Baird: Adobe's report is proof it's all about expectations

You raised your price target by about 20 bucks. You're still well below the street average. What did you see and, and how come you're less bullish or less excited about this company than your peers? Well, Frank, I, you know the, this is proof Adobe's report, it's proof that it's all about expectations. Adobe's coming off of a couple of tough quarters. Stock had been down 23% year to date versus the S&P up 14 1/2. So we feel as if we've been in the right position. Expectations in terms of last night where we think they just needed to come in in line, they actually did slightly better than that. And as you mentioned in your intro, generative AI is an area of focus and we are seeing some early signs that some of the products in the market, albeit still very early are starting to get traction. So again, I think the story on Adobe is positive signs, but against very low expectations and coming in the context of some other weaker software reports, which I think helped the set up, you know, Fairpoint, Adobe's games bringing it, I think close to halfway from where it was at the beginning of the year. So it's taking a pretty big drop this year. So still has a ways to go just to kind of get back to where it was. I want to talk to you about something that used to be kind of wonky remaining performance obligation. I used to say this on the show sometimes be like, well, what does that mean? It's kind of you're, you're smiling right now. It's kind of a a measure of the demand and and the pipeline of business that increased by 17% higher year over year. We're talking much more about that nowadays. In your mind, is that a read that demand for the AI products is very strong, adoption is very strong. Exactly how should we read that? Well, it's a tough metric to read for for investors because it doesn't give you a sense of the timing. It doesn't tell you when that business, when that, when that is actually going to hit revenue. So RPO remaining performance obligation does tell you the overall book of business is that sits for Adobe, but doesn't tell you when that's exactly going to hit. Some companies will report the current number, which is over the next 12 months, which gives you much more granularity. I, I think on the AI side, you know, it, it's certainly been Adobe's been sort of the tip of the gravitational spear here on both fear and optimism around generative AI, Frank. Because on the one hand, Adobe has been a great partner of creatives over the years and should have a great chance to succeed in generative AI. On the other hand, anybody who spends a few minutes playing with generative AI tools will know that Adobe has a bunch of competition out there. Since the acquisition attempt of Figma, which was broken up or which they passed on a $20 billion effort to get more in the collapse operation and next Gen. creative space, Adobe has really doubled down on the innovation. And I think even more than just the generative AI traction, that is what we saw last night, that Adobe's torrid pace of innovation, which you know, they had admittedly taken their foot off the gas a little bit. There is starting to see some traction with new products.

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