Adobe CEO Shantanu Narayen: People have been seeing a lot of spend in AI and infrastructure

Did the market get too negative on the stock of Adobe, the digital media marketing software kingpin people in question? The value of traditional enterprise software in a world where it's very easy to ask computers to do things that you thought you needed expensive software for. That's in part why Adobe stock had tumbled from 638 peak in February down to four and 58 to close tonight. However, what we got tonight from Adobe was a sharply better than expected quarter and a fantastic forecast and the stocks flying in after our trading. So what comes next? Let's take a closer shot to Ryan. He's the Chairman CEO of Adobe. Mr. Ryan, first of all, congratulations on an amazing quarter and welcome back to Man Body. Thanks, Jim, as always, great to be on your show. Well, I've got to tell you, this was a remarkable quarter. Great forecast boos. And I just want to ask you, how do you do you think that the market so misjudged Adobe, the company and all the amazing features that you get when you when you take your product? Well, I think, Jim, there's been so much focus around AI and infrastructure and chips. And rightly, I would say, you know, people have been seeing a lot of spend in that particular category. But at the end of the day, at Adobe, we're completely convinced that it's the interfaces rather than the models where the real value is for customers. That's where they're going to be performing their tasks. That's where they, you know, better their work flows. And if you want to do creativity or if you want to do marketing, that's where Adobe comes in. And so we've always said we've embraced AI. We think it expands our market opportunity. And I think there's been more questions around, you know, does AI replace these folks? And I've always maintained it's actually people who use AI who may replace people who don't use AI. And there's no replacement for human ingenuity. So this is playing out as expected for us. Jim. Yes. And this is really the most important point. It was right up to the top of your statement when you said Adobe's highly differentiated approach to AI is rooted in the belief that creativity is a uniquely human trait and that AI has the power to assist and amplify human engineering. But it's a human trait, and people don't seem to understand that. Well, Jim, you know, I think it's our job at Adobe to continue to show how our products can be made more accessible, how they how people can be more productive when they have this incredible creative idea that they want to communicate across any campaign or media type that, you know, through products like Photoshop or Adobe Express or with our models like Firefly, where we saw over 9 billion generations to date. That that's really the magic of taking what's in somebody's head and making it available, you know, as a campaign, as a flyer, as a video. And so, you know, again, we don't worry about the short term and how the market might view it, because we realized that any time that you can get more people into the platform, any time that you can deliver and delight your customers, you know, good things will happen. Right now there have been this so-called existential threat from an alpha called Canva, which has a good product, there's no doubt about it. But I was tinkering with Adobe Express. You pulled you pushed some stuff last night. It was really fabulous. And my daughter and I were doing with, we just said, look, you offer a much better free alternative than the paid alternative of Canva. That's what the new stuff is offering. So we don't understand the dilemma. I have to leave the the pickup top of Express is extraordinary in the short time it's been out. Well, I think what Adobe Express and the Adobe Express business event that you're talking about, these were big milestones for us. We completely redeveloped Express both across mobile and across the web. And the products are incredible because we believe that it's a leapfrog in terms of how they actually use AI to be able to accomplish your task. And so, you know, for a long time we're a product company. We were focused on the product and now we're going to pour gas on the go to market and how we get more awareness of the product, how we get it out in the hands of more people, how we continue to leverage the incredible inside sales that we have, the enterprise, you know, certain traction that we have to make sure that people are hearing a lot more about express. So I think the product is phenomenal, Jim, and now it's all about the go to market. Now how about the the existential hit that you got when this Sora came out of we looked at that absolutely, it's great, but it's basically a a product that is fun. OK, it's a fun thing to fool around with, but you're the gold standard. When we looked at Sora, all we could say was, hey, you know what if you don't, if you don't want to fool around with creativity, if you want to outsource creativity, maybe give this a try. But if you want to be creative, which is what I think you and I know is the essence of Adobe, there really is, there's really no compares. Well, if you take a step back, Jim, and think about, you know, what these models are able to do, the models are able to absolutely accelerate ideation, which is you're just starting off, you want a little bit of video to jump start the process. All that that means is all of these models and they're all going to be personalized in different ways. You know, our image model might be different from Soras in terms of, you know, the personality that they have, but it's going to create more content and all of that content will have to be edited. And that's the belief that we have. We invented and we created Firefly because it was really important for Adobe to understand how these models worked, how hallucination worked, how we could do it in an ethical way, how could we could do it in a responsible way. But we've always also said, and we've actually demonstrated at NAB where on the video side, whether it's Sora, whether it's other models like Runway ML or Pika, the power will really be in enabling all of those within our editing applications. And they may have different applicability for different use cases. But if you want to do that colour correction, if you want to, you know, transition the video the way you want to, you still need an editing application in order to be able to do that. And so I think while the attention has been on this model creation, the value will eventually accrue to the interfaces and what people use to accomplish their task. And I think to go a step further, I know there are people who will listen to you and they'll say, but wait a second, there are these cheaper alternatives. But if you go to any school in the country, nothing has changed. Every major design school this country did not flinch, they're all Adobe. I felt that the newer things that you're going to bring on will make it so that people who aren't at the design schools will go to Adobe and not others because they are very accessible. So you've decided, I think, to make the a free part of Adobe for people who don't really know how to use even computers. Well, I have and the company has always had a passion for education and the education segment gym. I mean, I used to say growing up that reading, writing and arithmetic were the three skills. You have to add creativity to that particular skill. So ensuring that Adobe is focused, whether it's AK through 12 student or whether it's the best design school in the world and making sure that we work with them, we get their feedback, we understand what's on the minds of that next generation. Creative is really important to us. So you know, we're thrilled with the engagement and the partnership that we have with those schools, but it truly is a passion for us at Adobe to make sure that the education segment in particular is both embracing and partnering with us for us to be able to deliver the most innovative products. Well, Shaz, I've got to tell you, this is a remarkable quarter. Obviously things are just getting stronger as the quarter went on. And I really want to thank you for coming back on Bad Bunny. And I, I just, I knew this was going to be a big quarter. Just a job well done, Sir. Fantastic work. Thank you, Jim, and thank you again for having me on your show. Of course, that's Shantanu Ryan, chair and CEO of Adobe. Even with UP 75, believe me, you're in good shape for this one. Everybody's back after the break. Coming up, pop open those umbrellas and tee up your toughest questions. Kramer takes on all comers in the Lightning Round next.