Adobe, but over the last decade plus, this is a company that went from about 25% of its revenue being recurring, to 90% currently huge pivot for the company. In five years, the company has gone from $10 billion in revenue to $20 billion in revenue. It’s growing almost as fast as The Futurum Group, which I really appreciated. This is a really, really important transformation for the company because, basically they’ve made themselves more valuable, they’ve given themselves a more compelling multiple, they’ve created a stickier product and a consumption model, and now of course they are capitalizing on this powerful generative AI movement that is going to create more need for visual content, more need for video content, more need for distribution.

And of course, Pat something you and I believe very strongly in; more need for analytics data and measurement. The experience platform with the Gen Studio is really a compelling offering that gives end-to-end capabilities and leans into the fact that Adobe may just have all the technology required to play a role in the B2B space, which many people for a long time have questioned. There’s so much more to cover, but I want to share some oxygen, Pat, and I’m going to pass this one back to you.

Patrick Moorhead: Yeah, so no, that was a great breakdown, Dan, and I went to the event with a few questions. So first of all, is AI just a, “Gee whiz” feature or is it truly delivering business value? The other one I was looking at is does this move the needle for Adobe and B2B? And that’s the key here. This is not a consumer show. This is not a creator show, Summit is B2B. There’s not a whole lot of competition on the creativity side, but there’s a heck of a lot of competition on the experience side from companies like Salesforce and HubSpot. I also wanted to see if we get a better picture of how much AI was providing financially to the company, and I got to tell you, I walked away with some pretty clear answers.

So first of all, I can’t tell you which one of Adobe’s largest customers said this, but essentially they said that they cut 50% of this content supply chain. So think about any type of imagery, any type of alt formats that you wanted in and also emails. And this company said they’ve already cut 50% of those costs already and are on track to cut 80%. Now, can’t give you the exact number, but it’s a nine figure investment here, which is gargantuan. Yes, hundreds and millions of dollar savings already. Let that sink in, folks. That’s a huge deal.

On the part about could Adobe, can investors really understand it? I do think the company did a good job, but I think they could have done a better job on this. If nothing else, percentage of revenue that’s AI last year and what’s going to be this year, carving out AI only services. I know that’s tough, particularly when you’re in Creative Cloud, and you are making things like Photoshop better with those tools, but the companies that are getting life on their stock price are the ones that are able to best articulate that.

Daniel Newman: I’m glad you said that, Pat.

Patrick Moorhead: Yeah, and by the way, one I’ll call it… Yeah, okay, let’s talk about Experience cloud versus let’s say HubSpot. And so, I’m taking this a lot more seriously at the point. It wasn’t something that my company had covered, but we need to do the double click on that. What I really like about this too, and this really hit me when we were talking with Eric Hall, the CMO of Digital Experience that the end-to-end capabilities of Adobe, Sam Altman talked about this 10 person billion dollar company.

Daniel Newman: One person, by the way. Yes.

Patrick Moorhead: Oh, one person?

Daniel Newman: He said, “One person.”

Patrick Moorhead: Okay. I think that’s kind of a little crazy, but let’s just call-

Daniel Newman: I mean, I would like to try it though. I wouldn’t mind it.

Patrick Moorhead: No, I wouldn’t mind it at all. But you can imagine a 10 person billion dollar company, one person is in charge of marketing, right? And these are the types of tools when you put Gen Studio on top of it, because right now, digital experiences is 15 different modules and that is a no-go for a small business or one person doing marketing in a company, but you put Gen Studio on it and you could see that built out across all three of the clouds that they have. You have something incredibly powerful.

Final comment, this is a bonus comment. What were the first companies that were done in the first keynote that were brought out? It wasn’t OpenAI, it wasn’t Microsoft, it wasn’t even Adobe, it was NVIDIA and Qualcomm. And Dan, you and I have talked about semiconductors eating the world here and we can debate who said it first, who wrote it first. I’ll give you-

Daniel Newman: Market Watch 2019.

Patrick Moorhead: Pat Moorhead 2017.

Daniel Newman: Dan Newman before he was born, 1979.

Patrick Moorhead: I was in the womb baby when I said it, 1967. So.

Daniel Newman: Anyways, I lied about my birth year, by the way.

Patrick Moorhead: Anyways, just a total sign of the times, right? And it’s why we cover semiconductors so much on this show.

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.