Hello again, everyone, and welcome back. Shantanu, thank you so much for joining us. I know you don't do this often, and we're delighted to have you here. Shantanu, I think, as you all know, is the Chairman and Chief Executive Officer of Adobe, one of the largest and most diversified software companies in the world. You joined Adobe in 1998. You became Chief Operating Officer in 2005 and CEO in 2007. You've really transformed the company over this period into an industry innovator, pioneered the cloud-based subscription model for your Creative Suite, established a global standard for digital documents, and you've created a hugely leading position in the explosive digital experience category. Adobe has achieved record revenue, lots of recognition for inclusive, innovative, and an exceptional workplace.
Continuously named a Great Place to Work, continuously named one of the Most Admired Companies by Fortune. So congrats on all that. It's been a good run, so let's dig in. 25 years at Adobe, more than 15 as CEO. I was gonna say 15 as CEO, that's a rarity in any industry.
Right.
But it's, it's probably a big rarity in the tech industry, too. Talk a little bit about the journey kind of where you think you are, kind of, kind of the experience over the last 15 years.
Sure, and, thanks for having me, David, and, the only reason we don't come here, I was telling David, the both the conference agenda and the attendees were amazing, is that we happen to be in our quiet period. We announce next week. But to your point it's been pretty remarkable what the company has gone through, and I think both our founders, John Warnock and Chuck Geschke, it was always about, are you creating seminal products-
Mm-hmm.
-that transform industries? And if you think about the impact that Adobe has had, whether it's on, digital documents, as you mentioned, desktop publishing, now digital marketing, I mean, the fabulous thing has been that every four or five years there are these seminal moments, that enable us to completely, I would say, first change the aspirations that we have for ourselves as a company.
Mm-hmm.
second to invest in these long-range technologies that I think have massive impact, and so, it's been absolutely a dream for me.
Yeah, and you've accomplished a ton. I wanna look forward a little bit. When you think about the next five years, can you talk a little bit about some of the prime goals, prime strategic objectives for the company for the next five years?
Sure. I mean as always, we're first looking at it and saying: What are our strategic growth opportunities?
Mm-hmm.
and in technology, we always just look at it and say: We want to drive growth, and we want to drive profitable growth, and I think that's one of the things that's always characterized us. A lot of people don't know that Adobe was profitable in year one, and so we've always said, how do we think about profitable growth? The three real areas of focus for us as a business under our mission, where we say, "Changing the world through digital experiences-
Mm-hmm.
Excuse me. The first one is about creativity for all, and if you think about the amount of content that's being created, and I'm sure we will touch on AI at some point, but if you think about the amount of content that's being created for different media types on different devices, we're just seeing this massive explosion.
Mm-hmm.
And so the number of creators in the world, everybody who has this idea to tell, strategically, we're always thinking about, are we delivering great products to them? Are we attracting more people to the platform? And how do we retain them? Because, as you said, our business model is fundamentally a subscription-based business model. The second one is all about documents, digital documents, automating inefficient paper-based processes. Certainly, I think, when you saw what happened during the pandemic, there was even more of an urgency that every business had about, how do I take any inefficient paper-based process and automate it? And that's been fueled by the growth of PDF, as sort of the language of documents on the internet, and then everything we've done around webs. So how do we grow that business?
And then the third one, which is a relatively new business for us at Adobe, has been about when we went through our own journey of saying: We have to engage with every customer in a personalized way. Why don't we build a stack? I mean, nobody had taken marketing as a category-
Mm.
and said, "We need to build an enterprise stack," right? I mean, I always say supply chain was automated, finance was automated, HR was automated, and we sort of had this vision that we have to enable a new form for the Chief Revenue Officer, Chief Digital Officer, Chief Marketing officer the space to enable them to engage with customers in a personalized way. so all three of these businesses were in the fortunate position that they're all growth businesses. They all have tremendous synergy with us. So the first thing I look at and I say, "With all these three, are we continuously looking at what the opportunities are?
Right.
As opposed to trying to preserve the status quo, so that's always the first thing. The second thing I would say that we focus on a lot is a cadence for execution. , we get the luxury in the companies that we have to do the exciting things that we have, as long as the table stakes part of continuously delivering on the quarter, on the fiscal year is there. And so I, I think the way we measure execution, we call it our data-driven operating model, where everything is, run on data, and we have so much insight into what our customers want and what they're anticipating. So I think continuously figuring out, are we refining our execution model? is the second thing that we're always focused on. And perhaps the most important, it's the people, right?
I mean, are we structured? Are we getting the right people to think about each of these opportunities at the scale at which they are? But when you're approaching $20 billion as a company the way you operate the company globally in 180 countries has to be very different. So I would say those are the three areas that we're continuously saying: Are we pushing ourselves out of our comfort zone?
Yeah. Yeah. , everybody's kind of debating where the U.S. economy is at the moment, and there's no question that the tone toward the potential for a soft landing has increased. You've got a pretty broad view when you look at your business of kind of consumer confidence, and in particular, the economic health of small enterprises. What do you see in your end markets, and kind of how do you feel about the trajectory of the economy based on insight you see in the business at the moment?
I'll answer that question two ways, David. I mean, the first is what we are seeing, and the second is how do we think about it as Adobe. Right?
Right.
, how we think about it as Adobe is always, digital's gonna be a tailwind. , there are gonna be business cycles, but if we overindex around the current business cycle, we might lose the big opportunities.
Mm-hmm.
And so we've used any macroeconomic weakness when there's been one, to say, "Are we reprioritizing what we want and investing in the areas?" And frankly, big companies and strong companies should get stronger in macroeconomic times.
Sure
-if there's weakness, because others can't afford to invest in it. So, that's the way we think about it, and we used even, the unfortunate pandemic at that point to reprioritize how we're doing it. But I think to your first question, we still see a lot of interest in digital.
Mm.
I think the way customers are thinking about it might be different, but let's take the creative business. There are more people creating content than ever before.
Absolutely.
I mean, -
Absolutely
... you were telling me earlier that a big part of the conference, this week is about media and what's happening with media and consumption, but the consumption patterns are all up and to the right.
Yeah.
And so the creative business has really seen this massive influx of new people who want to engage in a creative expression. And then on the other side of the spectrum, when we target large businesses, I would say large businesses are probably, in the marketing space, focused a little bit more on what is the efficiency of my spend. So if a year ago if it was growth at any cost, and how am i driving top-line growth and thinking about acquisitions, I mean, acquiring new customers, perhaps there's a little bit more focus on: Where am I spending my marketing dollars?
Mm.
How am I thinking about content? Am I automating them? Am I being more productive? Am I understanding the ROI? And so, while there may be a little bit thought being placed to where the spend is, I think big picture, they're still going to only look at digital-
Yeah
as an area for investment.
Yeah. So, I mean, that takes me a little bit to my next question, though, in terms of the size of the addressable market, how you can keep growing. , there are a bunch of Wall Street analysts, though not our research, I would observe, that have been wondering just how long you can be a growth company. And so you've proven a lot of skeptics wrong over a long period of time. Talk a little bit about kind of ways to keep sustaining that growth in your core markets.
Well, we're pleased. I think Kash has always sort of, been on this journey with us, thinking about the opportunities rather than the near term. But each one of those businesses, we try at our financial meetings once a year to talk about where the TAMs are and what's growing. but I mean, if you look at anything with respect to computing devices or the move towards the cloud, both of those have been really big accelerants for our particular business-
Mm-hmm
... because, take creativity. Now, wherever you are, you don't have to be tethered to a computer-
Right
-to do your creative expression, so that's an accelerant. The fact that PC sales continue to do well, that's an accelerant. The fact that mobile devices are capable of more. so we look at our addressable market opportunity and, in all three businesses, the growth, because we've also, frankly, redefined what those categories are.
Right.
I'll give you an example of that. When we started in digital marketing the real sort of insight that we had was, we said everybody's gonna need a content management system or analytics. So we started in that business by saying, "Let's just do the plumbing," right? Let's do the plumbing so everybody has a website, everybody has a mobile device, everybody has analytics. I think the largest area of growth that we're experiencing right now in the marketing business is this thing called the Customer Data Platform, which is, how can you, in real time, really understand? And the way I like to describe it is, if five years or 10 years ago, everybody was thinking about that record of a customer and where it's stored, I say that's irrelevant today.
What's relevant today is at that moment that you need to activate that information to deliver the experience that you want, do you have a new real-time customer data infrastructure to target the customer the way you want? And so that's a business that we we were the first to market. We have, I think, the largest presence in there. So I think it's redefining what marketing was, and first it was all about the CMO and how they were spending it.
Sure.
Now it's the confluence of the CMO and the CIO, because this is on every CIO's radar about what is my core customer data platform, or the chief revenue officer. When a company like Nike looks at it and says, "We have to completely change our business model and go direct to the customers," what are they thinking about? They're thinking about their content. They're thinking about the web infrastructure. They're thinking about the analytics, the customer segmentation, and we're incredibly well positioned there.
Yeah, that's terrific. When we were talking outside before we started, you were asking about some of the things getting discussed, and I said, "Of course every CEO is being asked about how AI affects business, from efficiency, from productivity." so I ask the question: Does it lower the bar or raise the bar for competition for you? And how is the progression of ai affecting your business model?
... First, I think big picture, if companies do this correctly, I think AI is actually going to be an accelerant more to incumbents.
Mm-hmm.
If they don't address it correctly, because they have the interface. So the way we try and break it out, and I'll speak maybe just to the creative business-
Sure.
First, we have an offering there, David, it's called Firefly.
Mm-hmm.
Think of Firefly as you enter a text prompt, and when you enter a text prompt, it actually creates the image that you want. We've done that for images, we've done that for vectors. You can do it for trying to create new alphabets, I mean fonts. Think of it as anything that is in the mind, if you want to be able to start to do that over time, 3D animation vectors. So, we said to ourselves, "If we want to have a solution that's differentiated, the first thing we have to think about in that space is data, and how do we think about AI and data?" And, unlike most other companies in this space, if you think about Firefly, we said we're going to be designing it to be commercially safe.
Mm-hmm.
And so our Firefly model and the data that we have, because we have tens of millions of people who use our product, billions of assets being created in our products, how do we make sure that we have a differentiated data set? Then we thought, which are the ones where we should focus on our models versus where do we leverage other models?
Sure.
For Firefly, for imaging, imaging is core to our business, video will be core to our business. We said we have to create our own models, and we created our own models. We've had billions of generations of the people using it. But I think the secret sauce is really in two areas. The secret sauce is first in the interfaces, and how can you embed this AI in interfaces that people love, they use, to make them, to your point, either more creative or more productive?
Right.
Some come at it from a, "I want to be more creative," and some come at it, "I, I want to be more productive.
Mm-hmm.
And so I, I'll geek out for a second. We built this technology called Generative Fill in Photoshop. I've been at the company, as you say, 25 years. I don't know that I've seen the kind of community interest in a feature that we've built. Because people look at that and say, "Oh, my God, that's absolute magic, and it's exactly what we want to do." And so think of it as you have a layer in Photoshop, and you can actually take subparts of that image and completely change it based on a text prompt. so our AI, sort of strategy has been around thinking about data in a very meaningful way, thinking about the models, where do we build it, and where do we leverage other models?
I mean, there are other large language models that exist, where you can look at it and say, "What value am I really providing?" But I think focusing on this interface layer and really thinking about it, whether it's for creatives, whether it's for people using our document solutions or marketers, how can I really provide value to them so that they can describe what they need? And we can do that. And we're seeing—I mean, our product roadmap on that space, I haven't seen as much innovation come out as at rapid a pace, so-
What I assume, if I tie that back to growth, this has to be a hugely important part of your growth trajectory going forward.
Absolutely!
Yeah.
Because I think it allows more people into the fold. It allows more people on creative who say, "I want to participate in the creative process, and I can now finally..." Most people are terrified of the blank page. If you are trying to create something and you see that blank page, now I can suddenly say, "Hey, I want to create image, and I want this in the image." So that's a big one. Let me touch on the other side. On the marketing side, if you try and think about the agility with which people want to create these campaigns, they want to understand their content you're probably producing a boatload of content. And if you were to ask people, "How do I get that localized? What's the automation of that production?
How do I understand the efficacy of my marketing spend?" We can, in a solution, really bring that together because we have the creative products-
Yeah
... we have the asset management, and we can activate it in real time with campaigns. So it suddenly allows more marketers to also enter the fold and say, "I can actually use these products." So we're convinced that it dramatically expands the number of users. And then, in terms of how we price it and monetize it, to your part about growth I think we have a very clear strategy of where we are going to use it to provide new SKUs that we monetize separately, and where we use it to basically get millions more into the fold-
Yeah
... and being very thoughtful about both.
Yeah, you've seen a lot of technology cycles, and technology cycles can accelerate, have a profound impact. How do you think about this technology and this cycle? How profound is this? Is it just the next step, or is there something that's really exponential that's happening here?
I think what most people don't appreciate fully, David, is that these technology platforms that are built, because they... The compounding effect comes from the fact that other sort of tectonic shifts in technology has already happened. The move to the cloud enabled data to move to the cloud.
Huge, yeah.
, you have this data now on which you can create the models. The GPU increase allows them to do it at a cost and a time scale that is actually making it effective.
Mm-hmm.
So all of these are compounding, and it is profound. I think what's even more different is the interest in AI from the number of people around the world. I don't think I've seen anybody gravitate towards one field of technology as quickly as they have.
As it has happened here.
Correct.
Yeah.
So I think that also will cause because if you have 10,000 great people looking at a problem, you'll solve it in a certain time. If you have 100 million people looking at that same problem... So I think some of the advances that you're seeing is just as a result of more people putting their processing on that. So I think it's more profound than any other technology that I've been. But I say that for every, ... I'm a kid in a candy store-
Everyone that comes along.
Exactly.
So when you think about generative AI technologies, this debate about the labor market. , your view some eliminate, creates efficiency. Clearly, there's gonna be some of that. Other arguments, takes high value add, makes it more productive. How do you see that debate, and what do you think the impact is on labor broadly as this technology proliferates?
First, the short answer is both, right?
Yeah.
It is going to eliminate-
It's gotta do both.
Some jobs.
Yeah.
Exactly.
It's gotta do both.
It's going to be improving. I think in the grand scheme, it actually brings more people into the fold. I mean, think about AI. I mean, the fact that you can now have a personalized tutor for a billion people, you can have personalized medicine, you can have personalized creative, you can-- So I think at the end of the day, every successive generation of technology, while it might have been scary, has enabled more people to participate in it.
Yeah.
I, I think this one's gonna be no different.
This one's gonna be the same.
Yep.
, data safety, data accuracy, big issue around this. , is Adobe positioned in a way to help businesses navigate and think about that?
It is. I mean, two things that I'll say in that. First is, we talked about how our data is designed to be commercially safe. I'll tell you why that's important. Part of what we've done with Firefly is we've created this imaging model.
Mm-hmm.
If you're a large company and you want to say, "Hey, I wanna be able to," whether you call it, customize that model or tweak that model or tune that model so that it has access to all my content, you're not going to upload that into some other system. So we have actually enabled companies whether you're Disney, whether you're Coke, whether you're... , you can come to Adobe and say, "Hey, we will give you our content. Create a customized model for us that allows us to do it." So we've been very thoughtful about data, again, going back to what the data is. The second thing I'll talk about is, we have this notion of Content Credentials, David.
Mm-hmm.
I mean, a lot of people talk to us about Adobe. What role are you playing as it relates to all of this content that's out there, and are you being responsible? So think of it as a nutrition label. So you can now, in any Adobe product, create a nutrition label, and that specifies who created the content, what was the provenance of that content, and then, I think there are 300 people now as part of this coalition. So as that goes downstream to a publisher or a distributor or where it's being-
Mm-hmm
... monetized, you have that nutrition label associated with it. And I think you're seeing more, governments also say, "Hey, can you work with us, Adobe? Can we have a partnership so that we allow people to see the content that's being created?" So I think this notion of, we call it in our purpose, technology to transform, and understanding the unintended consequences of some of this. So I think Content Credentials, the time is right, and for us, that's acting responsibly as a company about for any piece of content-
Mm-hmm
... how can we make sure that people know where it was created, and through AI, whether it was changed?
Yeah. So shifting gears a little bit, some people argue that when you look at spending on marketing, it can be a very good barometer of improving business conditions. When you look at your customers, how do you see them thinking about whether they want to expand or invest versus being more constrained?
Again, I would say macro, two things I would say. The first is, I think people have changed where in that marketing cycle-
Mm-hmm
... they want to spend more money, and that's, again the exciting thing for most marketers is acquisition, right, of customers, right? Am I acquiring customers? Am I creating more of the campaigns associated with it? and I think a few years ago, that was where the ruthless focus was.
Mm-hmm.
I would say today they're in two areas that are a little more downstream, the engagement part. So they're still spending money on marketing-
Mm
... but it's become a lot more around engagement with customers and saying, "Am I serving the customers that I will?
Mm-hmm.
so those solutions at Adobe are certainly seeing a lot more interest from customers. And then I would say the second area where there still is interest is the move from one channel to another channel. So maybe Connected TV
Mm
... is where because people feel like they can segment better, and they can understand better who the customer are. So you are seeing specific channel shifts-
Mm
... , in a, in a macroeconomic way. But I would say there's perhaps a little bit more scrutiny overall because, and this is where I, I think we can talk ourselves. If everybody says, "Oh my God, they're seeing weakness, so should I be seeing weakness?" And so, yeah, we like to say, we'll plan for the upside, and we'll react to the downside.
Sure.
-
Yeah
... that's the way to run a company.
Absolutely. Always is. , hiring in your industry has been a little bit subdued. When you think about hiring how do you think about it? How do you think about productivity metrics? How have you evolved your thoughts around hiring and headcount? Because it has been relatively subdued across the software industry.
And I would agree with that, David, and so one of the things we did was... I guess maybe I'll go back. When I first took over as CEO in 2007, in 2009, the recession hit, and when the recession hit and your largest expense is headcount-
Yep
... and if you have to balance that, we had to let people go. And that really has stuck with me as am I anticipating that and doing it? So I think, unlike a lot of other companies, we were very thoughtful two or three years ago when the sort of pandemic first started, and we said, "Let's reprioritize. Let's reprioritize as a company." There's 20% of staff in large companies that is probably not gonna move the needle.
Yeah.
So we canceled all of that stuff, and we said, "There's 20% of the staff that's probably a once-in-a-lifetime opportunity for a company like Adobe.
Mm-hmm.
We were subdued, but we did a lot of internal restructuring in terms of that. That's the first message what I would say, which is why we haven't had the need to do company-wide layoffs. We've been fortunate, and but we continue to deliver great profitability. I think the second thing I would say is that the nature of the people that we're looking for right now, I think there's more interest in looking for people on the software side specifically-
Mm-hmm.
who understand models and a different kind of software engineering than it is people who are perhaps more traditional-
Right
Software engineers. And that, ironically, is one of the interesting things for me. There's a lot of talk about, "Hey, is creativity is this going to reduce the market?" The area where AI is probably the furthest ahead is in software development.
Right.
Nobody's talking about that, which is it's this conundrum that I don't-
Yeah
Fully understand. So yes, we are limited hiring, very particular kinds of skill sets, and then but a lot of rearrangement within the company.
Yeah. Yeah, it's interesting. You announced last year your intention to acquire the product design tool, Figma. Talk a little bit about how you see this complementing the platform and kind of your aspirations for the acquisition.
well I, again, I've always believed that companies, when business is good, you have to be thinking around the corner, and what are areas that are adjacent that can help you grow into new areas that you haven't? And so the excitement around Figma was in three areas. The first was product design.
Mm-hmm.
, they had a leading product and product design. The second was collaboration and using the web as a platform to have more people collaborate, and I think they had some really innovative work in that space. And the third was this sort of, we think, emerging area of creativity and productivity, where in the past, there were creative tools and productivity tools.
Mm-hmm.
And so that was strategically where we looked at it and said, "We think that Figma has done some incredible technology work," and that's why we announced the intent. As we have said publicly, it's still under the regulatory process, and so we're
Working through it.
... following, we're working through it. That's the way of putting it.
That's the process.
Exactly. But that, the excitement-
Yeah
was around, it's an adjacency, it's looking around the corner. , when you're in a position of strength and business is growing-
Yeah
that's the time to look at
Time to do something.
Yep.
For sure. So just lastly, just to wrap up, we're in a super dynamic environment. , the world's changing very, very quickly. , just as a very seasoned CEO that's been in the seat a long time, you've seen a lot, ups, downs, different environments, different cycles. , broad advice on kind of steering through this dynamic environment. What's on your mind as you think about just navigating what's a really, really fluid environment?
, I always look at it and say, I mean... , for us, in our business, David, our intellectual property is our people. So the first thing, as a leader, are you prioritizing things enough? , it's so easy in a company to end up doing things that are not going to move the needle, and I think businesses you create a lot of sort of, crud in a company. And so the first thing we try and do as a company a lot is really re-emphasize what's important, what are the KPIs, and how we're doing it. So-
Yeah
... I think that's one thing. Secondly-
By the way, I just—that is, I said this earlier when I was with Dan Schulman. I mean, that, he was talking about this. We're talking a lot about this at Goldman Sachs: if it doesn't move the needle, don't do it.
Right.
Get rid of it. Stuff just accumulates. Prioritize, prioritize, prioritize.
Every individual wants to know, "Hey, I can connect what I am doing every day-
To the strategy.
-with something that...
Yeah.
Exactly.
Yeah.
That you are talking about in an all hands.
Yeah.
And so, we can never do enough.
Yeah.
Because... So that's one. The second thing we certainly believe in, I mean, as a product company, we're also unbelievably clear on what is our long-term differentiation. If we don't build great, innovative products that change the world-
Mm
We're not we're not going to be doing. So are we investing sufficiently in areas that are really going to move the needle? And that portfolio approach, and again, we've done that, as I said, by rearranging. And the third, and maybe I have the luxury of doing this, is to say, what? I, you build the greatest companies in the world not for the next quarter or the next year. I mean, you build them for... And so these macroeconomic business cycles are gonna change.
Yeah.
And yes, there may be some volatility in what happens, but I would imagine most of the investors that we're looking for are the investors who are like, "Hey, what are you doing three years from now?" I will never forget when I first took over in 2007 I used to go to a lot of meetings where people would ask me, "Hey, I saw this happen in Q1, and how do you think it's gonna happen in Q2?" And then I went and visited one investor, who was a very long-term investor in Adobe, and he said, "Tell me what you think happens in five years.
Yeah.
That really stuck with me.
That's the right question.
That's the right question.
The right question.
, if you're building a company for that business cycles. And don't get me wrong, that's table stakes, so we have to do the right thing every quarter.
Sure.
But don't lose sight on the prize, and I think that's the message that at least I've benefited from.
That's a great message. Great way to finish. Shantanu, appreciate it. Thank you for being here. Thank you for spending time with us.
Thanks so much, David.
Absolutely.
Thank you. Thanks so much.
That was great. Thank you very much. Thank you.