Adobe Inc. (ADBE) Earnings Call Transcript

Welcome, everyone, to Adobe's 2022 Financial Analyst Meeting. I'm Jonathan Vaas, VP of Investor Relations. And I'm going to say the same thing I just heard everyone on the MAX keynote say, it's so great to see everyone here in person. Even right before the event, I shook hands with 4 or 5 people that I've been speaking with for the last 3 years on video screens, haven't yet met in person. Some of you, I know your voices only, we've spoken on the phone, but it's just really great after all that time to finally be gathering here together. Also want to welcome members of Adobe's Board of Directors who have joined us here today. We're grateful to have you in the room. And then also, lastly, I want to welcome the folks around the world who are joining and listening to the live webcast. This is my 12th analyst meeting at Adobe, and it's the first one we've ever done that's been both an in-person event and a live simultaneous webcast. So we're really excited to be able to both gather together here today and make sure all those folks have access. So I've been reflecting a little bit being that it's been 3 years since we last met here in this theater in person. Just thinking about some of the other analyst meetings we've had over the years. My first year at the company was 2011. I know many of you were at our analyst meeting that year, it was when we announced Creative Cloud. Then the next one I've been reflecting on a lot was 2019 when we were here in this theater, that was when I first met many of you in person, and we had just announced the Adobe Experience Platform, and we're so excited to share more today about how that business has grown since then. I remember lots of questions, lots of folks typing and learning about this new product we had just brought to market 3 years ago. And then the last one I'll share before I move on was 2020. That was my first year leading Investor Relations for Adobe. And the initial analyst meeting was very different than what I had always imagined in my mind's eye. I was at the same place I just learned today where Adobe's first ever MAX was, Salt Lake City, Utah. 20 years ago, I learned at the keynote, that was the first Adobe MAX. 2 years ago at our analyst meeting, I was at my home in Salt Lake City in the darkest room and the quietest room in the house, in the basement, hoping my Internet wouldn't go out, hoping my kids wouldn't run in and create a viral moment as we did the analyst meeting. So that's my way of saying I'm very, very glad to be here in person with all of you. What did those other meetings have in common? One thing we've talked about a lot over the years is Adobe's addressable market. Last year, we shared the market had grown to being a $205 billion market by 2024. This year, we want to go a step further. Rather than just talking about the TAM, really go into the growth algorithm. And that comes from a lot of the questions we've heard from you over the last several months as we've been talking. I'll say more about that in just a moment. First, the disclaimer. So -- well, all of the presentations today will include forward-looking statements that involve risk and uncertainty. Please see the risk factors in our SEC filings for more information about that. We'll also be sharing GAAP and non-GAAP financial metrics. We have reconciliations between the 2 that you can find on our Investor Relations website. In terms of growth rates that we'll be sharing today, you'll see both as reported rates, constant currency rates as well as adjusted rates. And those account for the extra week that was in Q1 of fiscal 2021 as compared to fiscal 2022. And then lastly, you'll see on a number of the presentations, 2022 estimated numbers. What we've done there is we've taken Q1 through Q3 actuals and added our Q4 targets to those to come up with that 2022 estimate. Let's take a quick look at the agenda. You can see the order of the speakers here. Right after David's presentation, we'll take a short break. What I really wanted to highlight was just sort of our goals for what I hope we're sharing today and what comes across. Shantanu will start out by sharing vision and strategy for the company. Gloria is going to share foundations of our success, really highlighting not just our ESG strategy, but a lot of the goals we've set and progress against these goals. David and Anil will share growth drivers, a lot of new information about how we're growing our digital media and digital experience businesses and how we think about growth going forward. And you'll see some of those new metrics shared in the presentation materials today, which we're working to get up on our IR website right now. And then lastly, Dan will share our financial strategy, talking about growth drivers on the top line, margin drivers, capital allocation strategy and ultimately, the 2023 preliminary targets. And with that, I will hand it over to Adobe's Chairman and CEO, Shantanu Narayen.

Thank you, Jonathan. Thanks, Jonathan. And for those of you joining online as well as, in particular, for those of you joining in person, I'd like to welcome you as well to the FA meeting. I really hope you had an opportunity to see MAX though because when you see MAX and you understand the relationship that we have with our community on the Creative side and the incredible, incredible innovation that the teams are doing, it just gives you a sense of the impact that Adobe has had on publishing. For me, what I'm really going to focus on a little bit is sharing with you my perspective of 2022. I'll go a little bit then into the strategic stuff. Certainly, David and Anil are going to go into it in a lot more detail. And maybe share a little bit of my perspective on what's happening in the macroeconomic environment. The first is I think about 2022 and give ourselves our report card on what happened in 2022. I always start with product. And when I think about product, Adobe at its core is a product company. We're always focused on anticipating and building products that serve an ever broader set of customers. And across all of our product lines, we had some pretty incredible innovation that we delivered this year. When you think about Creative, really, the focus has been a lot more on thinking about what we do as it relates to power and precision as well as speed and ease, as Scott shared today, because we have this incredibly broad set of customers. When you think about how we are serving consumers, how we are serving communicators, how we are serving Creative professionals, the breadth of what we offer has to adapt itself to serving these set of customers. When I think about our flagship products and Photoshop and Illustrator and Premiere Pro and After Effects are certainly in that, I think a lot of people have been talking about the narrative of artificial intelligence and what we are doing with AI. But we showed, I think, a number of really dramatic improvements as it relates to the AI features that we had in Photoshop. There's a 1-click delete. There's a fill tool that now allows you to remain and replace objects in time. And so that's been really one of the themes. A lot of people are talking about AI. We've been working on it for many years. We have a really good strategy in terms of how we think about all of the people who are using our products, how we collect that data, the models that we have associated with it. So AI is certainly something when we think about power and precision and learning from the tens of millions of people who use our product. I think we did some really incredible work in there. The second theme that we've been spending a lot of time on as it relates to our Creative products is collaboration. And again, David is going to touch a lot on what's happening with collaboration. But we think about it both in terms of synchronous collaboration as well as asynchronous collaboration. And Acrobat has certainly been one of the key flagship products that drove a lot of what happened with asynchronous collaboration. But even in synchronous collaboration and asynchronous, we've been investing a lot. The share for review products that you saw today, that's been many years in the making in terms of how do you allow creators or teams of creators to work with an ever-increasing set of stakeholders. So some pretty incredible work that's happened there. Again, on the flagship products, video has certainly seen a lot of growth. And what we did with the first production review approval workflow, we've integrated Frame.io incredibly well. That has quite a bit of stakeholder participation when you create video. And the new emerging space of 3D and immersive. And I think that was, again, accelerated by what happened in the pandemic as people were not there. I think we made some fairly significant moves. You saw new product again out there today with substance. And so I think we have really one of the most comprehensive set of products in there. I think 1 area that a number of you as investors have been asking us about as it relates to our mission for creativity for all is what's happening as it relates to targeting consumers and communicators. We certainly already have the largest business in the world as it relates to targeting them. But we're really thrilled about the launch of Adobe Express. It's the new template-based web as well as mobile product for communicators as well as for consumers. And for us, the real advantage that we have is we have the brand in order to deliver this to an ever-increasing set of customers. And more importantly, we have the technology. And so the ability for us to accelerate the pace of what we can do, whether it's in video, whether it's in imaging, whether it's an illustration, artwork, vector, that list goes on. We're really excited about it. We're probably a little late as it relates to dealing with search-based intent and doing it on the web. But we're here with Adobe Express, and it's going to be awesome. It already is an awesome product. When I think about what we are doing on the document side, and we've always talked about accelerating document productivity, we made some fairly significant enhancements on the PDF side as well. First, the file format. The file format continues to be the most ubiquitous file format in the world. We have trillions of PDFs out there. But the 2 things that I'm particularly proud of what we were able to accomplish is, first, continuing to make sure that PDF for the mobile era is not just relevant, but it's seamless and it's excellent. We have 150 million, I think, downloads of Adobe Scan. And so allowing PDF creation for the mobile era, we made a significant amount of progress. We made a significant amount of progress on the web as it relates to the 1 billion searches that happen in terms of people looking for PDF functionality and verbs, making sure that we capture that in Adobe. And third, David is also going to talk a lot about what we are doing with making sure that we take Sign and we take Acrobat, make that a unified offering as well as ensure that we are scaling that across all customer segments. So on the Acrobat side, some significant product enhancements that we've done. And we've also been talking to you about the API economy and how we can make sure that PDF is available not just as an end product, but also as an API so that people who want this new responsive PDF that can be viewed on mobile devices or that can be signed, they're using our PDF to automate their inefficient paper-based processes as well as do the customized digital experiences that they want to deliver. So some great progress there. It was interesting that Jonathan talked about the Adobe Experience Platform and the fact that we announced that here. We always believe that every enterprise in the world as they had to engage with customers needed this new real-time customer data platform. And when we think about the number of growing global brands that are using it, whether it's Home Depot or FC Bayern or NFL, U.S. Bank, Nike, we're really pleased with the progress that we've had. Anil is going to talk about the book of business, which has gone from something like $70 million to $450 million in a couple of years. We're the clear leader on that. But it's not just about this organic innovation where we saw an opportunity and we said we're going to build that next-generation customer real-time data platform. But it's also the fact that we took all of our existing products and recreated them on top of this new platform. So when you think about what we are doing with Customer Journey Analytics or Adobe Journey Optimizer, it's really enabling, whether you're the Chief Digital Officer, the Chief Revenue Officer, the Chief Marketing Officer or the Chief Information Officer, to think about all of the customer touch points that you have across multiple channels and make sure that Adobe is the product that's actually powering all of these digital experiences. And we continue to innovate in that space. We've introduced some new media mix modeling right now to think about attribution and marketing as people are clearly spending more and more money on the marketing front. And then when you think about the Adobe Digital Index, data is something that's really important to us. I think we have our pulse on what happens because of the trillions of data points that we have in Adobe Analytics. But we also look at the things when we think about Adobe's purpose and making sure that we're focusing on what we stand for. Initiatives like the customer content authenticity initiative are also near and dear to us because we take very seriously the responsibility that we have and now the fact that there are 800 organizations that are partnering with us to combat misinformation and provide attribution and provenance for creators is something that we're quite proud of. And I think all of this innovation, when you think of all of this innovation, it's always great to see because this is a criteria that enterprises use, that Forrester and Gartner continue to believe that we have both in terms of the completeness of vision as well as our ability to execute top rankings in these particular spaces. On the right side, culture and purpose. Gloria is going to talk a lot about that. Everybody talks about the war for talent, but making sure that we can attract, recruit, retain and grow people has always been, I think, one of the reasons why Adobe has been as successful as we've been. And whether it's Fast Company's Best Workplace for Innovators, Fortune's Best Workplaces in Tech, one that's near and dear to my heart, Top Employers for College Graduates because you want to hire those scary smart people who are coming into the company, I think we just continue to be incredibly proud of how we're recognized for being a company that's thoughtful about people and thoughtful about social purpose. So it feels good on that front as well. And then when I talk about numbers, because this is a financial analyst meeting, I think it's important to put that in perspective and remember what we had guided to at the beginning of the year, it was approximately $17.9 billion that we had talked about. And what we had talked about, $13.70 approximately on EPS with $1.9 billion in Digital Media ARR. Those are probably the 3 terms that all of you paid the most attention for. And when you think about what's happened with the macroeconomic environment, what's happened with our decision to seize product sales in Russia or Belarus, what happened with tax and a little bit of that going against us, and if you think about what we will accomplish when you factor in those at the Q4 guide, which we reaffirmed today, and you take the Q1 to Q3 actuals, our revenue is approximately $17.6 billion, which is, I think, phenomenal performance on the earnings. And the EPS, it's $0.10 below what we had guided at the beginning of the year despite this massive headwind that we've all seen in FX. And so I feel good about all of that, certainly, Digital Media net new ARR at $1.88 billion. And we'll talk about how we look at that moving forward. But it feels like when everybody is talking about the Rule of 40 or 50 in software companies, we continue to be in verified atmosphere, and I think we're going to be extremely thoughtful as we move forward in 2023 about thinking about what is the macroeconomic environment and how do we invest to continue to make sure that we're leading platforms, but how much do we invest on the revenue growth and the ratio of revenue growth to EPS. So I think we'll talk about that. But I'm really proud of what the team was able to accomplish when you think about constant currency, when you're growing creative document and enterprise clouds greater than 15%. It just continues to show that despite the macroeconomic environment, digital will continue to be a tailwind, and I think we are positioned incredibly well. And so I just continue to believe that we have amazing resilience in our products and digital is going to be important. But that was about 2022. I know all of you are more interested in what happens. And I do have to start by saying, when you think about a company that is going to celebrate its 40th anniversary this year and the fact that we're driving record revenues and record EPS, it really is a company that has demonstrated that we have the ability to look around the corner. We have the ability to invest in key things. And some of the most seminal moments, which I touched on again earlier this morning at the MAX conference, I mean we invented desktop publishing with things like PostScript, which continues to be the leading product today. We've certainly done revolutionizing work in imaging and artistic expression with Photoshop. And Photoshop today remains more relevant than ever before. It's now available on all platforms, and it's the underlying engine that we will use to build other products. More recently, creating and leading the digital marketing category, which we did through the Omniture acquisition, and continuing to drive interesting new business models with SaaS and the move to the cloud, we really feel like we have the opportunity, we have the capital, we have the people to continue to focus on inventing the future. I think if there are 2 that I'll particularly touch on again, the first is everything that we're doing around the Adobe Experience Platform as well as the applications and how matching -- we have this unmatched opportunity to create real-time personalization at scale and Adobe Express. We're very optimistic about what Adobe Express will do. It's a massive expansive universe of creators and communicators who wish to create this task-based content. And so I think core to our DNA is innovation, and we're going to continue to focus on that. In each of the presentations, you're going to see a lot of macro trends that we believe are helping drive our business and our tailwinds to the business. But I thought I'd touch on a few of them. We've always talked to you about the content life cycle and how we enable people to create, manage, monetize, mobilize content. I think one of the things that is really changing with that is not just content, but it's content and applications. And the consumption of applications and prototyping and how you think about it and the designer developer workflow, we really believe that, that's one of the big new area of changes that we have a unique opportunity to participate in. We've touched on collaboration and how that's going to be even more central to hybrid work, especially as the new norm is that not everybody is necessarily in the same place at the same time. I've been spending a lot of time with CEOs around the world and with customers all around the world. What really resonates is this personalized engagement as a mandate for all businesses. And it doesn't matter whether you're a B2B business or a B2C business, that's a theme that we are hearing a lot more of. And I think we're uniquely positioned to address that particular opportunity. And for me, AI and ML, as a product person, I think making sure that we have the right infrastructure, the right data, the right people to think about models and how you invest it, I believe that the state of AI right now, it does not cut across domains. It does not cut across tasks and domains. So I believe that we've been very thoughtful about how AI and ML will continue to unleash tremendous ingenuity and actually enable millions of people to come into our platform. So I think these massive trends just underscore how now more than ever before, rich and dynamic digital experiences are going to shape every aspect of our life across every aspect, whether that's education, work, entertainment or play. So our mission, which we've shared with you to change the world through digital experiences, is still at the center, we believe, of it all. The 1 area that we feel like we have even more of a unique opportunity to invest in over the next few years is everything associated with imagining and expressing these ideas. Because we believe that every great experience starts with the spark of imagination. And that can be expressed in more ways. But thinking about the front end of that entire creative process is both, we think, a unique new area of investment for us as well as a good area of growth for us. I touched on the create content and apps that we're thinking a lot more about what it means to deliver these applications that are going to be, by definition, interactive because every device is going to have a screen. So I've been thinking about that. And personalized and power experiences. As you remember, Adobe was really all about the content creation. We think the play between the creation of this content and the delivery of this content is also an incredibly unique thing, not just from a technology perspective, but also from a route and go-to-market. And I think both Anil and David will touch on how with every new product, our ability to monetize that through the enterprise field organization that we have is also, we think, a big advantage. And at the bottom, what you see is that it really extends a huge set of customers. There isn't a person on the planet that we don't think, if they have access to digital, that should be a customer of ours. So whether it's students, whether it's consumers, certainly communicators, creative professional developers, a big new area of focus for us in small and medium businesses and enterprises, we feel like this is, again, one of the areas that's going to drive continued growth for us as a company. So one of the things that I wanted to touch on again is reaffirming the 3 strategic pillars that we have for ourselves as a company. Unleashing creativity. We continue to believe that everybody has a story to tell and enabling them to tell that story. Any media type, any device in a personalized way just continues to be a massive opportunity for us. On the accelerating document productivity, we think this is actually going to see a few more tailwinds with what's happening with hybrid and people not necessarily being at the same point. This is a business, as you saw in our fiscal '22 results, we had great performance in the Document Cloud, and we continue to believe that, that's going to be a big area of growth for us. And powering digital businesses, which is a product category that we invented. We just feel like that 1 is also going to be increased growth and acceleration, and Anil will, I think, touch on what it takes to accelerate that particular businesses. And I look at it and I feel like most companies would be pleased to have 1 growth businesses. We're really fortunate to have 3 successful businesses that are in the sweet spot of where the world needs technology to continue to play a role. I do want to touch a little on acquisition that we announced, and we think that this is a bold move that underscores Adobe's track record of transformation. Figma is this incredibly rare company that has achieved [indiscernible] velocity as it relates to product design and targeting an area that was an unsolved problem. And they also did some incredible pioneering work as it related to delivering multiplayer technology on the web that allows multiple people to collaborate. They have built this incredible business that I think is enabling the entire modern product design process for a wide, wide spectrum of stakeholders, from designers to product managers and designers. And actually, the majority of those customers are not creative people. They're actually people in the workflow, which I think represents a unique adjacency for us to target, whether it's developers or the other stakeholders in the design process. And the 3 key areas for us in terms of how we think, while it's a great company with a lot of momentum, we can actually accelerate their growth strategy. The first is advancing product design. Product design is all about how do you introduce all of the assets. I think later in the presentation, you're going to see some examples of how even our Frame.io team uses Creative Cloud in conjunction with Figma to continue to make that a faster process. The second is accelerating collaborative creativity on the web. Every one of our products, as we have added the ability to do asynchronous collaboration with share, we feel like we can also extend that to do synchronous collaboration, and we believe that the Figma platform will help accelerate the delivery of that on the web. And third, I think we look at it and say, right now, there's a confluence of what's happening between creativity and productivity. We approach it with this unique lens of creative expression is the most important part. And I think we will have the ability to take what Figma has with FigJam, what Adobe has with Adobe Acrobat, what we have with Express and create a brand-new platform that enables people to be both creative and productive. And we think that this will not only serve the hundreds of millions of customers well, but we think it will dramatically increase both Adobe and Figma's reach as well as addressable market opportunity. And so -- and it fits well across our strategic elements because it helps us unleash creativity. It helps us on the accelerating document productivity. And at the end of the day, it's all about delivering these personalized experiences. So zooming back out and just focusing at the end on what we believe will drive the next decade of growth before I hand it over to David. For us, we really believe that Adobe has never been in a better position to drive the next decade of growth. We have a proven ability to create and expand categories that transform markets and will drive long-term growth. We continue to deliver revolutionary technology platforms and services that advance the industry leadership and bolster our competitive advantage. In terms of our expansive product portfolio, we think that's unparalleled and allows us to serve an ever-growing user base as well as a stakeholder universe. Ecosystem that we've developed, whether it's the creative community, whether it's developers, whether it's ISVs and partners, I think, enables us to deliver more value and expand our footprint. And finally, we continue to believe that we are maintaining an absolutely world-class financial profile that delivers consistent top and bottom line growth. Jonathan talked about the over $200 billion addressable market opportunity that we had talked about last year. We're well on our way to expand that with the new innovative products that we're delivering. And so as we think about FY '23 and as you think about the targets for FY '23, what I wanted to just share is that in all my conversations with CEOs around the world, while digital will continue to be a tailwind, I think most people feel like the macroeconomic situation is going to be a little bit more uncertain in 2023 than it was in 2022. And we factored that into the targets that we have. So my conversations with customers are they continue to want to invest in digital. And whether it's the CEO confidence that has clearly come down a little bit, especially as it relates to what's happening with inflation or the war or thinking about the potential of an economic downturn, we just feel like we are going to manage the company a little bit differently. We're going to ruthlessly prioritize like we have. And in terms of our guidance, we've probably muted our top line revenue growth a little bit as a result of the macroeconomic environment. But as you can see, our targets reflect real good profitability. And so I continue to be incredibly excited about the opportunity ahead of us. I believe that our big advantage within the company is our people. And so with that, I'll pass it to Gloria to talk to the critical role that she plays within the company, both talking about culture and purpose in enabling our success. Gloria?

Thanks. Shantanu just shared with you our strategy, where we've been and where we're headed. And what I'm here to share with you today is what I believe is the foundation of our success. Now Adobe's 40-year track record of innovation, transformation and continuous reinvention doesn't happen by accident. It's grounded in who we are. We were founded on the belief that people are our greatest asset. And when we combine great people, a purpose-driven culture and a winning strategy, magic happens. Of course, as we enter into this next chapter of growth, we're having to navigate the new reality that all companies are facing. COVID has fundamentally changed the way we work. And we're competing for talent through the great resignation and the great regret at the same time. Increasingly, companies are viewed by customers, employees and stakeholders as extensions of their identity, values and community. During times like these, our values serve as our North Star. In genuine, innovative, exceptional and involved, these values come to life. So the amazing talent we're able to attract and retain and extends to how we support our communities and more broadly to how we're changing the world through digital experiences. As a global company, we've been able to succeed in the competition for talent because of our incredible brand and exceptional employee experience and our focus on creating an inclusive and diverse environment. Our award-winning reputation and programs like global college internships help us attract a strong talent pipeline. Just as importantly, our most recent survey shows that our employees continue to feel highly engaged. We're grateful for our focus on well-being, especially our global days off, and we continue to focus on career growth, including internal mobility. Over the past year, we've been evolving to a hybrid model that we call team flexibility where employees can divide their work between the office and home about half the time. As of last week, all leaders have rolled out guidelines for their teams. And while it's still early days, we've already seen a significant increase in office energy, and we're actively piloting, testing and iterating approaches to new ways of working. Now whether in-person or virtual, we're focused on Adobe For All because we believe when people feel respected and included, they can be more creative, innovative and successful. And when we have diverse teams, we're more reflective of the customers we serve. Our approach is holistic across the employee experience, starting with pipeline development like our programs focused on partnering with HBCUs and HSIs, on-ramping women mid-career and veterans outreach, mitigating bias in job specs and interview processes to coaching and sponsorship for growth and advancement. Our employees also play an active role in employee networks, peer mentoring, leadership circles and Adobe For All In Action circles. We're proud of the progress we've made. We know that having more diverse leaders creates a virtuous cycle of more role models, advancement and growth. And so we're especially pleased with our continued year-over-year increases in women and leadership globally and underrepresented minority leaders in the U.S. And for 4 straight years, we've maintained global gender pay parity. And in the U.S., we've affirmed pay parity between URMs and non-URMs for the second year in a row. When it comes to community engagement, we believe everyone has a story to tell. From the emerging filmmakers supported by the Sundance-Adobe Fellowship to the hundreds of creators we've supported financially through COVID and the war in Ukraine as part of our creative residency, we are helping people around the world tell their stories. Digital literacy has become an imperative, and we're committed to equipping students and teachers with what they need to succeed. To date, we've put Adobe Express into the hands of over 40 million K-12 students around the world, and we're engaging with college students across more than 50 designated Adobe Creative campuses. Our employees globally work together to create change in the communities where we live and work. And as a company, we have a history of giving that dates back to our founding, and much of our corporate giving is driven by employee input. For example, the Equity and Advancement Initiative grants go to organizations identified by our employee networks. Local offices vote on the causes that they will steer regional grants to and individuals donate generously of their volunteer hours and personal donations with corporate matching as well. Last year, in total, we gave over $95 million in donations to over 67,000 organizations worldwide. Our community impact also extends to our own operations. We've committed to achieving a 0 carbon footprint and are proud of the progress we're making. We've already achieved our 2025 targets for reduction in Scope 1, Scope 2 and business travel emissions. And with our continued focus on renewable energy across our major sites, including the completion of our all-electric San Jose headquarters early next year, the first of its kind in Silicon Valley, we're not just on track, but we're ahead of our original 2035 renewable electricity goal and we plan to meet this by 2025. But our greatest reach is with our technology leadership. As one of the world's most innovative software companies, we're committed to advancing the responsible use of technology for the good of our customers, communities and society. As you've heard today, we founded the Content Authenticity Initiative to take on the problem of deep fakes. CAI tools, now available in Photoshop, allow content creators to identify themselves and the edits that are made to their images and displays this information so consumers can decide for themselves what content they should trust. CAI coalition has grown tremendously and includes hardware, software and media companies all working together to bring more trust to media. You also heard a lot about AI at MAX today. We believe AI has the power to amplify human intelligence and creativity. And we're committed to advancing AI ethics in a responsible and inclusive way. We've worked with industry leaders to create and build a trust in AI framework, and all our AI-powered features go through a standardized ethics review process with a diverse cross-functional committee before they are brought to market. And earlier, I talked about our internal sustainability focus, but our greatest impact is through the reach of our products. Our 3D tools that you saw showcased today allow product catalogs and advertising campaigns to be designed and shopped virtually, eliminating the environmental cost of materials, manufacturing and travel. And estimates show that paper-to-digital workflows powered by Adobe Document Cloud eliminate over 2.5 billion pounds of greenhouse gas per year in the U.S. alone. This is a tremendous global impact. Now what's there not to love about this slide? I started at Adobe more than 25 years ago, now over half of the lifetime of the company. And I have seen how our people, our purpose and our DNA of transformation have propelled our success over and over again. At Adobe, our mission is to change the world through digital experiences, and we are transforming lives in industries. I'm incredibly proud of the culture that we've built and the impact that we have. And I'm confident that the strong foundation will continue to drive our success in the coming decade. And with that, I'm going to hand it over to David Wadhwani, President of the Digital Media Business Unit.

All right. Thanks, Gloria, and hello, everyone. I hope everyone had a good morning. I really hope you had an opportunity, as Shantanu said, to see the MAX keynote. Scott and his team did what they always do, and they put on an amazing show and walked out so much innovation. One of the things I said this morning was that I was actually at the very first MAX about 20 years ago. And as you can imagine, in that 20-year period, a lot has changed in the industry. But one of the things that stayed constant is the power of the community and the relationship we have with them. They're constantly looking to push the envelope on creating things that surprise us and shock us and get our attention. And to do that, they push us forward. And this relationship with the community is not just driving product innovation, but it's also driving the business forward. And that's why I'm able to stand here 20 years later and talk about a digital media business that's adding an estimated $1.88 billion of net new ARR. And doing that in the context where the DME business as a whole is adding about 16% of revenue growth, Creative Cloud growing at 14%, really on the strength of the core business while also starting to benefit from some of the outsized growth we're seeing from the emerging businesses like Stock and Frame and Substance and Express. Document Cloud is growing at 26%, and it's really benefiting from this incredible explosion of demand that we see for PDF-related solutions in the market. And while we're very excited about 2022, we're even more excited about the years. As Dan likes to say, we're still early in this process of the digitization of everything. And when you think about that and you put it in the context of where Adobe sits in that transformation, we are in a really amazing position. Our flagship application, so Acrobat and Photoshop and Illustrator, Premiere and After Effects, and new offerings like you saw this morning was Substance extending its line to include modeling, really put us at the forefront of digital documents, design, imaging, photo, video, 3D. And we are the standard for how this digital content is created. In addition to that, we're investing significantly in growing opportunities as well, like Sign and Scan and Frame and Stock. And we're driving more value and more efficiency to our existing customers through those motions. When you add -- in addition to all the products, you look at the global go-to-market motion we have, we have a really effective digital motion for bottoms-up selling, thanks to our data-driven operating model, which we've talked a lot about with you all. And we've added in, in recent years, much more focused on product-led growth so that we're building this efficient digital go-to-market. We also are marrying that with our global footprint for top-down selling across resellers, phones, mid-market and enterprise. You put all that together, the breadth of the products and the global footprint that we have gives us incredible diversity as we enter what is looking more and more like an uncertain macroeconomic environment. And we're going to talk both about Creative Cloud and Document Cloud today. But since it's MAX, I thought we'd start by talking about Document Cloud and leave the bulk of the time toward the end to get into the Creative business and really share a little bit of what's going on there. On the Document Cloud side, we talked about this last year, 2024 TAM estimate is about $32 billion. We see significant tailwinds here because the demand for PDF has never been greater. We have trillions of PDFs in the world today. And as a result, PDF has become the de facto standard for unstructured data and the foundation of document automation. And this is no longer just for enterprises. In fact, 85% of small and medium businesses today say that they're investing in tools to drive productivity. And this is driving 40% year-over-year growth in PDF-related searches. Think about that. John and Chuck introduced PDF 30 years ago. And in the last year, we've seen a 40% growth in PDF-related searches. This is putting us in an incredible position because 75% of small and micro businesses say they use Reader and Acrobat. So we have the surface to convert all of this, and this becomes a massive top of funnel for us. And converting this funnel is a really big focus for Adobe. We cast a very wide net across targeted -- for PDF-related intent across all our digital channels. We route that traffic to the best desktop web or mobile application that services the need of that intent. We drive quick success. And then we introduce a paid offering. Again, we drive usage of that paid offering and success in that paid offering before introducing to new services like sign or share for review. It's a very productive acquisition engagement and upsell motion for us, where we can get more value to the customer at the time and the moment that they need it. Now this motion is really the foundation of how we think about the strategy for Document Cloud in 4 pillars. The first, get Reader and Acrobat everywhere on every device. Second, leverage that footprint to get every single individual and small, medium business using our services like Sign and sharing through bottoms-up motions. Third, drive top-down sales for mid-market and enterprise. And fourth, embed PDF and sign into every product and workflow using our APIs. So let's walk through each of these. Let's start with advanced Acrobat as a standard across surfaces. Our mission here, as I said, is to get Reader and Acrobat everywhere across every device. We're doing things like investing in liquid mode for the best reading experiences on mobile devices. We're modernizing our journey so that the discoverability of the features that people are looking for is easier. And when they use a feature, we enable them to discover the next best action or the next best feature to drive continued engagement. And we're optimizing user success and conversion to paid through that product-led growth motion and the data activities that we do to personalize their product experiences. To put some numbers behind this, we have a very broad funnel. There are over 1 billion searches for PDF online. We take all of that intent. We drive it to the right offering. We get over 100 million or about 100 million people signing up each year across desktop, web and mobile. And we're converting them from free usage to paid usage increasingly versus taking them directly to paid offers. And what we're seeing now is that product-led growth motions for the Acrobat business represents over 60% of new paid Acrobat subs in this year. So it's a really important shift and transition we're doing, and this sets us up to bring more people into the franchise and take time to really move them forward as they're successful and build the business over the long term. Second, we're proliferating services -- service usage with Acrobat integration. An example of what we've done here is that you may remember we had an Adobe Sign mid-market solution, and we had Acrobat solutions. Acrobat in the U.S., for example, Acrobat Pro sold for $15 a month and Sign small medium business solutions sold for $25 a month. We took both of those solutions. We combined them into a single Acrobat Pro solution that sells for $20 a month. And this drives both Sign usage and it drives ARR benefit to us. So anyone using Acrobat Pro can now create and edit and share and sign. And the results are incredibly positive. We now have over 30 million monthly active users for Sign using it in Acrobat. And that's translated to over 50% year-over-year growth for Sign and small medium businesses. And now we're applying that same learning to other services like share and scan. So we're very excited about this motion that we've been unlocking over the last couple of years starting to take hold. The third area is accelerate Document Cloud adoption through direct sales. This is our traditional go-to-market motion where we have a very broad footprint. The product teams are delivering enterprise and government requirements like FedRAMP support and advanced analytics and also integrating our capabilities more into Microsoft and Salesforce and Workday and ServiceNow and of course, the business we have internally with digital experience as well. As a result, year-over-year customer wins continues to grow, including companies like Duke Energy, U.S. Bank, USAA, UHG, Department of State, real name significant organizations where we're getting a very large footprint of that organization. And last, but certainly not least, we're unlocking business workflows through PDF and Sign API integrations. Here, just as a macro comment, 80% of businesses of all sizes are saying they're looking to increase worker productivity. So companies and software vendors want to integrate Adobe's PDF and Sign capabilities using our APIs, and we've integrated them with low-code and no-code environments, including things like UiPath or Microsoft Power Automate, and this is driving real developer demand. So we're seeing strong growth in developer sign-ups. But even more interestingly, we're seeing those developers that do sign up using our APIs a lot more. So we're seeing outsized growth in actual transactions, which are up 15x, 15x year-over-year. So in short, we're really excited about the Document Cloud business. Our strategy here of proliferating Reader and Acrobat across every device, integrating services for more bottoms-up motions for individuals and SMBs and marrying that was a top-down for partnerships, mid-market and enterprise opportunities and opening up the platform for first and third-party developers is working incredibly well for us. And the strategy is working because businesses of all sizes, enterprises all the way down to micro businesses are automating their engagements across desktop, web and mobile. They're turning to PDF as the platform that they want to do this on and they look at Adobe as the trusted secure solution provider for this. We're very excited about Document Cloud. Now as we move from there to Creative Cloud, we're also pretty excited about this business because we're living at a time where content, creativity and design has never been more valued where content is fueling the global economy, where digital content consumption is absolutely exploding and where virtually every business needs a digital presence, where businesses and pros need to be more efficient in how they produce content across imaging, video, 3D design and more and where individuals and solopreneurs realize that their dreams and their passions are requiring them to stand out digitally on social media. So we're living in a time where creativity is the new productivity and creative expression is a 21st century skill, and that creates a massive tailwind for us. And so hereto, the opportunity for significant product-like growth motions really exists. And we are taking the learnings from what we've done in Acrobat and applying it more and more to what we're doing in the creative world. So we've cast a very wide net, capturing digital interest and creative expression across creative pros, across communicators and productivity workers and across consumers. We're routing them to the best application driving quick success and then driving awareness and cross-sell to more applications and/or upsell to Frame and Stock and some of our services like that. And here's what we see in this market. As we mentioned last year, we're not updating TAMs this year, but we expect this market to have a $63 billion TAM in 2024 based on the back of a massive user base. 68 million creative pros with more opportunities than they've ever had before, but also unprecedented demands on their time. Nearly 1 billion communicators focused on building audiences online and spending more time than they've ever spent actually creating content. And 4 billion consumers who are increasingly sophisticated with the digital expression. Now here's the thing you need to really understand about these users, especially pros and communicators. They're willing to pay for power and precision and they're willing to pay for speed and ease. They want both. Sometimes they want to create something that is truly differentiated and unique and sometimes they want to do -- produce content with volume. And we're the only supplier of products out there that they can get both of them in 1 plan. We're really uniquely positioned for that. So hereto, we're focused on 4 primary strategic drivers. First, continue moving our creative categories forward, design, imaging, photo, video, 3D with our core flagship applications; second, offering more speed and ease with Adobe Express; third, integrating Adobe Sensei to help users of our flagship applications and Express be more productive and produce better content; and fourth, wrapping all of this with collaboration workflows that help people coordinate their work with co-editors and with stakeholders. So let's start by looking at the power and precision for every creative category. For those of you who missed the keynote this morning, the team has been incredibly busy, auto styling, precise selection, photo restoration, speech detect, auto color, 3D model capture. The feature list that we went through on stage was impressive, and that was a fraction of what the team has actually shipped this year. We also introduced new products like Substance modeler that takes our Substance 3D line and makes it a broader set of capabilities that are targeting people that typically do 2D design and bringing them into the 3D world, really catalyzing this opportunity that we see around this. And this is driving continued innovation. We now have the highest monthly active use of our core flagship applications. Increased -- we've seen increased frequency of use per user. And the result across all of our core applications is really an NPS of greater than 50. So we feel really good about the focus and the momentum we're seeing in the core business and application as well. Now as we look at future of design for everyone, this is where I want to reiterate something Shantanu said. First of all, we are the largest provider of creative software to communicators, many of whom really want the power and precision of our flagship applications. At the same time, Express has definitely broadened the top of funnel because of the way we've approached this, right? We've removed all barriers to adoption. It's free to get started. It doesn't require a desktop download. It's 100% web and mobile. It doesn't have a learning curve. And sign up to publish and have your first success is a matter of minutes. So this fundamentally has changed and enabled us to bring new customers into the franchise. And the quality of our templates, the size of our stock library, over 175 million images, the integration of our funds, over 20,000 funds, workflows with our flagship applications, these are the things that differentiate us. And the team has been super busy since launch. We've now had over 100 releases in the last 10 months. We have a strong NPS. We have terrific customer stats. We're seeing a lot more people coming in and being very successful in a matter of minutes. And we have a massive top of funnel opportunity with over 250 million monthly active users in our mobile applications. So we're just getting started here. We have a huge opportunity to drive and convert this space over time. Next, on to Creative copilot with Adobe Sensei. We've been adding AI-based features to our products for years. And they've saved incalculable amounts of time and helped our creative pros and communicators produce things that they thought were previously impossible. Things like object detection, neural filters, content-aware fill and remove in Photoshop, frame-by-frame object level detection in our video products and now design recommendations in Adobe Express. And it's been amazing to see what people have done with this. I was just checking with someone, we've had over 1 billion of these features actually used at some point over the last few years. So it's just amazing to see the usage and the benefit that this is getting. But here's the thing, the next frontier here is generative technology. For those of you who are not familiar with it, generative AI can conjure up an image from a simple text description. So imagine a world where you can ask Sensei in Photoshop to add an object you've seen simply by describing what you want or ask Sensei to give you alternative ideas based on what you've already built. Imagine if you can combine gen tech with Lightroom. So you can ask Sensei and Lightroom to transform night into day to alter a sunny photograph into a beautiful sunset, move shadows by moving the light or changing the weather. Imagine what you could do in Adobe Express. If you could combine generative technology with our massive font library, you'll be able to create completely new and highly stylized fonts on the fly in a way that makes you and your brand stand out. So instead of talking about this, I want everyone to see this and feel this and experience and pay attention to not just what the AI is able to do, but pay attention to how it's able to do it in our existing products. So let's take a look. [Presentation]

I know you guys are hard to please, but come on, sake bottle fonts. How many Investor Days have you gone to with sake bottle fonts? This stuff is incredible. It really is incredible. But it also provides a business opportunity for us that I want you all to sort of take time to internalize. Adding generative technology to our products will make our existing customers more productive. But it will also allow us to make our products approachable to more users because of the way that generative technology gets integrated and the easier ways we can sort of expose these features to folks. So it really has the opportunity to expand our core franchise as it stands today. So the fourth pillar we wanted to touch on here is collaboration and share for review with co-editing workflows. Before jumping into this, there has been some confusion here. So I want to take the time to clear this up for folks. There are 2 ways people are collaborating today. The first is share for review. It's how an individual creative sends content to stakeholders for review and feedback. It's implicitly asynchronous, and it's 0 friction for stakeholders as they comment -- and may comment and assertions on the web. And for creators, it's great because they get all of that feedback directly integrated into their creative cloud applications. It basically replaces all the confusing and out-of-sync e-mail-based workflows and is much more integrated way of gathering shareholder feedback. The second type of collaboration is really about teams of editors and stakeholders. It's all about accessing a single source of truth in the cloud where you can have multiple editors and stakeholders working on things synchronously. And you can give people different permissions on what they can have access to and what they can do. Share for review is better for some creators and some use cases, and real-time co-editing is better for other teams of creators and other use cases. And we've been working very hard at Adobe around share for review. And Scott showed a number of things this morning on that. And our acquisition of Figma is significantly going to accelerate our ability to make real-time co-editing a reality across our core creative applications, and we'll talk about both of these in a minute. As it relates to share for review, we started our journey here with the acquisition of Frame.io about a year ago. Since then, we've integrated it into Premiere and After Effects and integrated Frame's stakeholder feedback directly into the time line of these video applications. And it makes it much easier for editors to get feedback and act on that feedback that's coming in from the stakeholders. Frame continues to do incredibly well with stakeholder engagement continuing to increase 16:1. So for every 1 editor there is, they are working with 16 reviewers that are participating in that process. Deal sizes are getting larger and the business continues to grow and accelerate. And by the way, the 16:1 also creates a top of funnel where we can access those 16 users and give them an opportunity to learn about Adobe products that they can participate in and use as well. And so today, we announced that we're broadening this capability from video, and we're also enabling share for review capabilities in our imaging and design products as well. So we're very excited about where this can go. When you add all of this up, we have Creative Cloud creating the world's best creative apps with power and precision. We have Adobe Express providing audience expansion and with speed and ease. We have Sensei for higher production and less effort for Creative Cloud and Adobe Express. And we have share for review with huge productivity benefits because it streamlines relationships with shareholders. And so we're really excited about this innovation that's coming in, and we're really excited about the impact it's having on the business. But we also wanted to give you a bit more data so that you all have a sense of how the business is performing because this has been a bit of a request that we've had from you over the last few quarters. First, our offering tiers have remained relatively steady over the years where individuals and business plans are driving roughly half of our net new ARR each. This has been consistent and constant for us. The second is we're actively working to grow our footprint with communicators and consumers and maximizing new user acquisition by onboarding them to our introductory offers like single apps and Adobe Express. Put another way, we're prioritizing user acquisition and growth and longer-term ARR over short-term maximization. As a result, single app contributions to net new ARR continue to grow. Third, we then execute programs to drive upsell to higher value plans or additional services, which represent a meaningful part of our net new ARR. The upsell motion is working. But it's really important to recognize that a significant majority of our growth continues to come from new paid user acquisition. In fact, if we add -- if we take a look, we added more new paid commercial subscriptions in FY '22 than ever before. The new customer adds continues to be a very important part of our business. And lastly, it's great to see our new emerging products like Frame, Substance, Stock and Express continuing to produce more and more for us. At the same time, the business is still driving -- is still driven on the strength of the core flagship applications because these new businesses are still early in their journey, and we continue to attract new users to the core flagship applications. But to double-click really quickly on the emerging businesses, many of them have come to us through acquisitions. I think we've done a pretty good job accelerating these businesses. If you look at Behance, from the time we acquired it to where it is now, membership growth has gone up 30x. If we look at Adobe Stock from the time we acquired it to where it is now, the CAGR has been 60%, which is far better than anyone else in the industry. If you look at Substance from the time we acquired the foundations of that to where we are now, we're at an 80% CAGR and approaching $100 million in ARR, and we're just getting started here, as you saw this morning. And in Frame.io, we're just 1 year in, but the business is growing and deal sizes continue to grow as well. So we're really putting that same playbook in terms of how we onboard Frame.io into the business as well. So in summary, we feel great about the long-term prospects of this business. We're growing Creative Cloud subscriptions across all our segments. Every segment is growing in terms of new subscriber -- in terms of total subscriptions. We're providing new value to Creative Pros and Creative Cloud and through new offers like Frame, Substance and Stock. We're accelerating acquisition of communicators with single apps, and we're attracting new audiences with Express and our new freemium model there. So overall, very happy with how the business is going. And while we're really excited about our plans, we think that the acquisition of Figma is one of those core transformational opportunities for us. As a reminder, Figma has 2 core products. The first is FigJam for brainstorming and ideation and the second is FigmaDesign for interactive product design. Both products are nice adjacencies to our TAM. The Figma, estimate it at about $16 billion of TAM. We want to show you a bit about Figma because there's been a lot of questions about how Figma works and what it is. And one of our own teams, as Shantanu mentioned at the beginning, Frame.io, uses Figma for all of their product design work. And so we asked the Frame.io team, who are avid Figma customers -- users, as we talked about, to show you how they use Figma and Creative Cloud to build their latest product onboarding experience. So let's take a look at that video, and then I'll come back and we'll talk a little bit more about Figma. [Presentation]

A better sense of what Figma is capable of doing, and we thought no one better to talk about that than Dylan Field, Figma's Co-Founder and CEO. But Dylan, maybe give everyone a quick update on where things are.

Hi, everybody. It's great to be here and a huge thank you to the Adobe team for having me. 10 years ago, my Co-Founder, Evan, and I left Brown University to start Figma. The advancements in technology called WebGL, which is the ability to use the GPU in your computer, in the browser, made it possible for the first time to render high-quality graphics in a browser-based setting. And so we built Figma to bring the ease and the efficiency of Google Docs to product design. Doing so, we made a big bet on the power of the browser. Building in the browser was a challenge to the identity and the working patterns of many designers around the world. Before Figma, many designers worked in silos. Ask him to take a leap and try this new way of working was, to put it mildly, controversial. Designers told us that if Figma was the future of design, they were changing careers. But as people started to use the product, design in it, collaborating in it, they saw the power of the browser firsthand. It was fun to be in the file at the same time together. It was also faster and it was more efficient. We made the design process easier for anyone, anywhere to participate, designers, engineers, product managers, marketers, everyone. Today, 2/3 of the Figma users are nondesigners. And as we were building Figma, multi-decade shift from a physical economy to a digital economy continued and also accelerated. Design and digital products are now the center of our world, in the center of an end-to-end product development process. We're building Figma to serve that full workflow, idea to design, code and production. And this is why we launched our second product, FigJam, last year for the earlier stages of the product development process. We're now working on ways to bring design and code closer together. Figma's vision is to make design accessible to everyone. And I think we barely scratched the surface of that. And that's part of why I'm so excited about what we can do together with Adobe and the future of what we can build.

Thank you, Dylan. Don't go anywhere. So Dylan and I have spent a lot of time over the last few months, as you can imagine. Just as a reminder, the deal is not closed. So Dylan will not be joining us for Q&A at the end of this. However, I will ask Dylan a few questions just so that you get a sense of some of the things that we've been discussing.

First of all, independent of what we've been -- independent of Adobe, you've got a pretty rich road map ahead. Congratulations on the success. What's next? Where do you go as part of your core strategy?

Thank you. As discussed, 2/3 of our users are nondesigners, and a substantial portion of those are developers. So as we think about the entire product journey of starting with ideation, brainstorming, diagramming in FigJam and going to Figma with design, next step of that is design to code. How do designers and engineers collaborate better? As we focus more on developers, I think you'll see a lot more coming and seeing there.

Yes, that's a very exciting and obviously, a very large opportunity for you. The other thing we talked about and we spend a lot of time thinking through is, as Figma is going after product design and as Adobe has all of these incredible products for the different categories that we serve, what does this world look like? And how can Adobe accelerate product design and the vision for how you remove barriers in a way that you wouldn't have been able to do as a stand-alone company?

Yes. Absolutely. There's so much that's part of the product design process, and we couldn't be more excited to be able to utilize more of Adobe's capabilities and also people, the talent Adobe has meant around everything from imaging to vector illustration, to video, to 3D. The note earlier was just absolutely inspiring. And there's so much we can do together to make that product design and development process better.

And then one of the things we got really excited about as we went through this process was about expanding this beyond accelerating what could happen in product design. We also wanted to think a little bit about if we took a step back and you took the technology that we have, as you've seen, starting to bring that to the web, and you took the Figma platform for creative co-editing, what could happen together with that? Maybe share a little bit about why we got so excited about that as we were spending time thinking about this deal.

Absolutely. I mean, again, those capabilities, imaging vector, video, 3D and more, not only could be integrated into the Figma platform to address the product design process, but also we can start to unlock those capabilities for Creatives as well and doing so in a web-based and collaboration first way. And if we can do that properly, I think we expand the access not only to design but to creativity. And I think there's a lot of vision alignment we have around making design and creativity accessible to everyone.

Yes. It gives us a really interesting canvas to reimagine what the future of this industry could even look like. And then last but certainly not least, the other thing that Dylan and I spent a lot of time talking about through this process was this idea that creativity is the new productivity, right? And we're coming at it from slightly different perspectives. We were doing this with Adobe Express. You started to look at this and start to do that with FigJam. Maybe talk a little bit about FigJam and how these things can come together to really reshape this idea of creativity and productivity.

Sure. FigJam is at the start of the process. And as part of that, we're trying to figure out how we bring as many people as possible into that product design process. But design is really for everyone in the organization now. It's not just for product designers, engineers, product managers, but people that are actually outside those functions as well. And so we're trying to figure out how do we make it so people can run meetings better with FigJam? How do we make it said they can facilitate these conversations? And as we've done that, we've seen FigJam's footprint grow way outside of the traditional people that are touching that product's own life cycle. So now as we look at Figma, we actually see that 5% of the files created in Figma are slides and presentations. And so we think there's enormous opportunity. Like you said earlier, creativity is the new productivity to try and think about and explore what we can do there together. And I couldn't be more excited.

Yes. Thank you, Dylan.

Thank you, David.

Appreciate it.

All right. So we've covered a lot today in this section. Let's take a quick step back. Document Cloud, Creative Cloud, Adobe Express, really an amazing amount of innovation happening here. Large markets, billions of users, $95 billion TAM when you add it all up together, amazing innovation, as we showed this morning and expressed some of this stuff here. We also have very strong fundamentals. I hope some of the data we shared with you today starts to give you a sense of that. We have incredible growth in terms of new users. We have services being attached as people are using our products. And we have emerging products that are starting to express more and more of the opportunity going forward in any given year. And going forward, we continue to invest in our product-led growth motions. What we saw and what we've seen the success with Document Cloud, we're applying that to the Creative Cloud motions. Now that we have Adobe Express and more web-based capabilities there, we are deepening our integration with our work with Anil's digital experience products and driving that idea of the content supply chain. Things like Adobe Express connected to some of the AEM products can really be game changers for how people want to work together. We're optimizing offerings and journeys across our product offerings. In particular, with the Creative business, as we've broadened the surface area with Express and other applications, we no longer need to think about pricing and packaging and offering and value doing double duty. The same thing for Pros and the same thing for consumers, we have the ability and the opportunity to start to really optimize the value to the individual audiences that are using it. And last but certainly not least, we're accelerating momentum by really continuing to push and drive on new user acquisition through things like Adobe Express. You put all that together, and we have a pretty darn healthy business with a really interesting opportunity for the decade ahead. You add something like Figma to the mix, and we're in a really transformational moment for Adobe. So thank you for the time. We are going to take a 5-minute break. So use the restrooms if you need or just mingle and then be back here in 5 minutes, and we'll continue from there. Thank you. [Break]

Everyone, if you would go ahead and take your seats, we're going to pick back up with the show where we left off. Every 5-minute break turns into an 8-minute break. It was just how it goes. Okay. Next up is Anil Chakravarthy, and he's going to talk about Adobe's Digital Experience business strategy and growth drivers. Anil?

Okay. Perfect. Thank you, Jonathan. Welcome back, everybody, and hello, everyone. Good afternoon. So I'm here to talk about our Digital Experience business, share a little bit with you my excitement about our momentum, our strategy and the growth opportunity that we have in the Digital Experience business. So let me dive right in and talk about the momentum you're seeing in the Adobe Experience Cloud business. So if you just take a look at the right, annual revenue, in the last 3 years, we've grown from $2.8 billion in fiscal year 2019, estimated to finish this year just north of $4.4 billion. And if you look underneath that, what's driving that growth? It's both deepening our engagement with our current customers as well as acquiring a lot of new customers, and I'll talk about that. But take a look at the growing customer engagement we have. Just a few statistics. If you take a look at the book of business, and that's a metric that we use, it's the annual subscription value. It's a metric we use to understand our share of wallet with our customers. If you take the top 100 customers, for example, the average book of business has nearly doubled from $8 million in FY '19 to at the end of Q3 this year to $15 million per customer on average book of business. If you take a look at the top 25 customers, almost the same pattern, again, doubling from $15 million nearly to $29 million. The largest customers that we have are making a huge investment with us, and really, we're becoming strategic partners. The combined total contract value of our top 10 customers was $1.1 billion. And across the portfolio, we're seeing excellent expansion as well as retention. And so the net dollar retention rate for our top 500 customers is 120%. So great examples of the engagement that we are seeing with our customers as well as the overall growth of the business, I'll talk more about. It's been great to be back on the road. In addition to a phenomenal conference like this, we've had executive forums. We just hosted a forum in the U.K. and then hosted a couple of sessions here in the U.S. It's great to see customers in person and get back into the rhythm of doing business with them. Some of the trends that we are hearing from them in terms of what the common themes are. First of all, coming through the pandemic, actually, every customer has the basics of digital experience in place, digital marketing, online commerce, things like that. Every customer that we talk to is looking at the next level. How do they personalize those customer experiences across the entire journey, the kind of journey that David talked about when he talked about our data-driven operating model, all the way from discovering a brand to trying the products, using the products, renewing the products, the entire journey? And that's what customers are all talking about. How do I personalize this so that I can be more differentiated and I can have better and deeper relationships with and deeper engagement with our customers? Every customer is struggling with the fragmentation and silos of data and content across their different systems, maybe the work that they are doing with their business partners and their channels, and how to get a unified architecture and how to get a single view that helps them take action in real time. From a business perspective, as we go into the current macro environment, they're still focused on top line growth. Obviously, everybody's got to keep growing. They're focused on that. But they're also more cost conscious. And they're looking at, how do I look closely at the ROI of these investments? How do I get value out of what I've already invested in? And now I want to make sure that I am carefully scrutinizing the investments that I'm making going forward. And the other big thing that we are seeing is as they look at the multiple point providers they have had or they've been looking at in this space of customer experience, digital marketing, we have -- one, it's leading to fragmentation. Two, they're just concerned about the viability of some of these providers. And so they're looking to a strategic digital partner, a partner like Adobe, who can really help them be the long-term partner of choice. So what we're really focused on is being that long-term partner for customer experience management. This is a category that we expanded and invented 5 years ago, and it's proved to be mission-critical across industries. Just to give you a couple of examples, if you look at financial services, almost every bank, they've had great adoption of their digital offerings, of their mobile apps. They're really looking at how do they expand that and make that a core part of their digital transformation and their business transformation as they reduce their reliance on branches, for example, as they want to do more self-service, enable more self-service, deeper engagement with their customers? That's a major area of investment. Health care has been a little slow in making these investments, but they are catching up fast. And especially with our products becoming hip already, they are looking at -- every health care company is looking at end-to-end patient experience, end-to-end member experience, and that's leading to significant investments in customer experience management. Media and entertainment. It's always been one of our strongest verticals and it's growing rapidly. The growth in digital streaming. Across sports, for example, fan engagement, deep fan engagement, Shantanu mentioned a couple of examples, I'll talk about Real Madrid in a second, excellent examples of customer experience management being at the heart of digital transformation. And travel and hospitality. Again, historically, one of our strongest verticals coming back strong after COVID. So when we look across verticals, B2B, B2C, new business models like direct-to-consumer, that's what makes this a big market. And as we mentioned, this is a $110 billion TAM in 2024, and we see a lot of opportunity to continue our growth here. So at the heart of our strategy for customer experience management is the Adobe Experience Platform. That is what is powering across these verticals the next generation of customer experience management. And what AEP is, it's a cloud-based platform that in real time helps any company, B2B, B2C company for millions of consumers and hundreds of thousands of business buyers really assemble that single view, that unified profile of their customers and then helps them act on it. Here are some of the key things that really differentiate this. We were one of the first ones to invest in it. We launched it in 2019 as both Shantanu and Jonathan mentioned. We were early to market. We saw around the corner and see what -- knew what was coming. Scale. We're now 29 trillion segment evaluations per day, and I'll talk a little bit about what that means. That's the basis of personalization is how to calculate segments and being able to do that in real time. Our response time is less than 250 milliseconds for most customers. That's super important. Data governance. Another critical part of -- especially when you look at verticals like financial services or health care or when you look at international markets like Europe. The use of AI and ML, our Adobe Sensei, to drive next best action, next best offer, predictive insights. These are all critical parts of the Adobe Experience Platform and bringing all of that together is a very complex engineering feat. And that's what we have done, and we're now at scale. And we believe we have clear product and category leadership in this area. And you see that in the business results. In 2020, our book of business for Adobe Experience and the 3 apps that we have constructed natively on this, which is the CDP, the real-time Customer Data Platform, the Adobe Journey Optimizer and the Customer Journey Analytics, that AEP and apps was a $70 million book of business in 2020, and we estimate that exiting this year, it'll be at $450 million and growing. So huge growth driven by the Adobe Experience Platform, and it's had a halo effect across our portfolio. What the AEP enables you to do uniquely is this idea of personalization at scale. And we've been doing this across our own Adobe business. So what does this really mean? Well, in an ideal world, you want to do one-on-one personalization. Every single consumer, even if you have millions of consumers, you know exactly what you want to personalize to them. That's hard to do for most companies. So today, what most companies actually do is they would love to just define fine-grained segments, actionable customer segment that help you create a single view across the -- across your enterprise. And remember, these could be customers that you don't know anything about initially. When they come in as a prospect, they may just be an identity you really don't know, they've just come to your website, all the way to customers that you know more about and then they are well deeper into the funnel, being able to create that single view, being able to drive acquisition in a very efficient manner through digital channels. Once you know who the customer is, once you know what actions they have taken, once you know their sentiment, once you know what stage of the journey they're in, being able to deliver those engaging personalized campaigns and then from all of that, deriving insights across the customer journey so that you can improve your segmentation and you can improve your value and you can improve the offers that you offer to these customers. That's what personalization at scale means. We have a lot of experience with ourselves at the Adobe we are doing this. And now we're bringing that through AEP and the apps on AEP to our customers. Let me give you a couple of examples. U.S. Bank is a great example of this. We have so many good examples to choose from. I picked a couple from the verticals that we just talked about. U.S. Bank is a customer that's been deepening their customer engagement. Again, they've had excellent adoption of their digital properties like their website, and their mobile apps. What they are really using Adobe Experience platform to do is now provide a personalized experience at scale across these consumers by linking that to all of their back-end systems as well so that they know exactly what stage of the journey every customer is in and what next best action or offer they could make them. For example, if they have customers who have products like checking accounts, savings accounts, so on who is the person that would offer a home equity loan of credit too. So that's an example of a personalized segment that they are driving. At the bottom right, you have an example like Real Madrid. Real Madrid, as you all know, is very popular for football club in Europe. They have extremely the rabid fans basically, but they're trying to take those fans and make these -- the fan experience, a very personalized experience whether the fans are in the stadium and they're building a brand-new stadium, a massive new stadium that while they're continuing to play in it or online. And some examples of that personalization at scale is -- you obviously have a personalized schedule for these fans. But when they come into the stadium for food and beverage, for example, or for merchandise, how to make those kinds of personalized offers that really make the fans feel special. That's an example of personalization at scale. So when we think about our strategy and how it maps to what Shantanu talked about, we map really well across all 3 of these areas. We have 4 key categories of our product lines, data insights and audiences, content and commerce, customer journeys, marketing workflow and all of these applications are tied into this common platform, the Adobe Experience Platform. And all of them tied to one or more of these key areas. As an example, the content supply chain that David mentioned is one of those offerings that cut across these areas. The idea of the content supply chain is today, if you are a brand, the way in which content is produced has changed dramatically. You still have the traditional ways of producing content with in-house creative teams, through agencies and so on. But in addition, you have a lot of this new content being generated by third-party content, maybe by your users through TikTok, et cetera, maybe soon through things like this generative AI that David talked about, lots of different ways of producing content. And then the users of content are also exploding. When you're thinking about these personalized campaigns, these are campaigns that go from concept to execution to analysis to new insights within a couple of weeks. So you need content to fuel these campaigns because you got to have the right content, the right channel at the right time in order to deliver a personalized campaign. So that's the example of what we talk about as the content supply chain, and we are really uniquely positioned because we cut across the Creative Cloud, we cut across the Experience Cloud. By bringing that together, we can provide the foundation to deliver these personalized campaigns. So at the heart of our strategy, 5 pillars. First, that laser focus on customer experience management. If you think of some of the competitors we have, right, we are now a $4.4 billion plus business, really focused on innovation in this area. And we're competing with companies, some of the larger companies we compete, 17 clouds, trying to automate every business process. They just don't have the focus that we do. That's a big advantage that we have. Second, building this real-time customer experience platform and starting that investment many years ago, 5 years ago, has given us a unique advantage in the market, clear product and category leadership. As I talk to customers, I actually talked to a customer who went through a full RFP and picked us as the CDP of -- strategic CDP of choice. And they told me, they think of the market. I said it's a cluttered market, how did you pick us? We said, "Look, first of all, there's a lot of players in the market who just have a story. They don't even have a real product. And how you can tell is when you look for operational statistics like I shared with you on how many segment evaluations can be done or how many profiles they have or how many customers they have that really don't can't give you many numbers. And that's an example of sort of the second stage people who have a product but don't really have operational maturity. And then the third stage is really companies in the CDP market who can actually give you business metrics that you can understand, like revenue, for example, or the book of business, and there are very few companies who can talk about that. That's why we believe that we are in a very advantageous position in the market in terms of the real-time customer experience platform. And then we have tied that to all of the applications that we have across these 4 categories: data insights and audiences, content and commerce, marketing workflow, customer journeys. And as a result, all of our categories are growing. Fourth pillar of our strategy is the leverage of the Adobe brand and the global presence. Adobe is our customer 0. That DDOM that David talked about, that goes across discover, try, buy, use and renew for all of our digital media business. We underpin that through the use of our own digital experience technologies. That gives us a unique advantage to really understand what a business at scale, a digital business at scale operates like and then we can bring that -- the benefit of that experience to all of our other customers. And the fifth pillar is the scaled enterprise go-to-market, which we then take to market across Adobe around the worldwide field organization. And then we take to our largest customers, both the digital experience products as well as the digital media products. Let me talk a little bit more about our go-to-market strategy. Four key parts of the strategy. First, we are a trusted partner to the C-suite. Shantanu mentioned, it's not just the Chief Marketing Officer. It's increasing the Chief Digital Officer, the Chief Information Officers. We are the trusted partner because they know that we have that laser focus on this category, and we have the experience of taking them to scale. We also do a lot of work with what we call transformational accounts. These are companies that are betting big on digital transformation, on business transformation have the experience of working with Adobe and want to have us as the strategic partner for the long term. I'll give you a couple of examples of those. Third key aspect is continuing to grow new logos. In addition to deepening our relationships with customers like we talked about, how to continue our new logo growth. And that comes through customer value realization and expansion of our solutions. Two examples of transformational accounts. This is a well-known telco company. We actually started our relationship in 2016. It was a pretty -- if you think of the relationship Adobe Analytics, Adobe Experience Manager. This was around web analytics, web content management, basic personalization using Adobe Target. This was about a $4.5 million business book of business with that customer at that time. Now you think over the next -- over the last 6 years in multiple tranches, we have grown that base so they're using our customer journey products like Adobe Campaign, they added the Adobe Experience platform a couple of years ago and the apps around the Adobe Experience Platform. More recently, they operate experienced demand commerce as well as marketing workflow. And today, our book of business with them annually is over $45 million. Another example, this one from health care, as I mentioned, health care companies were a little slow to invest, but they're really caught up now. And they are investing aggressively. This is a major health care company. In 2019, had the first relationship with us, again, starting with web analytics, content management through Adobe Experience Manager, then did a major expansion with the entire content suite and then a second major expansion where they're pretty much using our entire portfolio going from about $3.7 million annual business to over $48 million annual book of business right now. By the way, this company is also one of the major biggest customers we have for our Document Cloud as well with Adobe Sign, gives you a sense of the advantage that we have of working together. Let's talk now about customer growth. If you look at our total customer base for digital experience, we have about 11,500 customers today that we have grown both organically and inorganically over the last 10 years. 10 years ago, we were roughly about 2,000 customers with organic growth as well as the customers that we got through the acquisitions of companies like Neolane, Magento, Marketo and Workfront, we now have this base of 11,500 customers. And as I mentioned, we think of them as big account transformational account, industry-led accounts, we're organized by vertical industry. We understand their business problem, and we have named account managers and teams that serve those accounts and solution-led account, which are looking for one of these solution categories. They want to start somewhere, get value out of that and expand from there. So that's how we go to market across these 3 areas. I talked about a few of these transformational accounts. We believe we have a massive opportunity based on this to grow this space. If we go to the next chart. Thank you. If you look at the overall set of these 11,500 customers, only 10% or so of these customers have over 4 Adobe Digital Experience products. We've already been successful at growing that number. As of the end of Q3 of this year, we had 26% year-over-year growth on the number of customers who have 4-plus Adobe Experience Cloud products. And we see a much larger book of business from them when they go to that stage. So our average annual book of business for customers who have over 4 Adobe Experience Cloud products is 2.5 million. Obviously, not all of the 11,500 customers are going to get to the 2.5 million level. But we think several thousand of our customers can grow to that level. And the reason is we have a proven track record of taking customers who adopt one or a couple of solutions, a couple of products from us, helping them realize value and then that gives them the trust in Adobe and the confidence to grow further. This is a chart going back 10 years. And this is about all the customers that we have other than some of the customers who came to us through acquisitions because we have clean data going back 10 years. And what it shows you is over that 10-year period, typical pattern is you have a cohort where in the first year, as they're implementing their solutions at the end of the first full year of expansion, the subscription revenue we get is 1.3x the first full year of subscription revenue. So they're just implementing they're starting to go up the [hockey state]. At the end of 5 years, we get a 3.7x multiple on the first year revenue. And when the cohort has been here for a full 8 years for us with expansion, we have an 8x multiple on the subscription revenue compared to the first full year. And this is inclusive of attrition. So you see the -- how we calculate these numbers. We make sure that we have a healthy track record of growing them. Once they go through adoption, they have the trust in Adobe, and we become a strategic partner for growth. That's what gives us the confidence that we can keep continuing to grow. And the last key part of the go-to-market strategy is our expansive ecosystem. Shantanu talked about this. We have great relationships across both independent software vendors who are building on top of our platform, the AEP is an open platform in terms of data, in terms of APIs. As a result, we have over 400 partner integrations right now into AEP. We also have a huge number of system integrated partners, agencies, who work with us. And just for AEP, we have over 100 SI partners today. So to wrap up, I am super excited about this business. We created this market with digital marketing. If you look at with the acquisition of Omniture and what we did after that, we became the leaders in web analytics, web content management. And by 2016, we had grown to a $1.6 billion business. We then saw it on the corner and said, "Hey, we can expand this much further". It can go from digital marketing, and we can look at the entire space of customer experience management. And by the way, as we did that, digital marketing continued to grow because there's obviously lots of companies who are still adopting those products. That led us to these 4 key categories we talked about. And with the addition of the Adobe Experience platform and the key native apps that we built on top of the Adobe Experience Platform, we're now at a $4.4 billion business. And I believe we are on the cusp of another major growth through personalization at scale. When you think of what we have through the personalization at scale, when you think of all of these digital products that we could potentially have that could further accelerate this journey, when you think of the content supply chain that we are really uniquely qualified to bring to market, I am very excited about what we can potentially do over the next few years. So just to wrap up, we have a lot of momentum in this business. We have a massive growth opportunity, $110 billion TAM. We have a very clear, differentiated platform-led strategy. We have the product and category leadership to drive it, and we have the path for sustained profitable growth. So thanks for listening to me this afternoon. Let me pull up Dan Durn to talk about our financials.

Thanks, Anil. It's great to see everyone here in the room today. Before I jump into the presentation, I want to share a few reflections about my first year journey at Adobe. Last year, I talked with you about the digitization of everything, and David mentioned it in his presentation about how digital content and data are to going to be the fuel that drives the global economy. And the changes we see in technology, the changes we see happening right now and the changes we see in the next decade or 2, they're going to define the rest of the century. Much like oil did for the last 100 years. Digital content and data are going to be the fuel of economic growth going forward. Having spent a year at the company, I'm even more convinced of these trends today than I was a year ago. And I believe Adobe is better positioned than any other company to be the digital enabler of the world. Over the last year, I've gained a significant appreciation for the sophistication of the technology that Adobe is delivering and the complexity of the problems that we're solving for our customers and you saw many of them on display earlier this morning if you caught the keynote. We're talking about power, precision, pixel-level perfection, AI, machine learning, real-time CDP personalization at scale and the need for integrated solutions to truly deliver on scalability. I'm also excited about a number of areas where I feel like I've got an opportunity to help the company achieve its goals by supporting the execution engine of Adobe. How we execute on our road maps, how we implement product-led growth to complement marketing-led growth, how we drive integration and value maximization of acquisitions? Ultimately, I'm excited to have an opportunity to partner with Shantanu and the team to continue the company's market leadership and drive growth in the next decade ahead. Before we look forward, I want to take a minute -- take a look at what Adobe has uniquely accomplished over the last decade to achieve the financial profile that the company has today. In 2012, Adobe made a historic transition. It went from a leading box software business to a subscription model, and you see the results today. Prior to the transition, Adobe had less than 10% recurring revenue. Today, it's well over 90%. Then you look at the impact on operating margins. Shantanu, David and the team at the time understood the opportunity and the way a recurring model could not only expand the company's addressable market and drive predictability but also drive profitability was a bold move at the time. And clearly, the strategy is paid off. What is the result of strong growth, recurring revenue streams and expanding profitability? In software, we often talk about the rule of 40. And you can see here how consistently Adobe has exceeded that threshold. In fact, when you think about the sum of our operating margin and revenue growth, we've often achieved 60 last handful of years show that. We're going to do that again this year. That's not something many companies in software have done, particularly at this scale. There's a differentiation in the financial model that underpins this company. The result has been a strong increasing flow of operating cash flow which enables the company to make transformational investments to drive future growth and return capital to investors. Let's look at our financial performance to date, fiscal year 2022. On an adjusted basis, we're on track to grow revenue 15% year-over-year. Our growth is driven by strong performance, engagement, retention and upsell, and we do it across both established businesses as well as a number of emerging high-growth businesses that are in the process of scaling up such as AEP, Stock, Frame, Substance. Our EPS, driven by the combination of revenue growth and world-class margins. And despite some of the macro externalities from FX and Russia and Ukraine, we continue to be proud of the company's resilience in the current environment, including how we delivered EPS upside to our June annual targets and how we've absorbed significant EPS headwinds from tax. And today, you've heard Shantanu, Gloria, David, Anil talk about the company's profile. But from my financial viewpoint, there are several things that I think make Adobe unique and enable the company's resilient performance. It starts with a culture of innovation. It all starts with innovation, which result in leading products and services and category-defining platforms. These products, they span massive market opportunities. They're used by a wide range of customers. From students, individuals, to governments, to small and medium businesses and the world's largest most sophisticated enterprise with this end-to-end suite of products and services. Adobe is better positioned today than we've ever been to serve these markets. The company is incredibly diversified from business models, to the product and segment mix to our go-to-market motions. We're also reaching customers in virtually every region around the globe. The culmination of a well-positioned business is a growing RPO balance, which we know represents contractually committed future revenues that are going to produce predictable growth in the years to come. With the strong top line growth and the efficient business model that sits behind it, we've delivered substantial margin expansion over the last 4 years. And margins like this, they just don't happen to a company. It's a result of industry and product leadership, operating discipline, focus and a culture of consistent execution. And you can see where Adobe's margin was prior to the pandemic. And in our fiscal 2020 and 2021, our margins benefited from cost savings across travel and facilities. In the back half of fiscal '22, we've returned to business travel, facilities use and in-person conferences like this week. And you can see we're on pace to deliver approximately 5 points of margin expansion over the last 3 years. And that margin performance includes delivering significant improvement in the margin of our digital experience business. Let's look at the performance of our business units. Let's start with Digital Media. This is one of the most successful value-creation stories anywhere in technology. And you can see the way the business continues to deliver consistent growth of annualized recurring revenue. And not surprisingly, it tracks how we've grown our subscriber base over time. Let's look more specifically at the Document Cloud business. strong ARR growth in the Document Cloud business translates to revenue performance. And what you see is a revenue compound annual growth rate of 25% over the last 3 years. It all starts with PDF. That is the standard for digital documents in the cloud era. We continue to acquire new users, optimize our product-led growth motion on the web, and expand in SMB and enterprise with integrated services like Acrobat Sign. Our continued success spans all segments in geographic regions. And now looking at Creative Cloud. In Creative Cloud, we've got a comprehensive portfolio of innovative products, and you've seen many of them on display if you caught the keynote this morning. And those products, they not only define the industry, but they set the standard for that industry. We're attracting new users with the rise of the creator economy. And we're using the insights derived from our data-driven operating model and our targeted marketing campaigns that raise awareness, drives traffic to adobe.com and it increases engagement, retention and upsell. This is a massive market and continuing growth opportunity for the company. And last but not least, let's look at the Experience Cloud. In Digital Experience, we're driving profitable growth, but we're also redefining the customer experience management segment with a real-time data platform and applications. And they enable our customers to realize that vision of personalization at scale. It's the key unlock to personalization at scale. We're driving strong expansion in our enterprise accounts. We've got a massive opportunity to cross-sell our entire suite of products in the Experience Cloud. And we do that into the current customer base while we're landing new logos. And it creates a great momentum around this business. Now I want to talk about how we think about driving growth and shareholder returns in the decade ahead. Last year, I talked about Adobe's path to $30 billion to $45 billion and beyond. Today, we're making those investments to get there with durable, profitable growth. It starts with a TAM of greater than $200 billion and a huge ecosystem of customers and partners that sit behind those solution offerings. And we're broadening our appeal to a wider range of customers. We're driving engagement and retention, and we're doing it with value realization and services across all geographies. We're also growing by innovating and investing to enter new categories that further complement and expand the growth trajectory of the business. And you see this with Adobe Express, you see this with Adobe Experience platform, and you're going to see the future opportunities we have with Figma. Adobe is a special company in a world where economic growth is going to be unlocked and fueled by digital content and data. We have an opportunity to not only grow and define but catalyze the digital economy in a way that few others can. In the near term, how do we think about the revenue growth drivers? In Digital Media, David talked about Adobe's world-class performance in new customer acquisition, which was built on the back of the data-driven operating model. In addition to marketing-driven growth, we're committed to product-led growth, which starts with frictionless web offerings. And you're seeing that PLG success play out with Acrobat Web, and we're going to use the same data-driven focus to accelerate product-led growth in Adobe Express. I started today talking about Adobe's bold decision to layer in subscription revenue a decade ago. Let me tell you how I think about PLG as a growth driver today for the Creative business. Just like subscription revenue a decade ago, -- we're beginning to layer in a new freemium model with Adobe Express. The next few years, you're going to see the effect of that viral PLG motion contributing in a more meaningful way to revenue. And it's going to add a new muscle to the company for healthy, efficient, viral growth in the years ahead. In addition to PLG, we're scaling our other emerging businesses like Stock, Substance and Frame. We're growing with all customer segments, all geographies where we operate. In Digital Experience, Anil and the team, they're building on the momentum we have with our AEP and applications business with a book of business that's quickly approaching $0.5 billion. The growth we're seeing in that business can be an accelerant to the overall company growth. And we're landing with new logos, and we're expanding towards transformational adoption of the full suite of our product solutions, and we're delivering value to our customers with the professional services. As I mentioned earlier, margins just don't happen to a company. They are the result of focus, industry leadership, consistent sharp product execution. But ultimately, there's trade-offs. There's trade-offs and tension between driving growth and driving profitability and margins. We're going to be balanced how we think about managing both of those priorities. We're going to have a bias towards growth. That said, if we're not seeing the opportunity in growth, we're going to lean more into driving margin and profitability at the company. We're also driving margin expansion, which always starts the top line. We're investing in emerging businesses, that will expand profitability as they continue to scale. We're driving profitable future growth with PLG, which is extremely efficient due to the viral nature of that growth. We're going to continue to prudently manage cloud and vendor spend. We're going to be judicious of how we think about growth in headcount and other spend. As I discussed at the outset, foreign exchange continues to be a headwind to margins in the near term. When we take all of this together, we expect about 0.5 point of margin expansion in fiscal year 2023 from the baseline that we set in the back half of fiscal 2022. A strong capital structure with robust investment-grade credit ratings. It positions us to continue to drive growth and provides financial flexibility, making access to capital affordable for Adobe. We're committed to maintaining that investment-grade debt rating, which positions the company well in a rising rate environment. Our stock repurchase program, it's funded through growth in operating cash flows. You can see how successful we've been in driving down that average shares outstanding over the last 4 years. Since 2019, we've returned more than $16 billion of cash to shareholders through the share repurchase program. Exiting Q4, we have $6.6 billion remaining on our authorization through the end of 2024. Update on the Figma deal process, our required regulatory filings, they're proceeding normally. We expect the transaction will close next year. While the transaction is pending, we will be opportunistic regarding share repurchase. And you saw that in the current quarter with our $1.75 billion share repurchase executed. And at a minimum, we'll repurchase enough shares to remain dilution-neutral, but we'll always look to be opportunistic in this environment. We expect to use accumulated cash as well as debt to finance the cash portion of the deal, then we'll monitor the economic environment, optimize the company's long-term capital structure, and then we'll have a strong bias with excess cash to return to shareholders through share repurchase. We've talked about our investment-grade debt rating. We talked about the share repurchase track record and the Figma transaction. Now let's take a step back. Let's talk about how we think about capital allocation. Given the tremendous opportunities we see in front of this company, priorities 1 and 2 are going to be to invest to drive growth for the company. Most importantly, we're going to invest to drive organic growth. And you see that with CDP, real-time customer data platform. You see it with Acrobat Web, you see it with Adobe Express, but we'll also complement that organic growth with inorganic activity from time to time. You see that with Figma, Workfront, Frame, Substance, others. Our other capital allocation priority, returning capital to shareholders. As a growth company, we think the most efficient mechanism to return cash to shareholders is through share repurchase. Our goal is going to be to meaningfully reduce the share count over time following the closing of the Figma acquisition. Adobe's free cash flow margins, they're world-class, and we're committed to returning cash to investors. Now let's turn to the outlook for fiscal 2023. And before we get to the preliminary targets, just a few considerations that give context. Given the continued macro uncertainty and the volatility we're seeing in the FX markets, we're going to be providing ranges for our financial targets, continued strength in the U.S. dollar, it's expected to result in about a 4% headwind to reported revenue growth rates in fiscal 2023. At the end of this fiscal year, we expect a downward revaluation to our ending ARR balance of approximately $700 million based on anticipated FX rates as we look into next year. And we're expecting some increases in our effective tax rates based on current tax policies in the geographies that we operate in. When we factor all of that in, here Adobe's fiscal 2023 annual targets. For the year, we're targeting total Adobe revenue $19.1 billion to $19.3 billion. Net new Digital Media ARR approximately $1.65 billion. Digital Media segment revenue of $13.9 billion to $14.0 billion; Digital Experience segment revenue, $4.925 billion to $5.025 billion. Digital Experience subscription revenue, $4.375 billion to $4.425 billion. Tax rate approximately 22% on a GAAP basis, 18.5% on a non-GAAP basis. GAAP earnings per share, $10.75 to $11.05. And non-GAAP earnings per share of $15.15 to $15.45. Here, you can see the growth rates at the midpoints of those targets. Total company revenue, 13% in constant currency. So to summarize, company is delivering strong financial performance. We're well positioned to navigate the current macro environment with a business that's extremely diversified, and resilient. We're offering leading products across multiple growing markets. We're investing to win. And as we do that, we're going to continue to balance growth with world-class profitability and drive capital returns to investors. We'll now run a short video and turn it over to Jonathan for Q&A. Thanks for your time.

There we go. All right, a little housekeeping as we're just getting settled for Q&A. First of all, I wanted to make sure everyone knows the slide presentation that we've shown here today is available on Adobe's Investor Relations website so you can download that. There are some additional slides and details on the posted version that we didn't cover in the live presentation. so we don't want you all to get board on your flights or back in your hotel. So there's more for you to consume. In addition to the speakers, we have the other members of our executive team joining us for Q&A. We have Dana Rao, General Counsel and Chief Trust Officer and Ann Lewnes, our Chief Marketing Officer; and Scott Belsky, the MC of MAX, who helped pull off what we're doing today with Ann and Chief Product Officer for the company. For Q&A, we have a couple of mic runners who will be here in the aisles. We do ask that everybody introduce yourself quickly at the beginning and try to limit to one question and not too many compound questions per person so we can get through as many possible with the time. It's never worked, but I'm going to say it every time. Okay. And I just want to have a visual on our mic runners here. We have Jessica and Linda, and we'll go ahead and start with Jay right here in the second row. Good to see you, Jay.

Jay Vleeschhouwer from Griffin. Shantanu, in your remarks this morning on main stage, you made the observation that for you personally, it's been fascinating to see the evolution of Adobe and, frankly, for me as well. But one thing that's been consistent thus far is the product and innovation culture that John and Chuck instilled many, many years ago. The question is for the next 10 years, given how Adobe scope has grown, you've got 24x many employees as when I started following the company, how do you keep that going for the next decade or more in terms of innovation and so forth? With regard to Figma, one thing the company has yet to really do is explain what really is the underlying architectural plumbing that is, I think, the main driver or should be the main driver of the long-term strategic value of this acquisition that will allow you to move more aggressively to the cloud and the web, as you've said you've had to do. I mean, today, unfortunately, I don't think you've really explained what that really is except some references to multiplayer and so forth. So maybe you could talk about that. At this meeting 3 years ago, you talked about your ultimate objective of moving to micro services, for example. Does this get you there? That was one question.

Well, first, I think I said it and I just take immense pride from the fact that at our core, we are a product-driven culture. And I think delivering innovation and products -- and you look at it by any metric. The businesses that we create, Adobe Experience platform when you talk about what we've done there, everything that we've done with AI and ML, Jay. I feel incredibly proud of what the team has done. We look at it with respect to patents filed. We look at it with respect to NPS. I think David talked about the NPS on our products, what we've done with that cart on the web. I feel great. I give Gloria a lot of credit for how she herself creates and instill this culture of hiring the right people, promoting the right people. I run engineering council that's one of the councils that still exist in the group, that still exists in the company. That doesn't mean that we invent everything. And good ideas, we've also always believed you talked about John and Chuck. I mean we've always believed that good ideas come from everywhere. And sometimes if you look at our history of acquisitions, the history of acquisitions is really all about leveraging what other companies have done. And so I think all great companies do inorganic acquisitions and organic innovation. And I don't feel that, that is something that we should be anything but proud of because that's really how you drive businesses. I think specifically as it relates to Figma and what we are excited about and I'll certainly have David and Scott add, I think what Figma did brilliantly and Dylan talked about that as well is really overcome multiple obstacles that exist in terms of web being friction-free to allow creativity. And we did that on the Document Cloud side. I mean if you look at Adobe and what we've done on the Acrobat website, we've done a lot of that. But this fundamental nature, I think, again, as Dylan said, if you think about who's really solved the problem of enabling creative collaborative computing on the web. Google did that for office productivity and Figma has done that for creative productivity. And what they've built is this underlying platform that allows both stakeholders, individuals, co-editing, understanding collisions, what you have to do. Way that's very fundamental and that we think we can help accelerate to bring that. What we focused on was file format compatibility, which is an incredibly hard problem. And so when we think about what we did on the web and when we did share for web, and the fact that you now have a PSD file, which is 30 years of incredible technology working across iPads and mobile devices and desktop that is no less an engineering feat, and we did the same thing with Acrobat. So I think we came at it with 2 very different approaches. Our approach was how do we ensure file format compatibility so that anybody can, wherever inspiration strikes have access to the technology and that's always what we've been talking about. Expanding that to be truly multiplayer and stakeholder-friendly that's a different unlock that I think we can really leverage what Figma has been able to do with us. And we can wait, frankly, for this thing to close. That's when we can share a lot more until then we are planning. But I think people are increasingly well there was questions upfront, and there were questions upfront perhaps about the purchase price and questions upfront about what that said about our core business. I think increasingly, every customer that we're talking to, every enterprise that we're talking to, it's now about the excitement of what you can do together in an awareness and understanding of that. So that's the way I would describe it. I could probably literally spend hours on file formats versus object models in the web and what it takes. There is some -- but there's a real power to what they've done that I think we've taken advantage of in no way, shape or form does that detract from what our product engineers have done in terms of solving incredibly hard problems. I mean that AI stuff, you talk about models and what is happening. I don't know whether you realize how incredible data. I'll give you one more, liquid mode in PDF to take any PDF that was created 30 years ago to be able to, without any structure, figure out what the model for that is and make that responsible on mobile that's just an incredible theme. And so innovation is alive and well, but inorganic acquisitions, when you can accelerate that, that's what all great companies do. That's what we're excited of.

I just want to add one quick thing to that since you asked 7 questions, I figure if you can. So one of the key things that we talked about was collaboration is an overused term that gets a little confusing and you conflate a lot into that. And we talked about share for review, and we talked about real-time co-editing. What we're doing with our core flagship applications because we're orienting toward the file format compatibility element of that, which is the thing we should be doing there. As we build that out, you're going to see Photoshop web, Illustrator web, these things look and feel a lot more like Acrobat Web, which is an extension and an ecosystem built around that core file format. what Dylan and team have done is, as Shantanu mentioned, created this platform for a model based, a data model-based way of looking at and having a project. And it isn't dependent on a specific file format, and you can create a rich, very rich collaborative real-time collaborative coediting model. These two are -- there are times that you use one versus the other. I do want to also -- the one thing I want to add to what Shantanu was saying is that the work that we've done around the share for review and file-based workflows, including -- included taking our core libraries of Photoshop and Illustrator and Premier and After Effects, and, a, webifying them so that they can run in the web and b, opening them up as APIs. And so one of the things that we're really excited about is taking -- when the deal closes, working with Dylan and team to take those core capabilities take the core platform that Dylan and the team have built and really reimagine what should the flows be, but the technology, the hard technology problems we've solved on the core creative categories, they've solved on the platform and then it becomes a question of how we want to expose it to users and user journeys. So very excited about that. And the developers that are engaging with the platform in a whole other level to the ecosystem as well.

Good news is David can also talk hours about the same issue that compound questions get compound answers. Okay. Let's go -- Linda, -- let's go down here next. And then, Jessica, why don't you give the mic to Alex here in the fifth row for the follow-up. Okay. I'll start over here, and then we'll go over here.

It's Keith Bachman from Bank of Montreal. I'm a little disappointed to start out with that I didn't get a water. But I wanted it, David, if I could direct David... I wanted to see if I could direct this to you, if I could. In your slide deck, you had an interesting characterization tough crown. Of the $1.4 billion in the upsell versus the new in terms of driving the growth. I was a little bit surprised on the upsell wasn't a bit greater contribution and also pleasantly surprised the new was a key contributor. Could you flush that out a little bit in terms of what's driving that -- and is that sustainable? And since the door was already open in the multipart question. The second part is, if you think about Figma though, what does it do to that $1.4 billion and why -- and what I'm really asking about is there is some level of cannibalization on the creative side, but there are some opportunities also on what it loosely characterizes the workflow side. So just talk about what Figma does to that kind of $1.4 billion on the creative side as you look longer term.

Sure. Yes. At a high level, first of all, I just want to go back to the core business that we're talking about in Creative. As we mentioned, we've added -- we're expecting to end with over $1.4 billion this year. Over the last 3 years, we've added $4.5 billion in net new ARR. The core engine of that business continues to be incredibly strong. As it relates to how we're approaching opportunities and new acquisition, one of the things that we're very excited about is Shantanu and Dan both mentioned, the creator economy and how that is driving incredible interest in sort of 21st century digital skills across the entire market, all the way from K-12 and Higher ed to knowledge workers that are starting to look and say, "Well, I need to participate in this ecosystem". So as we're doing that, our primary focus on our funnels are really pointed at bringing those users on board. And as we bring those users on board, we're driving them and onboarding them into some of our introductory offers. And as we do those, they tend to be offers like single app and Express. And with Express, it's both a combination of freemium and also some paid plans. So that's going to sort of -- that's going to drive a lot of user acquisition, and it's going to shift the shape of some of the net new ARR as you look at it here. And I think that -- if you unpack that a little bit, that will drive the predominance of this. In terms of upsell and migration, we're actually very pleased with the way that's working out and how that's a mix of the business. Part of this is a trade-off between these things. At the end of the day, the web and our products are a very broad surface, but they're a finite surface. And how we dial upsell opportunities and migration of our users versus how we dial opportunities to bring more people on board. Those are completely in our control, and that's something that we balance very carefully as we look back and forth. And then to your second question about the $1.4 billion. I do want to kind of reiterate this point that Dylan made earlier is that Dylan and what the team has done there, that is an adjacent business to us. We have so many customers both Shantanu and Dan talked a little bit about this, too, which is our customer response to this acquisition from enterprises to individual creatives has been overwhelmingly positive. And the reason for that is that they are looking at ways -- they're using both products, and it's not like one product obviates the need for the other. And what we can do to make these better together is fundamentally going to, I think, improve the prospect. So I look at this very much as an additive thing, not a replacement. So we believe very strongly that this is going to be additive.

Alex Zukin from Wolfe Research. I'll make the joke, I guess, I'll ask for the coffee. So I'm going to ask one question. So it's about the guide. And the question is, I think a lot of investors would appreciate a little bit greater clarity on both the Digital Media ARR guide and the DX guide in terms of where are the layers of conservatism? Is it in the changing mix of additions? Is it in the close rates or the conversion rates for the DM business? For the DX business, it actually looks like the guide is more aggressive in terms of an initial guide versus prior years. So I appreciate the great level of clarity and detail on the slide in terms of the opportunity to upsell within existing accounts. But if it's a more difficult deal environment, particularly for larger deals, particularly in a lot of those verticals that you guys have really good traction. And I guess, just help us understand where that -- where the conservatism is on that part of the business as well?