ADOBE INC.

Previous 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.

Current wording

For our third 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 marketing professionals.

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. Our Adobe Acrobat offerings fuel document productivity, enabling users to create, collaborate, review, approve, sign and track documents at home, in the office and across devices. AI innovation is deeply infused into our Digital Media solutions, including through Adobe Firefly-powered generative AI features available across our Creative Cloud flagship apps, and through Acrobat AI Assistant, a generative AI-powered conversational interface designed to enhance document experiences. Our Digital Media customers include business professionals, consumers, creative professionals, creators and marketing professionals.

Previous 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.

Current wording

Digital Media ARR grew to $18.59 billion at the end of the third quarter of fiscal 2025, representing 11.7% year-over-year growth. Our success in driving growth in ARR has positively affected our revenue growth. Digital Media segment revenue grew to $4.46 billion in the third quarter of fiscal 2025, up from $4.00 billion in the third quarter of fiscal 2024, representing 12% year-over-year growth.

Previous 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.

Current wording

Digital Experience revenue was $1.48 billion in the third quarter of fiscal 2025, up from $1.35 billion in the third quarter of fiscal 2024, representing 9% year-over-year growth. Subscription revenue grew to $1.37 billion in the third quarter of fiscal 2025, up from $1.23 billion in the third quarter of fiscal 2024, representing 11% year-over-year growth.

Previous wording

Our customers often are involved in workflows that integrate multiple Adobe products across both segments. By combining the creativity of our Digital Media business with the science of our Digital Experience business, such as with our Adobe GenStudio solutions, we help our customers to more efficiently and effectively make, manage, measure and monetize their content across every channel with an end-to-end workflow and feedback loop.

Current wording

Our customers often are involved in workflows that integrate multiple Adobe products across both segments. By combining the creativity of our Digital Media business with the science of our Digital Experience business, such as with our Adobe GenStudio solutions, we help our customers to more efficiently and effectively make, manage, measure and monetize their content across every channel with an end-to-end workflow.

Previous 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.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the nine months ended August 29, 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 $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.

Current wording

•Digital Media ARR of approximately $18.59 billion as of August 29, 2025 increased by 11.7% from $16.64 billion as of August 30, 2024 revalued using currency rates determined at the beginning of fiscal 2025.

Previous 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.

Current wording

•Digital Media revenue of $4.46 billion during the three months ended August 29, 2025 increased by $464 million, or 12%, compared to the year-ago period.

Previous 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.

Current wording

•Digital Experience revenue of $1.48 billion during the three months ended August 29, 2025 increased by $122 million, or 9%, compared to the year-ago period.

Previous 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.

Current wording

•Cost of revenue of $642 million during the three months ended August 29, 2025 increased by $88 million, or 16%, compared to the year-ago period.

Previous wording

•Operating expenses of $3.13 billion during the three months ended May 30, 2025 increased by $300 million, or 11%, compared to the year-ago period.

Current wording

•Operating expenses of $3.17 billion during the three months ended August 29, 2025 increased by $311 million, or 11%, compared to the year-ago period.

Previous 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.

Current wording

•Cash flows from operations of $6.87 billion during the nine months ended August 29, 2025 increased by $1.74 billion, or 34%, 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 May 30, 2025 increased by 10% from $17.86 billion as of May 31, 2024.

Current wording

•Remaining performance obligations of $20.44 billion as of August 29, 2025 increased by 13% from $18.14 billion as of August 30, 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 and six months ended May 30, 2025 and May 31, 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 nine months ended August 29, 2025 and August 30, 2024 were as follows:

Previous 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.

Current wording

Revenue from Digital Media increased $464 million and $1.31 billion, and revenue from Digital Experience increased $122 million and $377 million, during the three and nine months ended August 29, 2025 as compared to the three and nine months ended August 30, 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 and six months ended May 30, 2025 and May 31, 2024 were as follows:

Current wording

Subscription revenue by reportable segment for the three and nine months ended August 29, 2025 and August 30, 2024 were as follows:

Previous 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:

Current wording

Digital Media and Digital Experience subscription revenue by customer group for the three and nine months ended August 29, 2025 and August 30, 2024 were as follows:

Previous 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.

Current wording

Overall revenue during the three and nine months ended August 29, 2025 increased in all geographic regions as compared to the three and nine months ended August 30, 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 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.

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 months ended August 29, 2025 as compared to the three months ended August 30, 2024, the U.S. Dollar weakened against EMEA currencies and the Japanese Yen, which resulted in a net increase in revenue in U.S. Dollar equivalents of approximately $43 million and was partially offset by net hedging losses of $12 million from our cash flow hedging program. During the nine months ended August 29, 2025 as compared to the nine months ended August 30, 2024, the U.S. Dollar primarily strengthened against APAC currencies and weakened against EMEA currencies, which resulted in a net decrease in revenue of approximately $55 million and was partially offset by net hedging gains of $26 million.

Previous wording

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

Current wording

Cost of Revenue for the Three and Nine Months Ended August 29, 2025 and August 30, 2024

Previous 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.

Current wording

Cost of subscription revenue increased during the three and nine months ended August 29, 2025 as compared to the three and nine months ended August 30, 2024 primarily due to increases in hosting services and data center costs, as well as the reversal of a loss contingency during the three months ended August 30, 2024.

Previous wording

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

Current wording

Operating Expenses for the Three and Nine Months Ended August 29, 2025 and August 30, 2024

Previous 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.

Current wording

Research and development expenses increased during the three and nine months ended August 29, 2025 as compared to the three and nine months ended August 30, 2024 primarily due to increases in compensation costs.

Previous 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.

Current wording

Sales and marketing expenses increased during the three and nine months ended August 29, 2025 as compared to the three and nine months ended August 30, 2024 primarily due to increases in advertising expenses and compensation costs.

Previous wording

General and administrative 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 software licenses.

Current wording

General and administrative expenses increased during the three and nine months ended August 29, 2025 as compared to the three and nine months ended August 30, 2024 primarily due to increases in compensation costs and software licenses.

Previous wording

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

Current wording

During the nine months ended August 30, 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 and Six Months Ended May 30, 2025 and May 31, 2024

Current wording

Non-Operating Income (Expense), Net for the Three and Nine Months Ended August 29, 2025 and August 30, 2024

Previous 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.

Current wording

Interest expense increased during the three and nine months ended August 29, 2025 as compared to the three and nine months ended August 30, 2024 primarily due to higher average debt balances. See Notes 5 and 13 for further details regarding our interest rate swaps anddebt, respectively.

Previous wording

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

Current wording

Provision for Income Taxes for the Three and Nine Months Ended August 29, 2025 and August 30, 2024

Previous 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.

Current wording

Our effective tax rate increased by approximately one percentage point for the three months ended August 29, 2025, as compared to the three months ended August 30, 2024, primarily due to a net tax expense related to stock-based compensation recorded during the three months ended August 29, 2025 as compared to a net tax benefit related to stock-based compensation recorded during the year-ago period. Our effective tax rate decreased by approximately four percentage points for the nine months ended August 29, 2025, as compared to the nine months ended August 30, 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 nine months ended August 29, 2025 as compared to a net tax benefit related to stock-based compensation recorded during the year-ago period.

Previous 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.

Current wording

Our effective tax rates for the three and nine months ended August 29, 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 $779 million as of May 30, 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 $805 million as of August 29, 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 $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.

Current wording

The gross liabilities for unrecognized tax benefits excluding interest and penalties were $715 million and $703 million as of August 29, 2025 and August 30, 2024, respectively. If the total unrecognized tax benefits as of August 29, 2025 and August 30, 2024 were recognized, $542 million and $539 million would decrease the respective effective tax rates.

Previous wording

Our primary source of cash is receipts from revenue. Other customary sources of cash include proceeds from maturities and sales of short-term investments and issuance of debt instruments. Our primary uses of cash are general business expenses including payroll and related benefits costs, income taxes, marketing and third-party hosting services, as well as our stock repurchase program as described below. Other customary uses of cash include purchases of short-term investments, property and equipment, payments for taxes related to net share settlement of equity awards, and repayment of debt instruments.

Current wording

Our primary source of cash is receipts from revenue. Other customary sources of cash include proceeds from maturities and sales of short-term investments and issuance of debt instruments. Our primary uses of cash are general business expenses including payroll and related benefits costs, income taxes, marketing and third-party hosting services, as well as our stock repurchase program as described below. Other customary uses of cash include purchases of short-term investments, property and equipment, payments for taxes related to net share settlement of equity awards, repayment of debt instruments and business acquisitions.

Previous 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.

Current wording

Net cash provided by operating activities of $6.87 billion for the nine months ended August 29, 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 driven by our Digital Experience and Digital Media offerings. The primary working capital uses of cash included decreases in accrued expenses and other liabilities and increases in prepaid expenses and other assets.

Previous wording

Net cash used for investing activities of $762 million for the six months ended May 30, 2025 was primarily due to purchases of short-term and long-term investments, net of proceeds from the maturities of short-term investments.

Current wording

Net cash used for investing activities of $1.04 billion for the nine months ended August 29, 2025 was primarily due to purchases of short-term and long-term investments, net of proceeds from the maturities of short-term investments, and ongoing capital expenditures.

Previous wording

Net cash used for financing activities of $6.63 billion for the six months ended May 30, 2025 was primarily due to payments for our common stock repurchases and repayment of our 1.90% 2025 Notes and 3.25% 2025 Notes. These uses of cash were offset in part by proceeds from the issuance of senior notes. See the sections titled “Senior Notes” and “Stock Repurchase Program” below.

Current wording

Net cash used for financing activities of $8.51 billion for the nine months ended August 29, 2025 was primarily due to payments for our common stock repurchases and repayment of our 1.90% 2025 Notes and 3.25% 2025 Notes. These uses of cash were offset in part by proceeds from the issuance of senior notes. See the sections titled “Senior Notes” and “Stock Repurchase Program” below.

Previous wording

Our cash equivalent and short-term investment portfolio as of May 30, 2025 primarily consisted of money market funds, corporate debt securities, U.S. Treasury securities and time deposits. We use professional investment management firms to manage a large portion of our invested cash.

Current wording

Our cash equivalent and short-term investment portfolio as of August 29, 2025 primarily consisted of money market funds, corporate debt securities, U.S. Treasury securities and time deposits.

Previous wording

In January 2025, we issued $800 million of senior notes due January 17, 2028, $700 million of senior notes due January 17, 2030 and $500 million of senior notes due January 17, 2035. In total, we have $6.15 billion of senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. During the six months ended May 30, 2025, we entered into interest rate swaps for certain of our senior notes that effectively convert the fixed interest rates on the notes to floating interest rates. As of May 30, 2025, the carrying value of our senior notes was $6.17 billion, net of fair value of the interest rate swaps and unamortized discount and debt issuance costs, and our maximum commitment for interest payments was $1.20 billion for the remaining duration of our outstanding senior notes and interest rate swaps. Interest on the notes is payable semi-annually, in arrears, and interest on the swaps is payable quarterly. Our senior notes do not contain any financial covenants. See Note 13 of our notes to condensed consolidated financial statements for further details regarding our debt.

Current wording

In January 2025, we issued $800 million of senior notes due January 17, 2028, $700 million of senior notes due January 17, 2030 and $500 million of senior notes due January 17, 2035. In total, we have $6.15 billion of senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. During the nine months ended August 29, 2025, we entered into interest rate swaps for certain of our senior notes that effectively convert the fixed interest rates on the notes to floating interest rates. As of August 29, 2025, the carrying value of our senior notes was $6.20 billion, net of fair value of the interest rate swaps and unamortized discount and debt issuance costs, and our maximum commitment for interest payments was $1.09 billion for the remaining duration of our outstanding senior notes and interest rate swaps. Interest on the notes is payable semi-annually, in arrears, and interest on the swaps is payable quarterly. Our senior notes do not contain any financial covenants. See Note 13 of our notes to condensed consolidated financial statements for further details regarding our debt.

Previous wording

Our principal commitments as of May 30, 2025 consisted of purchase obligations resulting from agreements to purchase goods and services in the ordinary course of business and obligations under operating lease arrangements. During the second quarter of fiscal 2025, we executed agreements associated with certain of our long-term supplier commitments that increased our minimum purchase obligations by approximately $1.3 billion through December 2029. There have been no other material changes in our purchase obligations during the six months ended May 30, 2025.

Current wording

Our principal commitments as of August 29, 2025 consisted of purchase obligations resulting from agreements to purchase goods and services in the ordinary course of business and obligations under operating lease arrangements. During the second quarter of fiscal 2025, we executed agreements associated with certain of our long-term supplier commitments that increased our minimum purchase obligations by approximately $1.3 billion through December 2029. There have been no other material changes in our purchase obligations during the nine months ended August 29, 2025.