ADOBE INC

Previous wording

For our first quarter of fiscal 2025, we experienced strong demand across our Digital Media and Digital Experience offerings, driven by customer-focused product innovation. As we execute on our long-term growth initiatives, with emphasis on delivering value through AI-powered and highly differentiated solutions to meet the needs of our diverse and expanding customer base, we have continued to experience growth in software-based subscription revenue across our portfolio of offerings.

Current wording

For our second quarter of fiscal 2025, we experienced strong demand across our Digital Media and Digital Experience offerings, driven by transformative and customer-focused product innovation. As we execute on our long-term growth initiatives, with emphasis on delivering value through AI-powered and highly differentiated solutions to meet the needs of our diverse and expanding customer base, we have continued to experience growth in software-based subscription revenue across our portfolio of offerings.

Previous wording

Our Digital Media products, services and solutions help users create, design and publish rich content and 3D experiences, and improve productivity by transforming how they view, share and collaborate on documents and content. These offerings include our Creative Cloud flagship applications (“apps”) such as Adobe Photoshop, Adobe Illustrator, Adobe Lightroom, Adobe Premiere Pro and Adobe Stock; as well as Adobe Acrobat, Adobe Express, Adobe Firefly and many more products, which are available across surfaces and platforms as desktop tools, web and mobile apps and cloud-based services. Adobe Express is our web and mobile app designed to enable a broad spectrum of users, including novice content creators and communicators, to create, edit and customize content quickly and easily with content first, task-based solutions. In addition, Adobe Firefly-powered generative AI features are available across Digital Media apps including Adobe Photoshop and Adobe Express. Our Adobe Acrobat offerings, with a set of integrated mobile apps and cloud-based document services, enable users to create, collaborate, review, approve, sign and track documents regardless of platform or application source type. These Acrobat offerings enhance the way people manage critical documents at home, in the office and across devices. Last year, we introduced Acrobat AI Assistant, a generative AI-powered product designed to deliver insights and enhance productivity through interactive document experiences, which is available as an add-on subscription to our Adobe Acrobat Pro and Standard and Adobe Acrobat Reader products. Our Digital Media customers include business professionals, consumers, creative professionals, creators and marketers.

Current wording

Our Digital Media products, services and solutions help users create, design and publish rich content and 3D experiences, and improve productivity by transforming how they view, share and collaborate on documents and content. These offerings include our Creative Cloud flagship applications (“apps”) such as Adobe Photoshop, Adobe Illustrator, Adobe Lightroom, Adobe Premiere Pro and Adobe Stock; as well as Adobe Acrobat, Adobe Express, Adobe Firefly and many more products, which are available across surfaces and platforms as desktop tools, web and mobile apps and cloud-based services. Adobe Express is our web and mobile app designed to enable a broad spectrum of users, including novice content creators and communicators, to create, edit and customize content quickly and easily with content first, task-based solutions. In addition, Adobe Firefly-powered generative AI features are available across Digital Media apps including Adobe Photoshop and Adobe Express. Our Adobe Acrobat offerings, with a set of integrated mobile apps and cloud-based document services, enable users to create, collaborate, review, approve, sign and track documents regardless of platform or application source type. These Acrobat offerings enhance the way people manage critical documents at home, in the office and across devices. Last year, we introduced Acrobat AI Assistant, a generative AI-powered product designed to deliver insights and enhance productivity through interactive document experiences, which is available as an add-on subscription to our Adobe Acrobat Pro and Standard and Adobe Acrobat Reader products. Our Digital Media customers include business professionals, consumers, creative professionals, creators and marketing professionals.

Previous wording

Digital Media ARR grew to $17.63 billion at the end of the first quarter of fiscal 2025, representing 12.6% year-over-year growth. Our success in driving growth in ARR has positively affected our revenue growth. Digital Media segment revenue grew to $4.23 billion in the first quarter of fiscal 2025, up from $3.82 billion in the first quarter of fiscal 2024, representing 11% year-over-year growth.

Current wording

Digital Media ARR grew to $18.09 billion at the end of the second quarter of fiscal 2025, representing 12.1% year-over-year growth. Our success in driving growth in ARR has positively affected our revenue growth. Digital Media segment revenue grew to $4.35 billion in the second quarter of fiscal 2025, up from $3.91 billion in the second quarter of fiscal 2024, representing 11% year-over-year growth.

Previous wording

Our Digital Experience apps and services are designed to manage customer journeys, enable personalized experiences at scale and supply intelligence for businesses of any size in any industry. Digital Experience is comprised of solutions to deliver actionable data, with products such as Adobe Analytics and Adobe Real-Time Customer Data Platform; optimize content delivery, with products such as Adobe Experience Manager, Adobe Commerce and Adobe GenStudio for Performance Marketing; and manage customer journeys, with products such as Adobe Marketo Engage and Adobe Campaign. Our differentiation and competitive advantage are strengthened by our ability to use the Adobe Experience Platform to integrate our comprehensive set of solutions and our ability to embed AI into our product portfolio, such as with our Adobe Experience Platform AI Assistant, a generative AI-powered conversational interface designed to help customers automate workflows and generate new audiences and journeys. Our Digital Experience customers include marketing professionals such as brand managers, channel marketers and campaign strategists.

Current wording

Our Digital Experience apps and services are designed to accelerate customer experience orchestration at scale and supply intelligence for businesses of any size in any industry. Digital Experience is comprised of solutions to deliver actionable data, with products such as Adobe Analytics and Adobe Real-Time Customer Data Platform; optimize personalized content delivery, with products such as Adobe Experience Manager, Adobe Commerce and Adobe GenStudio for Performance Marketing; and manage customer journeys, with products such as Adobe Marketo Engage and Adobe Campaign. Our differentiation and competitive advantage are strengthened by our ability to use the Adobe Experience Platform to integrate our comprehensive set of solutions and our ability to embed AI into our product portfolio, such as with our Adobe Experience Platform AI Assistant, a generative AI-powered conversational interface designed to help customers automate workflows and generate new audiences and journeys. Our Digital Experience customers include marketing professionals such as brand managers, channel marketers and campaign strategists.

Previous wording

Digital Experience revenue was $1.41 billion in the first quarter of fiscal 2025, up from $1.29 billion in the first quarter of fiscal 2024, representing 10% year-over-year growth. Subscription revenue grew to $1.30 billion in the first quarter of fiscal 2025, up from $1.16 billion in the first quarter of fiscal 2024, representing 11% year-over-year growth.

Current wording

Digital Experience revenue was $1.46 billion in the second quarter of fiscal 2025, up from $1.33 billion in the second quarter of fiscal 2024, representing 10% year-over-year growth. Subscription revenue grew to $1.33 billion in the second quarter of fiscal 2025, up from $1.20 billion in the second quarter of fiscal 2024, representing 11% year-over-year growth.

Previous wording

•Business Professionals and Consumers require all-in-one web and mobile apps with easy-to-use AI capabilities, and are increasingly benefiting from deep integration between Adobe Acrobat and Adobe Express. Revenue associated with the Business Professionals and Consumers customer group consists of Adobe Acrobat offerings and Adobe Express, all of which are part of Digital Media.

Current wording

•Business Professionals and Consumers desire web and mobile apps with easy-to-use AI capabilities, and are increasingly benefiting from using Adobe Acrobat and Adobe Express. Revenue associated with the Business Professionals and Consumers customer group consists of Adobe Acrobat offerings and Adobe Express, all of which are part of Digital Media.

Previous wording

By viewing the Digital Media and Digital Experience segments through this additional lens, we can more effectively execute on our long-term growth strategies. Our success will be achieved though continued acquisition and retention of our customer base by delivering valuable new features and technologies to customers with our latest releases, including generative AI capabilities to enhance creativity, productivity and marketing, and expanding availability of our offerings across an increasing number of surfaces.

Current wording

By viewing the Digital Media and Digital Experience segments through this additional lens, we can more effectively execute on our long-term growth strategies. Our success will be achieved through continued acquisition and retention of our customer base by delivering valuable new features and technologies to customers with our latest releases, including generative AI capabilities to enhance creativity, productivity and marketing, and expanding availability of our offerings across an increasing number of surfaces.

Previous wording

While our revenue and earnings are relatively predictable as a result of our subscription-based business model, the broader implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, remain uncertain. Seethe section titled“Risk Factors” in Part II, Item IA of this report for further discussion of the possible impact of these macroeconomic issues on our business.

Current wording

While our revenue and earnings are relatively predictable as a result of our subscription-based business model, the broader implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, remain uncertain. See the section titled “Risk Factors” in Part II, Item 1A of this report for further discussion of the possible impact of these macroeconomic issues on our business.

Previous wording

There have been no significant changes in our critical accounting policies and estimates during the three months ended February 28, 2025, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended November 29, 2024.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the six months ended May 30, 2025, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended November 29, 2024.

Previous wording

•Digital Media ARR of approximately $17.63 billion as of February 28, 2025 increased by 12.6% from $15.66 billion as of March 1, 2024 revalued using currency rates determined at the beginning of fiscal 2025.

Current wording

•Digital Media ARR of approximately $18.09 billion as of May 30, 2025 increased by 12.1% from $16.14 billion as of May 31, 2024 revalued using currency rates determined at the beginning of fiscal 2025.

Previous wording

•Digital Media revenue of $4.23 billion during the three months ended February 28, 2025 increased by $411 million, or 11%, compared to the year-ago period.

Current wording

•Digital Media revenue of $4.35 billion during the three months ended May 30, 2025 increased by $437 million, or 11%, compared to the year-ago period.

Previous wording

•Digital Experience revenue of $1.41 billion during the three months ended February 28, 2025 increased by $125 million, or 10%, compared to the year-ago period.

Current wording

•Digital Experience revenue of $1.46 billion during the three months ended May 30, 2025 increased by $130 million, or 10%, compared to the year-ago period.

Previous wording

•Cost of revenue of $622 million during the three months ended February 28, 2025 increased by $32 million, or 5%, compared to the year-ago period.

Current wording

•Cost of revenue of $638 million during the three months ended May 30, 2025 increased by $40 million, or 7%, compared to the year-ago period.

Previous wording

•Operating expenses of $2.93 billion during the three months ended February 28, 2025 decreased by $756 million, or 21%, compared to the year-ago period, primarily due to the $1 billion Figma termination fee incurred during the first quarter of fiscal 2024.

Current wording

•Cash flows from operations of $4.67 billion during the six months ended May 30, 2025 increased by $1.56 billion, or 50%, compared to the year-ago period, primarily due to payment of the $1 billion Figma termination fee during the first quarter of fiscal 2024.

Previous wording

•Remaining performance obligations of $19.69 billion as of February 28, 2025 increased by 12% from $17.58 billion as of March 1, 2024.

Current wording

•Remaining performance obligations of $19.69 billion as of May 30, 2025 increased by 10% from $17.86 billion as of May 31, 2024.

Previous wording

Revenue for the Three Months Ended February 28, 2025 and March 1, 2024

Current wording

Revenue for the Three and Six Months Ended May 30, 2025 and May 31, 2024

Previous wording

We have the following reportable segments: Digital Media, Digital Experience, and Publishing and Advertising. Total revenue by reportable segment for the three months ended February 28, 2025 and March 1, 2024 were as follows:

Current wording

We have the following reportable segments: Digital Media, Digital Experience, and Publishing and Advertising. Total revenue by reportable segment for the three and six months ended May 30, 2025 and May 31, 2024 were as follows:

Previous wording

Revenue from Digital Media increased $411 million and revenue from Digital Experience increased $125 million during the three months ended February 28, 2025 as compared to the three months ended March 1, 2024 due to subscription revenue growth across our offerings.

Current wording

Revenue from Digital Media increased $437 million and $848 million, and revenue from Digital Experience increased $130 million and $255 million, during the three and six months ended May 30, 2025 as compared to the three and six months ended May 31, 2024. The increases in total revenue were due to subscription revenue growth across our Digital Media and Digital Experience offerings.

Previous wording

Subscription revenue by reportable segment for the three months ended February 28, 2025 and March 1, 2024 were as follows:

Current wording

Subscription revenue by reportable segment for the three and six months ended May 30, 2025 and May 31, 2024 were as follows:

Previous wording

Increases in subscription revenue for the Digital Media segment were driven by strength in Creative Cloud flagship apps and Acrobat across all routes to market and geographies. Increases in subscription revenue for the Digital Experience segment were driven by strength in Adobe Experience Platform and related apps.

Current wording

Increases in subscription revenue for the Digital Media segment were driven by strength in Creative Cloud flagship apps and Acrobat across all routes to market and geographies. Increases in subscription revenue for the Digital Experience segment were driven by strength in Adobe Experience Platform and related apps, and Adobe Experience Manager.

Previous wording

Digital Media and Digital Experience subscription revenue by customer group for the three months ended February 28, 2025 and March 1, 2024 were as follows:

Current wording

Digital Media and Digital Experience subscription revenue by customer group for the three and six months ended May 30, 2025 and May 31, 2024 were as follows:

Previous wording

Increases in subscription revenue for the Creative and Marketing Professionals customer group were driven by strength in Creative Cloud flagship apps and Adobe Experience Platform and related apps. Increases in subscription revenue for the Business Professionals and Consumers customer group were driven by strength in Acrobat.

Current wording

Increases in subscription revenue for the Creative and Marketing Professionals customer group were driven by strength in Creative Cloud flagship apps, Adobe Experience Platform and related apps, and Adobe Experience Manager. Increases in subscription revenue for the Business Professionals and Consumers customer group were driven by strength in Acrobat.

Previous wording

Overall revenue during the three months ended February 28, 2025 increased in all geographic regions as compared to the three months ended March 1, 2024. Within each geographic region, the fluctuations in revenue were attributable to the factors noted in the segment information above.

Current wording

Overall revenue during the three and six months ended May 30, 2025 increased in all geographic regions as compared to the three and six months ended May 31, 2024. Within each geographic region, the fluctuations in revenue were attributable to the factors noted in the segment information above.

Previous wording

Included in the overall change in revenue for the three months ended February 28, 2025 as compared to the three months ended March 1, 2024 were impacts associated with foreign currency and our foreign currency hedging program. During the three months ended February 28, 2025, the U.S. Dollar primarily strengthened against APAC and EMEA foreign currencies as compared to the year-ago period, which resulted in a net decrease in revenue in U.S. Dollar equivalents of approximately $74 million. For the three months ended February 28, 2025, we had net hedging gains from our cash flow hedging program of $26 million.

Current wording

Included in the overall change in revenue were impacts associated with foreign currency which were mitigated in part by our foreign currency hedging program. During the three and six months ended May 30, 2025 as compared to the three and six months ended May 31, 2024, the U.S. Dollar primarily strengthened against APAC currencies and the Euro, which resulted in a net decrease in revenue in U.S. Dollar equivalents of approximately $24 million and $98 million in the respective periods. The foreign currency impacts to revenue were partially offset by net hedging gains from our cash flow hedging program of $9 million and $39 million, respectively, as compared to the year-ago periods.

Previous wording

Cost of Revenue for the Three Months Ended February 28, 2025 and March 1, 2024

Current wording

Cost of Revenue for the Three and Six Months Ended May 30, 2025 and May 31, 2024

Previous wording

Cost of subscription revenue increased during the three months ended February 28, 2025 as compared to the three months ended March 1, 2024 primarily due to increases in hosting services and data center costs, royalty fees, and compensation costs.

Current wording

Cost of subscription revenue increased during the three and six months ended May 30, 2025 as compared to the three and six months ended May 31, 2024 primarily due to increases in hosting services and data center costs and, to a lesser degree, compensation costs.

Previous wording

Operating Expenses for the Three Months Ended February 28, 2025 and March 1, 2024

Current wording

Operating Expenses for the Three and Six Months Ended May 30, 2025 and May 31, 2024

Previous wording

Research and development expenses increased during the three months ended February 28, 2025 as compared to the three months ended March 1, 2024 primarily due to increases in compensation costs and hosting services and data center costs.

Current wording

Research and development expenses increased during the three and six months ended May 30, 2025 as compared to the three and six months ended May 31, 2024 primarily due to increases in compensation costs and, to a lesser degree, hosting services and data center costs.

Previous wording

Sales and marketing expenses increased during the three months ended February 28, 2025 as compared to the three months ended March 1, 2024 primarily due to increases in marketing spend and compensation costs.

Current wording

Sales and marketing expenses increased during the three and six months ended May 30, 2025 as compared to the three and six months ended May 31, 2024 primarily due to increases in advertising expenses and compensation costs.

Previous wording

General and administrative expenses consist primarily of compensation and contracted costs, travel expenses and related facilities costs for our finance, facilities, human resources, legal, information services and executive personnel. General and administrative expenses also include outside legal and accounting fees, provision for bad debts, expenses associated with computer equipment and software used in the administration of the business, charitable contributions and various forms of insurance.

Current wording

General and administrative expenses consist primarily of compensation and contracted costs, travel expenses and related facilities costs for our finance, facilities, human resources, legal, information services and executive personnel. General and administrative expenses also include outside legal and accounting fees, expenses associated with computer equipment and software used in the administration of the business, charitable contributions, provision for bad debts and various forms of insurance.

Previous wording

During the three months ended March 1, 2024, we incurred a $1 billion termination fee which resulted from termination of the Figma transaction.

Current wording

During the six months ended May 31, 2024, we incurred a $1 billion termination fee which resulted from termination of the Figma transaction.

Previous wording

Non-Operating Income (Expense), Net for the Three Months Ended February 28, 2025 and March 1, 2024

Current wording

Non-Operating Income (Expense), Net for the Three and Six Months Ended May 30, 2025 and May 31, 2024

Previous wording

Interest expense represents interest associated with our debt instruments. Interest on our senior notes is payable semi-annually, in arrears. Floating interest payments on the interest rate swaps are paid quarterly. The fixed-rate interest receivable on the swaps is received semi-annually concurrent with the senior notes interest payments.

Current wording

Interest expense represents interest associated with our debt instruments. Interest on our senior notes is payable semi-annually, in arrears. Floating interest payments on our interest rate swaps are paid quarterly. The fixed-rate interest receivable on the swaps is received semi-annually concurrent with the senior notes interest payments.

Previous wording

Interest expense increased during the three months ended February 28, 2025 as compared to the three months ended March 1, 2024 due to the senior notes issued in April 2024 and January 2025. See Notes 5 and 13 forfurther details regarding our interest rate swaps and debt, respectively.

Current wording

Interest expense increased during the three and six months ended May 30, 2025 as compared to the three and six months ended May 31, 2024 primarily due to the increase in floating rates on our interest rate swaps and higher average debt balances. See Notes 5 and 13 for further details regarding our interest rate swaps and debt, respectively.

Previous wording

Provision for Income Taxes for the Three Months Ended February 28, 2025 and March 1, 2024

Current wording

Provision for Income Taxes for the Three and Six Months Ended May 30, 2025 and May 31, 2024

Previous wording

Our effective tax rate decreased by approximately 19 percentage points for the three months ended February 28, 2025, as compared to the three months ended March 1, 2024. The decrease was primarily due to the impact of the Figma acquisition termination fee incurred in the prior year, which was not deductible for financial statement purposes, and an increase in the anticipated benefit from a foreign tax asset in the current year. The decrease was partially offset by a net tax expense related to stock-based compensation recorded during the three months ended February 28, 2025 as compared to a net tax benefit related to stock-based compensation recorded during the year-ago period.

Current wording

Our effective tax rate increased by approximately two percentage points for the three months ended May 30, 2025, as compared to the three months ended May 31, 2024, primarily due to an increase in the net tax expense related to stock-based compensation during the three months ended May 30, 2025. Our effective tax rate decreased by approximately six percentage points for the six months ended May 30, 2025, as compared to the six months ended May 31, 2024, primarily due to the impact of the Figma acquisition termination fee incurred in the prior year, which was not deductible for financial statement purposes, and an increase in the anticipated benefit from a foreign tax asset in the current year. The decrease was partially offset by a net tax expense related to stock-based compensation recorded during the six months ended May 30, 2025 as compared to a net tax benefit related to stock-based compensation recorded during the year-ago period.

Previous wording

Our effective tax rate for the three months ended February 28, 2025 was lower than the U.S. federal statutory tax rate of 21% primarily due to the net tax benefits from effects of non-U.S. operations and the U.S. federal research tax credit, partially offset by state taxes.

Current wording

Our effective tax rates for the three and six months ended May 30, 2025 were lower than the U.S. federal statutory tax rate of 21% primarily due to the net tax benefits from effects of non-U.S. operations and the U.S. federal research tax credit, partially offset by state taxes and a net tax expense related to stock-based compensation.

Previous wording

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized based on evaluation of all available positive and negative evidence. On the basis of this evaluation, we continue to maintain a valuation allowance to reduce our deferred tax assets to the amount realizable. The total valuation allowance was $762 million as of February 28, 2025, primarily related to certain state credits and capital loss carryforwards.

Current wording

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized based on evaluation of all available positive and negative evidence. On the basis of this evaluation, we continue to maintain a valuation allowance to reduce our deferred tax assets to the amount realizable. The total valuation allowance was $779 million as of May 30, 2025, primarily related to certain state credits and capital loss carryforwards.

Previous wording

The gross liabilities for unrecognized tax benefits excluding interest and penalties were $657 million and $666 million as of February 28, 2025 and March 1, 2024, respectively. If the total unrecognized tax benefits as of February 28, 2025 and March 1, 2024 were recognized, $492 million and $502 million would decrease the respective effective tax rates.

Current wording

The gross liabilities for unrecognized tax benefits excluding interest and penalties were $685 million and $689 million as of May 30, 2025 and May 31, 2024, respectively. If the total unrecognized tax benefits as of May 30, 2025 and May 31, 2024 were recognized, $516 million and $519 million would decrease the respective effective tax rates.

Previous wording

Net cash provided by operating activities of $2.48 billion for the three months ended February 28, 2025 was primarily comprised of net income adjusted for the net effect of non-cash items. Working capital sources of cash included increases in deferred revenue, offset by increases in prepaid expenses and other assets.

Current wording

Net cash provided by operating activities of $4.67 billion for the six months ended May 30, 2025 was primarily comprised of net income adjusted for the net effect of non-cash items. Working capital sources of cash included decreases in trade receivables driven by strong collections, offset by increases in prepaid expenses and other assets.