Earnings Call: Adobe Mulling Limits on AI Capabilities as Generative Credit Usage Surges

Adobe will consider putting in caps on AI generation capabilities, David Wadhwani, President of its Digital Media Business said during the company’s earnings call for the third quarter of Financial Year 2024 (Q3FY24) ending in August. Wadhwani mentioned that the company has observed that with every subsequent capability it integrates into the AI models, the number of credits people use up increases. For context, generative credits are a kind of pricing strategy where companies put a usage allowance or quota for AI-powered generative features within their products. 

While the company is considering such quotas, it also has other monetization strategies in mind, Wadhwani added. “So we’re also considering other opportunities like having standard CC plans that have a core set of generative capabilities, but also having premium AI plans that will include things like video,” he said. Wadhwani’s comment comes soon after the company introduced its new Adobe Firefly video model. The company has previously also spoken about monetizing AI by integrating it into its applications. Wadhwani noted that when people use generative AI features inside Adobe applications, the company is able to retain them better.

Adobe CEO Shantanu Narayen mentioned that the company intends to integrate the Firefly video model into Premier Pro. “When you ingest the video that people want to edit, the ability to extend that is not just dependent on what the model is, but also on what the new data is. And again, that represents really a unique ability for us,” he said, explaining that the video generation models would learn from the videos it ingests during the editing process.

Keeping up with competition:

During the call, an investment firm representative asked the company whether the consumption of its AI models can contribute to annual recurring revenue (ARR), which is the monetary value of a subscription-based company’s subscriber base. “Because I think there’s pervasive fears that the state of competition may in fact limit your ability to turn on that monetization, if you will, from either consumption or price,” he said.

To this, Narayen responded that Adobe’s apps and models are uniquely differentiated from those of others, with one of the reasons for this being that the content Adobe’s AI generates is “commercially safe”. In a newsletter sent to customers earlier this month, the company said that it only trains its models on licensed content. The company also mentioned that it compensates Adobe Stock contributors for the use of their content to train Firefly.

Growth in document cloud helping overall digital media revenue:

Adobe reported a net new annual recurring revenue (ARR) of $504 million in Q3FY24. The company attributed this growth to its Document Cloud (which includes Adobe Acrobat). “Link sharing and what we’ve done with reader distribution across mobile, web, and desktop, that’s really what continues to drive this business,” Wadhwani said.

Wadhwani mentioned that the company has seen link sharing grow by 70% on a year-on-year basis in Q3. The company is also adding users in Document Cloud through Acrobat Web, which has increased its monthly user base by 35% year on year. “In Q3, we released significant advancements including the ability to have conversations across multiple documents and support for different document formats,” Wadhwani said, while discussing the company’s AI assistant integration into the Document Cloud. The AI assistant allows users to interact multiple PDFs by asking questions.

Source: medianama