ADOBE INC.
For the period ended May 29, 2026. Filed Jun 15, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 29, 2026 · Filed Jun 15, 2026
ADBE$239.30-2.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-02-27; filed 2026-03-25.
0000796343-26-000056
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-05-29; filed 2026-06-15.
0000796343-26-000112
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 131 previous paragraphs and 139 current paragraphs.
82 unchanged; 43 reworded; 14 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Creative & Marketing Professionals customer group subscription revenue was $4.54 billion in the second quarter of fiscal 2026, up from $4.02 billion in the second quarter of fiscal 2025, representing 13% year-over-year growth.
Current report
Business Combinations
Current report
We allocate the purchase price of acquired companies to tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies, and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include, but are not limited to:
Current report
•future expected cash flows from software license sales, subscriptions, support agreements, consulting contracts and acquired developed technologies and patents;
Current report
•expected costs to develop acquired technologies and patents internally into commercially viable products;
Current report
•historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
Current report
•the acquired company’s trade name and trademarks as well as assumptions about the period of time the acquired trade name and trademarks will continue to be used in the combined company’s product portfolio;
Current report
•the expected use of the acquired assets; and
Current report
•discount rates.
Current report
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.
Current report
•Total subscription revenue of $6.42 billion during the three months ended May 29, 2026 increased by $775 million, or 14%, compared to the year-ago period.
Current report
•Operating expenses of $3.67 billion during the three months ended May 29, 2026 increased by $539 million, or 17%, compared to the year-ago period.
Current report
•Net income of $1.71 billion during the three months ended May 29, 2026 remained relatively flat compared to the year-ago period.
Current report
During the six months ended May 29, 2026, we recorded a goodwill impairment charge related to our Publishing & Advertising reporting unit. During the six months ended May 29, 2026, we also incurred loss contingencies associated with a legal settlement and other legal matters. See Note 13 for further details regardingthe legals ettlement.
Removed paragraphs (6)
Previous report
Creative & Marketing Professionals customer group subscription revenue was $4.39 billion in the first quarter of fiscal 2026, up from $3.92 billion in the first quarter of fiscal 2025, representing 12% year-over-year growth.
Previous report
•Total revenue of $6.40 billion during the three months ended February 27, 2026 increased by $684 million, or 12%, compared to the year-ago period.
Previous report
•Operating expenses of $3.32 billion during the three months ended February 27, 2026 increased by $387 million, or 13%, compared to the year-ago period.
Previous report
•Net income of $1.89 billion during the three months ended February 27, 2026 increased by $78 million, or 4%, compared to the year-ago period.
Previous report
During the three months ended February 27, 2026, we incurred a loss contingency associated with a legal settlement. See Note 12 for further details regarding ourlegal proceedings.
Previous report
On November 18, 2025, we entered into a definitive agreement to acquire Semrush Holdings, Inc., a publicly held brand visibility platform company, for approximately $1.9 billion, primarily in cash consideration. The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in the second quarter of fiscal 2026. We expect to finance the acquisition using cash on hand.
Reworded paragraphs (43)
Previous wording
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding product plans, future growth, market opportunities, including artificial intelligence (“AI”) opportunities, customer needs, business and finance strategies, macroeconomic conditions, fluctuations in foreign currency exchange rates, strategic investments, industry positioning, customer acquisition and retention, the amount of annualized recurring revenue and revenue growth. In addition, when used in this report, the words “will,” “expects,” “could,” “would,” “may,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “intends to,” “continues” and similar expressions, as well as statements regarding our focus for the future, are generally intended to identify forward-looking statements. Each of the forward-looking statements we make in this report involves risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part II, Item 1A of this report. The risks described herein and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for fiscal 2025, should be carefully reviewed. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document, except as required by law.
Current wording
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding product plans, future growth, market opportunities, including artificial intelligence (“AI”) opportunities, customer needs, business and finance strategies, macroeconomic conditions, fluctuations in foreign currency exchange rates, strategic investments, industry positioning, customer acquisition and retention, the amount of annualized recurring revenue and revenue growth. In addition, when used in this report, the words “will,” “expects,” “could,” “would,” “may,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “targets,” “estimates,” “continues” and similar expressions, as well as statements regarding our focus for the future, are generally intended to identify forward-looking statements. Each of the forward-looking statements we make in this report involves risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part II, Item 1A of this report. The risks described herein and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for fiscal 2025, should be carefully reviewed. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document, except as required by law.
Previous wording
For our first quarter of fiscal 2026, we experienced strong demand across our portfolio of solutions, 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.
Current wording
In our second quarter of fiscal 2026, we experienced strong demand across our portfolio of subscription-based solutions, 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.
Previous wording
Our solutions targeted toward the Creative & Marketing Professionals customer group consist of our customer experience orchestration offerings as well as Creative Cloud flagship apps such as Photoshop, Lightroom, Illustrator and Premiere. Creators, creative professionals and marketing professionals require agile and comprehensive solutions to create high volumes of compelling content, infused with commercially safe AI capabilities. For creators and creative professionals, we offer an end-to-end, ideation-to-creation platform powered by our commercially safe Adobe Firefly models and an expansive partner model ecosystem, offering customers choice and flexibility. For marketing professionals, we unify creative production and marketing execution with comprehensive content supply chain solutions that deliver end-to-end customer experience orchestration solutions, automate workflows and personalize experiences and engagement at scale across channels. Our customer experience orchestration solutions 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. Adobe Experience Platform is a customer data platform that serves as a foundation in enterprises for digital customer engagement by unifying our comprehensive set of AI-powered apps and agents to build, deliver, and optimize marketing campaigns and customer experiences. Adobe’s integrated solutions, such as GenStudio and Firefly Services, bridge the gap between content creation and marketing execution, enabling seamless collaboration and efficiency across the entire content lifecycle spanning content ideation, creation, production, and activation.
Current wording
Our solutions targeted toward the Creative & Marketing Professionals customer group consist of our customer experience orchestration offerings as well as Creative Cloud flagship apps such as Photoshop, Lightroom, Illustrator and Premiere. Creators, creative professionals and marketing professionals require agile and comprehensive solutions to create high volumes of compelling content, infused with commercially safe AI capabilities. For creators and creative professionals, we offer an end-to-end, ideation-to-creation platform powered by our commercially safe Adobe Firefly models and an expansive partner model ecosystem, offering customers choice and flexibility. For marketing professionals, we unify creative production and marketing execution with content supply chain solutions that deliver end-to-end customer experience orchestration solutions, automate workflows and personalize experiences and engagement at scale across channels. Our customer experience orchestration solutions 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. Adobe Experience Platform is a customer data platform that serves as a foundation in enterprises for digital customer engagement by unifying our comprehensive set of AI-powered apps and agents to build, deliver, and optimize marketing campaigns and customer experiences. Adobe’s integrated solutions, such as GenStudio and Firefly Services, bridge the gap between content creation and marketing execution, enabling seamless collaboration and efficiency across the entire content lifecycle spanning content ideation, creation, production and activation. In addition, our acquisition of Semrush in April 2026 enhances our Adobe Experience Manager offerings with search engine optimization and generative engine optimization solutions.
Previous wording
Our solutions targeted toward the Business Professionals & Consumers customer group consist of Adobe Acrobat offerings and Adobe Express. Business professionals and consumers desire web and mobile apps with easy-to-use AI capabilities that enable them to create, collaborate and derive insights across multiple media types and channels. 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. Acrobat AI Assistant provides users with conversational experiences to quickly and accurately derive insights within individual documents, or across documents in PDF Spaces. 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. Acrobat Studio is an all-in-one platform for productivity and creation that unites Adobe Acrobat, Adobe Express and AI agents to enable people to quickly, easily and intuitively work.
Current wording
Our solutions targeted toward the Business Professionals & Consumers customer group consist of Adobe Acrobat offerings and Adobe Express. Business professionals and consumers desire web and mobile apps with easy-to-use AI capabilities that enable them to create, collaborate and derive insights across multiple media types and channels. 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. Acrobat AI Assistant provides users with conversational experiences to quickly and accurately derive insights within individual documents, or across documents in PDF Spaces. 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. Acrobat Studio is an all-in-one platform for productivity and creation that unites Adobe Acrobat, Adobe Express and AI agents to enable users to quickly, easily and intuitively work.
Previous wording
Business Professionals & Consumers customer group subscription revenue was $1.78 billion in the first quarter of fiscal 2026, up from $1.53 billion in the first quarter of fiscal 2025, representing 16% year-over-year growth.
Current wording
Business Professionals & Consumers customer group subscription revenue was $1.85 billion in the second quarter of fiscal 2026, up from $1.60 billion in the second quarter of fiscal 2025, representing 16% year-over-year growth.
Previous wording
Total Adobe ARR grew to $26.06 billion at the end of the first quarter of fiscal 2026, representing 10.9% year-over-year growth driven by strength in Creative Cloud Pro, Acrobat, and Adobe Experience Platform and related apps, partially offset by a decrease from Adobe Stock. Our success in driving growth in ARR has positively affected our revenue growth. Total customer group subscription revenue grew to $6.17 billion in the first quarter of fiscal 2026, up from $5.46 billion in the first quarter of fiscal 2025, representing 13% year-over-year growth.
Current wording
Total Adobe ARR grew to $27.10 billion at the end of the second quarter of fiscal 2026, representing 12.5% year-over-year growth, including approximately $480 million from the Semrush acquisition and further driven by strength in Creative Cloud Pro, Acrobat, and Adobe Experience Platform and related apps. Our success in driving growth in ARR has positively affected our revenue growth. Total customer group subscription revenue grew to $6.39 billion in the second quarter of fiscal 2026, up from $5.61 billion in the second quarter of fiscal 2025, representing 14% year-over-year growth.
Previous wording
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition and income taxes have the greatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.
Current wording
We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, business combinations and income taxes have the greatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.
Previous wording
There have been no significant changes in our critical accounting policies and estimates during the three months ended February 27, 2026, 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 28, 2025.
Current wording
There have been no other changes in our critical accounting policies and estimates during the six months ended May 29, 2026, 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 28, 2025.
Previous wording
•Total Adobe ARR of $26.06 billion as of February 27, 2026 increased by 10.9% from $23.50 billion as of February 28, 2025 revalued using currency rates determined at the beginning of fiscal 2026.
Current wording
•Total Adobe ARR of $27.10 billion as of May 29, 2026 increased by 12.5% from $24.08 billion as of May 30, 2025 revalued using currency rates determined at the beginning of fiscal 2026.
Previous wording
•Total subscription revenue of $6.20 billion during the three months ended February 27, 2026 increased by $715 million, or 13%, compared to the year-ago period.
Current wording
•Total revenue of $6.62 billion during the three months ended May 29, 2026 increased by $745 million, or 13%, compared to the year-ago period.
Previous wording
•Cost of revenue of $664 million during the three months ended February 27, 2026 increased by $42 million, or 7%, compared to the year-ago period.
Current wording
•Cost of revenue of $715 million during the three months ended May 29, 2026 increased by $77 million, or 12%, compared to the year-ago period.
Previous wording
•Cash flows from operations of $2.96 billion during the three months ended February 27, 2026 increased by $476 million, or 19%, compared to the year-ago period.
Current wording
•Cash flows from operations of $5.12 billion during the six months ended May 29, 2026 increased by $450 million, or 10%, compared to the year-ago period.
Previous wording
•Remaining performance obligations of $22.22 billion as of February 27, 2026 increased by 13% from $19.69 billion as of February 28, 2025.
Current wording
•Remaining performance obligations of $22.27 billion as of May 29, 2026 increased by 13% from $19.69 billion as of May 30, 2025.
Previous wording
Revenue for the Three Months Ended February 27, 2026 and February 28, 2025
Current wording
Revenue for the Three and Six Months Ended May 29, 2026 and May 30, 2025
Previous wording
Subscription revenue by customer group for the three months ended February 27, 2026 and February 28, 2025 were as follows:
Current wording
Subscription revenue by customer group for the three and six months ended May 29, 2026 and May 30, 2025 were as follows:
Previous wording
Increases in subscription revenue for the Creative & Marketing Professionals customer group were driven by strength in Creative Cloud Pro and other flagship apps, Adobe Experience Platform and related apps, Adobe Experience Manager and GenStudio solutions. Increases in subscription revenue for the Business Professionals & Consumers customer group were driven by strength in Acrobat.
Current wording
Increases in subscription revenue for the Creative & Marketing Professionals customer group were driven by strength in Creative Cloud Pro and other flagship apps, Adobe Experience Platform and related apps, and Adobe Experience Manager. Increases in subscription revenue for the Business Professionals & Consumers customer group were driven by strength in Acrobat.
Previous wording
Revenue by geographic area for the three months ended February 27, 2026 and February 28, 2025 were as follows:
Current wording
Revenue by geographic area for the three and six months ended May 29, 2026 and May 30, 2025 were as follows:
Previous wording
Overall revenue during the three months ended February 27, 2026 increased in all geographic regions as compared to the three months ended February 28, 2025. Within each geographic region, the fluctuations in revenue were attributable to the factors noted in the customer group subscription revenue information above.
Current wording
Overall revenue during the three and six months ended May 29, 2026 increased in all geographic regions as compared to the three and six months ended May 30, 2025. Within each geographic region, the fluctuations in revenue were attributable to the factors noted in the customer group subscription revenue 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 months ended February 27, 2026 as compared to the three months ended February 28, 2025, the U.S. Dollar primarily weakened against EMEA currencies, which resulted in a net increase in revenue in U.S. Dollar equivalents of approximately $123 million and was partially offset by net hedging losses of $49 million from our cash flow hedging program.
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 29, 2026 as compared to the three and six months ended May 30, 2025, the U.S. Dollar primarily weakened against EMEA currencies, which resulted in a net increase in revenue in U.S. Dollar equivalents of approximately $116 million and $240 million in the respective periods. The foreign currency impacts to revenue were partially offset by net hedging losses from our cash flow hedging program of $22 million and $71 million, respectively, as compared to the year-ago periods.
Previous wording
Cost of Revenue for the Three Months Ended February 27, 2026 and February 28, 2025
Current wording
Cost of Revenue for the Three and Six Months Ended May 29, 2026 and May 30, 2025
Previous wording
Cost of subscription revenue increased during the three months ended February 27, 2026 as compared to the three months ended February 28, 2025 primarily due to the following:
Current wording
Cost of subscription revenue increased during the three and six months ended May 29, 2026 as compared to the three and six months ended May 30, 2025 primarily due to the following:
Previous wording
Operating Expenses for the Three Months Ended February 27, 2026 and February 28, 2025
Current wording
Operating Expenses for the Three and Six Months Ended May 29, 2026 and May 30, 2025
Previous wording
Research and development expenses increased during the three months ended February 27, 2026 as compared to the three months ended February 28, 2025 primarily due to increases in compensation costs.
Current wording
Research and development expenses increased during the three and six months ended May 29, 2026 as compared to the three and six months ended May 30, 2025 primarily due to increases in compensation costs.
Previous wording
Sales and marketing expenses increased during the three months ended February 27, 2026 as compared to the three months ended February 28, 2025 primarily due to increases in advertising expenses and, to a lesser extent, compensation costs.
Current wording
Sales and marketing expenses increased during the three and six months ended May 29, 2026 as compared to the three and six months ended May 30, 2025 primarily due to increases in advertising expenses and, to a lesser extent, 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, 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.
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, impairment of goodwill, charitable contributions, provision for bad debts and various forms of insurance.
Previous wording
General and administrative expenses increased during the three months ended February 27, 2026 as compared to the three months ended February 28, 2025 due to the following:
Current wording
General and administrative expenses increased during the three and six months ended May 29, 2026 as compared to the three and six months ended May 30, 2025 due to the following:
Previous wording
Non-Operating Income (Expense), Net for the Three Months Ended February 27, 2026 and February 28, 2025
Current wording
Non-Operating Income (Expense), Net for the Three and Six Months Ended May 29, 2026 and May 30, 2025
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 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. See Notes 5 and 13 for further details regarding our interest rate swaps and debt, respectively.
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. See Notes 6 and 14 for further details regarding our interest rate swaps and debt, respectively.
Previous wording
Other income (expense), net decreased during the three months ended February 27, 2026 as compared to the three months ended February 28, 2025 primarily due to decreases in interest income driven by lower average overall cash balances and interest rates.
Current wording
Other income (expense), net decreased during the three months ended May 29, 2026 as compared to the three months ended May 30, 2025 primarily due to higher foreign exchange losses. Other income (expense), net decreased during the six months ended May 29, 2026 as compared to the six months ended May 30, 2025 primarily due to decreases in interest income driven by lower average overall cash balances and interest rates, as well as higher foreign exchange losses.
Previous wording
Provision for Income Taxes for the Three Months Ended February 27, 2026 and February 28, 2025
Current wording
Provision for Income Taxes for the Three and Six Months Ended May 29, 2026 and May 30, 2025
Previous wording
Our effective tax rate increased by approximately five percentage points for the three months ended February 27, 2026, as compared to the three months ended February 28, 2025, primarily due to an increase in the anticipated benefit from a foreign tax asset in the prior year, and an increase in the net tax expense related to stock-based compensation and decrease in the net tax benefit from effects of non-U.S. operations in the current year.
Current wording
Our effective tax rate increased by approximately four percentage points for the three months ended May 29, 2026, as compared to the three months ended May 30, 2025, primarily due to a decrease in the net tax benefit from effects of non-U.S. operations, an increase in state taxes, and a goodwill impairment charge which is not deductible for income tax purposes. Our effective tax rate increased by approximately five percentage points for the six months ended May 29, 2026, as compared to the six months ended May 30, 2025, primarily due to an increase in the anticipated benefit from a foreign tax asset in the prior year, and a decrease in the net tax benefit from effects of non-U.S. operations and increase in the net tax expense related to stock-based compensation in the current year.
Previous wording
Our effective tax rate for the three months ended February 27, 2026 was higher than the U.S. federal statutory tax rate of 21% primarily due to state taxes and a net tax expense related to stock-based compensation, partially offset by net tax benefits from the effects of non-U.S. operations and the U.S. federal research tax credit.
Current wording
Our effective tax rates for the three and six months ended May 29, 2026 were higher than the U.S. federal statutory tax rate of 21% primarily due to state taxes and a net tax expense related to stock-based compensation, partially offset by net tax benefits from the effects of non-U.S. operations and the U.S. federal research tax credit.
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 $833 million as of February 27, 2026, primarily related to certain U.S. state and federal 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 $862 million as of May 29, 2026, primarily related to certain U.S. state and federal credits and capital loss carryforwards.
Previous wording
The gross liabilities for unrecognized tax benefits excluding interest and penalties were $702 million and $657 million as of February 27, 2026 and February 28, 2025, respectively. If the total unrecognized tax benefits as of February 27, 2026 and February 28, 2025 were recognized, $536 million and $492 million would decrease the respective effective tax rates.
Current wording
The gross liabilities for unrecognized tax benefits excluding interest and penalties were $736 million and $685 million as of May 29, 2026 and May 30, 2025, respectively. If the total unrecognized tax benefits as of May 29, 2026 and May 30, 2025 were recognized, $563 million and $516 million would decrease the respective effective tax rates.
Previous wording
Net cash provided by operating activities of $2.96 billion for the three months ended February 27, 2026 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 cash collections and increases in deferred revenue due to the timing of billings during the quarter. The primary working capital uses of cash included decreases in accrued expenses and other liabilities largely driven by the payment of accrued bonuses.
Current wording
Net cash provided by operating activities of $5.12 billion for the six months ended May 29, 2026 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 cash collections and increases in deferred revenue due to the timing of billings during the period. The primary working capital uses of cash included increases in prepaid expenses and other assets and decreases in accrued expenses and other liabilities.
Previous wording
Net cash provided by investing activities of $474 million for the three months ended February 27, 2026 was primarily due to proceeds from the maturities of short-term investments, offset in part by purchases of short-term and long-term investments.
Current wording
Net cash used for investing activities of $1.24 billion for the six months ended May 29, 2026 was primarily due to our acquisition of Semrush in the second quarter of fiscal 2026, as well as purchases of short-term investments, partially offset by proceeds from maturities of short-term investments. See Note 3 for further details regarding this acquisition.
Previous wording
Net cash used for financing activities of $2.54 billion for the three months ended February 27, 2026 was primarily due to payments for our common stock repurchases and taxes paid related to the net share settlement of equity awards. These uses of cash were offset in part by proceeds from re-issuance of treasury stock related to our employee stock purchase plan. See the section titled “Stock Repurchase Program” below.
Current wording
Net cash used for financing activities of $4.40 billion for the six months ended May 29, 2026 was primarily due to payments for our common stock repurchases and taxes paid related to the net share settlement of equity awards. These uses of cash were offset in part by proceeds from the issuance of commercial paper. See the section titled “Stock Repurchase Program” below.
Previous wording
We have a commercial paper program under which we may issue unsecured commercial paper up to a total of $3 billion outstanding at any time, with maturities of up to 397 days from the date of issue. The net proceeds from the issuance of commercial paper are expected to be used for general corporate purposes, which may include working capital, capital expenditures, acquisitions, stock repurchases, refinancing indebtedness or any other general corporate purposes. As of February 27, 2026, there were no outstanding borrowings under the commercial paper program.
Current wording
We have a commercial paper program under which we may issue unsecured commercial paper up to a total of $3 billion outstanding at any time, with maturities of up to 397 days from the date of issue. The net proceeds from the issuance of commercial paper are used for general corporate purposes, which may include working capital, capital expenditures, acquisitions, stock repurchases, refinancing indebtedness or any other general corporate purposes. As of May 29, 2026, the carrying value of our commercial paper was $494 million, net of the related discount.
Previous wording
We have $6.15 billion of senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. As of February 27, 2026, the carrying value of our senior notes was $6.23 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 $933 million 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
We have $6.15 billion of senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. As of May 29, 2026, the carrying value of our senior notes was $6.15 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 $974 million 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 14 of our notes to condensed consolidated financial statements for further details regarding our debt.
Previous wording
During the first quarter of fiscal 2026, we reclassified the senior notes due February 1, 2027 as current debt in our condensed consolidated balance sheets. As of February 27, 2026, the carrying value of our current debt was $849 million, net of the related discount and issuance costs. We intend to refinance the current portion of our debt on or before the due date, subject to market conditions.
Current wording
During the six months ended May 29, 2026, we reclassified the senior notes due February 1, 2027 and April 4, 2027 as current debt in our condensed consolidated balance sheets. As of May 29, 2026, the carrying value of the current portion of our senior notes was $1.35 billion, net of the related discount and issuance costs. We intend to refinance the current portion of our debt on or before the due date, subject to market conditions.
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