![]() This argument makes sense, as these AI functionalities will make image and video editing more convenient than ever, saving users a considerable amount of time. Adobe's management has indicated that Firefly is expected to contribute to their Annualized Recurring Revenue starting next year. Adobe can use these platforms to expand their user base, enabling more people to become content creators.Īdditional Revenue Streams: All these platforms operate on a subscription-based model. However, these AI-powered platforms are incredibly user-friendly, requiring only a few mouse clicks. I believe Adobe's early investment in these AI platforms is a strategic move, and Adobe can benefit in several ways:Įxpand User Base: Becoming a master of photo editing software like Photoshop takes a significant amount of time. Their management also indicates that the current Firefly functionality is just the beginning, with plans to expand these AI capabilities to all digital media, including videos. They are leveraging their extensive image data and user base for machine learning and developing their own models for these platforms. Adobe plans to offer Firefly as both a standalone product and an integrated feature within the Adobe family. According to their management, since the launch of Firefly, there have already been 1 billion images generated on the platform. These AI-powered functions empower an average person to become a media creator. Adobe Firefly can generate images from text, perform generative fills, apply text effects, and recolor, among other capabilities. ![]() Adobe recently launched the fresh new Adobe Express platform, powered by generative AI through Adobe Firefly. Adobe Express and Firefly AI CapabilitiesĪdobe possesses tremendous data, platforms, and a vast customer base, positioning them well for AI innovation. Overall, I believe Adobe's Digital Media business slowdown is temporary and will recover in the future. With digital marketing, marketers can track the conversion ratio and measure the total return of a specific marketing campaign. ![]() Lastly, digital marketing enables marketers to better measure their return on the marketing spending dollar. In addition, Statista estimates that the number of internet users worldwide stood at 5.18 billion in 2023, and there are still 1/3 of the global population that doesn't have access to the internet. According to Fortune Business Insights, the global smartphone market is expected to grow at a 7.3% compound annual growth rate from 2022 to 2029. With more smartphone and internet access, digital media can better reach the mass population. Secondly, the global smartphone and internet user base continues to grow over the next few years. Digital media can better target potential customers and generate a higher return for marketers. Firstly, traditional media like newspapers and TV cannot deliver the same level of personalized marketing experience to potential customers as digital media can. I believe it is temporary in nature as enterprises need to reduce marketing spending to control their budgets in a weak macroeconomic environment. The key question here is whether the reduced digital marketing spending is temporary or structural. When enterprises began cutting their digital marketing spending, the total digital media ARR started to decelerate, and it only grew by 9.2% in Q2 FY23. The Digital Media business represents approximately 73% of Adobe's total revenue and was growing at an above 20% rate in the pre-COVID period. Decelerated Revenue Growth Amid Weak Enterprise Market SpendingĪ good metric for measuring Adobe's Digital Media business is the Net New Digital Media Annualized Recurring Revenue (ARR) growth. I believe these investments lay a solid foundation for their future growth acceleration. However, Adobe is investing in new AI capabilities with fresh, new Adobe Express and Firefly. The company's revenue growth has been decelerating in recent quarters as enterprises are constraining their digital marketing spending. Adobe is one of the pioneer companies that have successfully transitioned from a traditional on-premises license model to a pure subscription business model. Adobe ( NASDAQ: ADBE) owns a broad range of industry-leading software platforms, including Photoshop, Lightroom, Illustrator, and Premiere Pro, among others.
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