AI Features Paying Dividends as Adobe Gives Strong Outlook

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2:12Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. I want to talk a little bit about a company that's kind of moving all over the place. Adobe earnings out last night. Shares bouncing around higher by as much as 4.5 % today, as low as 0.6 % today as well. The company did give a strong quarterly revenue outlook, suggesting that it's seeing a payoff from its investments in AI features. The company also did boost its annual forecast. I want to bring in Anil Chakharvarthy, President, Digital Experience, Worldwide Field Operations at Adobe.

2:50He joins us from San Jose, California. Anil, welcome. It's good to talk to you again. It's been almost a year since we last spoke. How are you? Good. Thank you. Thank you for having me back. Yeah. Thanks so much for joining us on the program. I want to talk a little bit about the stock move today because it does seem like investors might be missing something here. I did mention that the company boosted its annual forecast, gave a strong quarterly revenue outlook. Analysts on Estimate gave a number that was at the bottom of the range, and you came out with numbers that said sales will be at the top of that range.

3:25What are they missing today? Look, like you said, we had a strong quarter. We gave really good guidance for our fiscal fourth quarter as well. We are focused on building a long-term AI platform. We believe that this is a massive transformative moment, just like we went from on-prem software to SaaS software, and Adobe was a leader in that. We believe this is the next big transformation of taking advantage of agentic AI and the transformation that's going on. and bringing the right AI functionality and models through all of our software. I mean, our software is pretty much ubiquitous, as you know, in Photoshop and Acrobat and everything we do with Experience Cloud as well.

4:03And so we think that from a long-term perspective, we're really well-positioned. All right, so well-positioned, and I think investors were pleased initially. But if you look at what the street's doing, Anil, like you see Piper Sandler lower the price target from$500 to$470. UBS lowered it from$400 to$375. Evercore ISI cut the price from$475 to$450. Barclays did raise it from$460 to$465. I guess I'm laying that out because maybe people say, okay, but maybe not at this price or this valuation. Should investors to some extent in terms of the efforts you guys are doing when it comes to AI, maybe temper back, pull back in terms of their expectations or how long this might take and how long it or how much it might cost?

4:53We are focused on both delivering value over the near term as well as the long term to shareholders and obviously through everything that we're doing for our customers and our partners. I understand, of course, that there are a couple of differing opinions on where it might shake out, given all the transformation that's happening with AI and some of this uncertainty around the market. But we believe that we're fundamentally in a really strong position. We talked specifically about numbers around AI. We actually share two metrics. One is AI-influenced annual recurring revenue, which cost$5 billion, and then AI-first annual recurring revenue, which earlier in the year, we had set a target of$250 million by the end of the year.

5:39And just in the end of the third quarter, we had already achieved that target a quarter early. So, you know, the way we see it is we are not only incorporating AI and the best of AI models, not only our own Firefly, but also third-party models like Google and Runway and so on, making it available to our customers. We believe it's also creating value in what we're showing through the monetization. So, I believe that, you know, over the course of the next couple of quarters, the market will work itself out. You know, you mentioned the transformation that we're seeing as a result of AI. Carol and I are really trying to figure out, and we ask everybody who comes across our desk, what is the future going to look like?

6:19I mean, I was at this dinner last month, Anil, and it was all about AI. And the topic of conversation that dominated most was like, what jobs are at risk here? And certainly a lot of people talked about coding, but there's also the discussion about creatives and to what extent the creative class could actually see a hit to these jobs as a result of AI tools that are available right now. And I'm wondering how you think about that in your strategy. Like, how do you grow your revenue at Adobe if there are potentially fewer people who need the software because it's so easy to actually create using AI?

6:56Yeah, you know, we see that AI will absolutely have a transformative impact. But the way it will work, as in every transformation, you know, if you think of the last three transformations, the internet transformation, the cloud transformation, the mobile transformation. Adobe has been a winner in each of these transformations, and the software does different things once you go through the transformation. We see that in the world of AI, what's going to happen is people will embrace AI and people will use it. We shared a number of 29 billion generations that were done through our products, including Photoshop and Premiere and so on, of people who are already using these products, incorporating AI into their work.

7:35And the way we see the future playing out is as AI becomes ubiquitous and available through products like ours, what's expected in the market will change. So, you know, people are not going to use just AI and automate it because then all of it will look alike. You know, your creative work always needs to stand out. Every advertisement, everything that's produced in Hollywood, even every business presentation needs to stand out. And standout content requires both both that human creativity plus the power of AI. So we believe that over time, it'll absolutely be essential, but it won't be sufficient.

8:10And that combination of creativity plus AI is what's going to make content stand out. How are you thinking though about how AI will ultimately shake out? And I think about, you know, open AI kind of figuring out its future and restructuring to give nonprofit a stake, but not necessarily just be a nonprofit. it. You've got Microsoft and OpenAI, their non-binding agreement will likely ease concern about an end to their partnership. But at the same time, Microsoft is working, it seems like, focusing a lot internally. There's a lot of churn, a lot of movement, a lot of money. I mean, how do you make sure you are either partnering with the right folks and positioning yourself in the right way?

8:56Do you hold back a little bit to see where the dust settles, the AI dust settles? No, I think you have to be in the moment and working with everybody like we are, whether it's with OpenAI, with Microsoft, with Amazon, with Google, and with a number of the other smaller players like Runway and others. We are working with a variety of these players. You know, I think in terms of how it's evolving, there will obviously be a couple of LLM providers who will be like the new operating systems of the world. So, there'll be probably three, four, five of them. There will already be a lot of players who specialize in particular areas.

9:35Maybe that's video. Maybe that's a vertical. Maybe there's a specific niche that they focus on. There will also be a lot of AI language models that will run on device, whether it's working with a Qualcomm or other providers. There will be a lot of on-device, on-computer, local AI that will run as well. So it'll be this combination of different AI architectures. And one of the things that we're doing as a software provider is how do we make sure that our next generation of AI architecture can work and take advantage of all of these so that, you know, from a consumer perspective and from an enterprise customer perspective, they get the best of both worlds.

10:13They get the power of the software that does exactly what they need, and they get the power of AI. We're speaking with Anil Chakravarty, President, Digital Experience Business, Worldwide Field Operations at Adobe, joining us from San Jose. I think a lot about price elasticity with products such as these. And as we see price increases on the consumer side from companies ranging from digital media to SaaS companies, how do you think about elasticity and price from your perspective? How much can you raise prices? We believe it's directly correlated with value. That's what we have done over the last few years.

10:46As our customers see increasing value, and as long as it is tied to their business outcomes, we will continue to see the ability for them to pay higher prices. In the individual's market, for example, we see that as long as they can amplify their own creativity, and then that shows up in whatever their own business model is. They may be a solopreneur. They may be a freelancer. They may be working on behalf of somebody else, as long as it shows up in value for them, that increasing value will provide us elasticity. From an enterprise perspective, it's really tied to business value. As they look at their business outcomes in terms of increasing their own agility, in terms of their overall efficiency, in terms of being able to personalize their customer experiences through better content and better data, that will tie to what they are willing to pay for software like ours.

11:40So it's all completely correlated with the value we're creating for them. Hey, one thing I want to just, you know, talk a little bit more about your business is how does your business get impacted with consolidation in the traditional advertising industry? What we are seeing with ad platforms is there's obviously a lot of interest in a lot of new ad channels, whether it is connected TV, streaming, retail media networks, a lot of interest there, in addition to the traditional platforms. So when we talk to enterprise customers, what they want to do is to say, hey, look, now I have, you know, I used to deal with three or four channels.

12:15I'm now dealing with 50 plus channels. The advantage, if I can do it right, is I get a much better ROI through a cost per click or even being able to reach the right audience or even getting the full loop of data on what's working and what's not. But in order to be able to do that, I need to have the right content and the right agility to be able to work with 50 plus channels. And so that's really what we are offering with our products like Adobe Gen Studio, which is the end-to-end content supply chain offering, and through the Adobe Experience platform. Anil, always love it when you join us. Appreciate you taking the time, especially on the first day the stock traded after those earnings came out.

12:53Anil Chakravarty, President, Digital Experience Business, Worldwide Field Operations at Adobe, joining us from San Jose, California. Thanks again, Anil.

13:30We'll see you next time. of 6-15-2026. Past performance is no guarantee of future results. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest.

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14:49So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Wise is the smart way to manage the currencies you need around the globe. If you've ever sent money internationally using a traditional bank, there's a good chance you've paid more than you realized.

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