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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
 
FORM 10-Q
(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 29, 2025
  or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    
 
Commission File Number: 0-15175
 
ADOBE INC.
(Exact name of registrant as specified in its charter)
________________________________

Delaware 77-0019522
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)

345 Park Avenue , San Jose , California 95110-2704
(Address of principal executive offices and zip code)

( 408 )  536-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.0001 par value per share ADBE NASDAQ

________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No ☒
As of September 19, 2025, 418.6 million shares of the registrant’s common stock, $0.0001 par value per share, were issued and outstanding.

ADOBE INC.
FORM 10-Q
 
TABLE OF CONTENTS
 

    Page No.

PART I—FINANCIAL INFORMATION  
Item 1.

Condensed Consolidated Financial Statements:
3

 

Condensed Consolidated Balance Sheets
August 29, 2025 and November 29, 2024
3

 

Condensed Consolidated Statements of Income
Three and Nine Months Ended August 29, 2025 and August 30, 2024
4

Condensed Consolidated Statements of Comprehensive Income
Three and Nine Months Ended August 29, 2025 and August 30, 2024
5

Condensed Consolidated Statements of Stockholders’ Equity
Three and Nine Months Ended August 29, 2025 and August 30, 2024
6

 

Condensed Consolidated Statements of Cash Flows
Nine Months Ended August 29, 2025 and August 30, 2024
8

 

Notes to Condensed Consolidated Financial Statements
9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations
26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk
37

Item 4.

Controls and Procedures
37

 PART II—OTHER INFORMATION  
Item 1.

Legal Proceedings
38

Item 1A.

Risk Factors
38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds
50

Item 5.

Other Information
50

Item 6.

Exhibits
51

Signature
52

Summary of Trademarks
53

 
2

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ADOBE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)

  August 29,
2025 November 29,
2024
(Unaudited) (*)
ASSETS
Current assets:    
Cash and cash equivalents $ 4,982   $ 7,613  
Short-term investments 958   273  
Trade receivables, net of allowances for doubtful accounts of $ 14 for both periods
2,093   2,072  
Prepaid expenses and other current assets 1,379   1,274  
Total current assets 9,412   11,232  
Property and equipment, net 1,908   1,936  
Operating lease right-of-use assets, net 307   281  
Goodwill 12,862   12,788  
Other intangibles, net 555   782  
Deferred income taxes 2,092   1,657  
Other assets 1,618   1,554  
Total assets $ 28,754   $ 30,230  

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:    
Trade payables $ 337   $ 361  
Accrued expenses and other current liabilities
2,289   2,336  
Debt —   1,499  
Deferred revenue 6,385   6,131  
Income taxes payable 154   119  
Operating lease liabilities 74   75  
Total current liabilities 9,239   10,521  
Long-term liabilities:  
Debt 6,200   4,129  
Deferred revenue 149   128  
Income taxes payable 502   548  
Operating lease liabilities 362   353  
Other liabilities 532   446  
Total liabilities 16,984   16,125  
Stockholders’ equity:  
Preferred stock, $ 0.0001 par value; 2 shares authorized; none issued
—   —  
Common stock, $ 0.0001 par value; 900 shares authorized; 601 shares issued; 
420 and 441 shares outstanding, respectively
—   —  
Additional paid-in capital 14,968   13,419  
Retained earnings 43,516   38,470  
Accumulated other comprehensive income (loss) ( 341 ) ( 201 )
Treasury stock, at cost ( 181 and 160 shares, respectively)
( 46,373 ) ( 37,583 )
Total stockholders’ equity 11,770   14,105  
Total liabilities and stockholders’ equity $ 28,754   $ 30,230  

_________________________________________
( * )      The condensed consolidated balance sheet as of November 29, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3

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ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)

  Three Months Ended Nine Months Ended
  August 29,
2025 August 30,
2024 August 29,
2025 August 30,
2024
Revenue:  
Subscription $ 5,791   $ 5,180   $ 16,915   $ 15,156  
Product 68   82   251   305  
Services and other 129   146   409   438  
Total revenue 5,988   5,408   17,575   15,899  
 
Cost of revenue:
Subscription 510   413   1,505   1,324  
Product 5   6   17   19  
Services and other 127   135   380   399  
Total cost of revenue 642   554   1,902   1,742  
Gross profit 5,346   4,854   15,673   14,157  
 
Operating expenses:
Research and development 1,088   1,022   3,196   2,945  
Sales and marketing 1,639   1,431   4,760   4,228  
General and administrative 408   366   1,152   1,073  
Acquisition termination fee
—   —   —   1,000  
Amortization of intangibles 38   43   120   127  
Total operating expenses 3,173   2,862   9,228   9,373  
 Operating income 2,173   1,992   6,445   4,784  
 
Non-operating income (expense):
Interest expense ( 67 ) ( 51 ) ( 197 ) ( 119 )
Investment gains (losses), net 23   12   31   34  
Other income (expense), net 58   89   191   241  
Total non-operating income (expense), net 14   50   25   156  
Income before income taxes 2,187   2,042   6,470   4,940  
Provision for income taxes 415   358   1,196   1,063  
Net income $ 1,772   $ 1,684   $ 5,274   $ 3,877  
Basic net income per share $ 4.18   $ 3.78   $ 12.28   $ 8.63  
Shares used to compute basic net income per share 423   445   429   449  
Diluted net income per share $ 4.18   $ 3.76   $ 12.26   $ 8.58  
Shares used to compute diluted net income per share 424   448   430   452  

See accompanying notes to condensed consolidated financial statements.

4

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ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)

Three Months Ended Nine Months Ended
  August 29,
2025 August 30,
2024 August 29,
2025 August 30,
2024

Increase/(Decrease) Increase/(Decrease)
Net income $ 1,772   $ 1,684   $ 5,274   $ 3,877  
Other comprehensive income (loss), net of taxes:
Available-for-sale securities:
Unrealized gains / losses on available-for-sale securities —   3   1   10  

Derivatives designated as hedging instruments:
Unrealized gains / losses on derivative instruments
( 44 ) ( 60 ) ( 231 ) ( 59 )
Reclassification adjustment for realized gains / losses on derivative instruments 15   1   ( 8 ) 9  
Net increase (decrease) from derivatives designated as hedging instruments ( 29 ) ( 59 ) ( 239 ) ( 50 )
Foreign currency translation adjustments 21   23   98   16  
Other comprehensive income (loss), net of taxes ( 8 ) ( 33 ) ( 140 ) ( 24 )
Total comprehensive income, net of taxes $ 1,764   $ 1,651   $ 5,134   $ 3,853  

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)

Three Months Ended August 29, 2025

  Common Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock  
  Shares Amount Shares Amount Total
Balances at May 30, 2025
601   $ —   $ 14,375   $ 41,744   $ ( 333 ) ( 174 ) $ ( 44,338 ) $ 11,448  
Net income —  —  —  1,772   —  —  —  1,772  
Other comprehensive income (loss),
net of taxes
—  —  —  —  ( 8 ) —  —  ( 8 )
Re-issuance of treasury stock under stock compensation plans
—  —  96   —  —  1   46   142  
Repurchases of common stock —  —  —  —  —  ( 8 ) ( 2,081 ) ( 2,081 )

Stock-based compensation —  —  497   —   —  —  —  497  

Balances at August 29, 2025
601   $ —   $ 14,968   $ 43,516   $ ( 341 ) ( 181 ) $ ( 46,373 ) $ 11,770  

Three Months Ended August 30, 2024

  Common Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock  
  Shares Amount Shares Amount Total
Balances at May 31, 2024
601   $ —   $ 12,504   $ 35,227   $ ( 276 ) ( 152 ) $ ( 32,612 ) $ 14,843  
Net income
—  —  —  1,684   —  —  —  1,684  
Other comprehensive income (loss),
net of taxes
—  —  —  —  ( 33 ) —  —  ( 33 )
Re-issuance of treasury stock under stock compensation plans
—  —  48   —  —  1   48   96  
Repurchases of common stock —  —  —  —  —  ( 5 ) ( 2,519 ) ( 2,519 )

Stock-based compensation —  —  474   —  —  —  —  474  

Balances at August 30, 2024
601   $ —   $ 13,026   $ 36,911   $ ( 309 ) ( 156 ) $ ( 35,083 ) $ 14,545  

6

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ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)

Nine Months Ended August 29, 2025

  Common Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock  
  Shares Amount Shares Amount Total
Balances at November 29, 2024
601   $ —   $ 13,419   $ 38,470   $ ( 201 ) ( 160 ) $ ( 37,583 ) $ 14,105  
Net income —  —  —  5,274   —  —  —  5,274  
Other comprehensive income (loss),
net of taxes
—  —  —  —  ( 140 ) —  —  ( 140 )
Re-issuance of treasury stock under stock compensation plans
—  —  96   ( 228 ) —  3   99   ( 33 )
Repurchases of common stock —  —  —  —  —  ( 24 ) ( 8,889 ) ( 8,889 )

Stock-based compensation —  —  1,453   —  —  —  —  1,453  

Balances at August 29, 2025
601   $ —   $ 14,968   $ 43,516   $ ( 341 ) ( 181 ) $ ( 46,373 ) $ 11,770  

Nine Months Ended August 30, 2024

  Common Stock Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Treasury Stock  
  Shares Amount Shares Amount Total
Balances at December 1, 2023
601   $ —   $ 11,586   $ 33,346   $ ( 285 ) ( 146 ) $ ( 28,129 ) $ 16,518  
Net income
—  —  —  3,877   —  —  —  3,877  
Other comprehensive income (loss),
net of taxes
—  —  —  —  ( 24 ) —  —  ( 24 )
Re-issuance of treasury stock under stock compensation plans
—  —  48   ( 312 ) —  3   100   ( 164 )
Repurchases of common stock —  —  —  —  —  ( 13 ) ( 7,053 ) ( 7,053 )

Stock-based compensation —  —  1,392   —  —  —  —  1,392  
Value of shares in deferred compensation plan —  —  —  —  —  —  ( 1 ) ( 1 )
Balances at August 30, 2024
601   $ —   $ 13,026   $ 36,911   $ ( 309 ) ( 156 ) $ ( 35,083 ) $ 14,545  

See accompanying notes to condensed consolidated financial statements.
7

Table of Contents

ADOBE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

  Nine Months Ended
  August 29,
2025 August 30,
2024
Cash flows from operating activities:    
Net income $ 5,274   $ 3,877  
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation, amortization and accretion 634   639  
Stock-based compensation 1,453   1,392  
Deferred income taxes ( 391 ) ( 341 )

Other non-cash items 37   41  
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:

Trade receivables, net ( 25 ) 414  
Prepaid expenses and other assets ( 157 ) ( 799 )
Trade payables ( 23 ) 2  
Accrued expenses and other liabilities ( 195 ) ( 162 )
Income taxes payable ( 11 ) 116  
Deferred revenue 275   ( 44 )
Net cash provided by operating activities 6,871   5,135  
Cash flows from investing activities:    
Purchases of short-term investments ( 1,351 ) —  
Maturities of short-term investments 681   379  
Proceeds from sales of short-term investments 4   9  
Acquisitions, net of cash acquired ( 17 ) —  
Purchases of property and equipment ( 145 ) ( 135 )
Purchases of long-term investments, intangibles and other assets ( 216 ) ( 125 )
Proceeds from sale of long-term investments and other assets 3   2  
Net cash provided by (used for) investing activities ( 1,041 ) 130  
Cash flows from financing activities:    
Repurchases of common stock ( 8,807 ) ( 7,000 )
Proceeds from re-issuance of treasury stock 348   361  
Taxes paid related to net share settlement of equity awards ( 381 ) ( 525 )
Proceeds from issuance of debt 1,997   1,997  
Repayment of debt ( 1,500 ) —  
Other financing activities, net ( 162 ) ( 56 )

Net cash used for financing activities ( 8,505 ) ( 5,223 )
Effect of foreign currency exchange rates on cash and cash equivalents 44   10  
Net change in cash and cash equivalents ( 2,631 ) 52  
Cash and cash equivalents at beginning of period 7,613   7,141  
Cash and cash equivalents at end of period $ 4,982   $ 7,193  
Supplemental disclosures:  
Cash paid for income taxes, net of refunds $ 1,705   $ 1,389  
Cash paid for interest $ 196   $ 94  

See accompanying notes to condensed consolidated financial statements.
8

Table of Contents

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.   BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended November 29, 2024 on file with the SEC (our “Annual Report”).
Use of Estimates
In preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, we must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ materially from these estimates.
Reclassifications
Certain prior year amounts, which are not material, have been reclassified to conform to current year presentation in the notes to condensed consolidated financial statements.
Significant Accounting Policies
There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.
Recent Accounting Pronouncements Not Yet Effective
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. We will adopt the updated standard for annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026 on a retrospective basis. While we are continuing to assess the potential impacts of the standard, we do not expect it to have a material impact on our financial statement disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid, and modifies other income tax-related disclosure requirements. The updated standard is effective for us beginning with our fiscal year 2026 annual reporting period. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements. The updated standard is effective for our annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.
There have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended August 29, 2025, as compared to the recent accounting pronouncements described in our Annual Report, that are of significance or potential significance to us.
9

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ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 2.   REVENUE
Segment Information
Our segment results for the three months ended August 29, 2025 and August 30, 2024 were as follows:

(dollars in millions) Digital
Media Digital
Experience Publishing and
Advertising Total
Three months ended August 29, 2025

Revenue $ 4,459   $ 1,476   $ 53   $ 5,988  
Cost of revenue 212   410   20   642  
Gross profit $ 4,247   $ 1,066   $ 33   $ 5,346  
Gross profit as a percentage of revenue 95   % 72   % 62   % 89   %
Three months ended August 30, 2024

Revenue $ 3,995   $ 1,354   $ 59   $ 5,408  
Cost of revenue 137   395   22   554  
Gross profit $ 3,858   $ 959   $ 37   $ 4,854  
Gross profit as a percentage of revenue 97   % 71   % 63   % 90   %

Our segment results for the nine months ended August 29, 2025 and August 30, 2024 were as follows:

(dollars in millions) Digital
Media Digital
Experience Publishing and
Advertising Total
Nine months ended August 29, 2025

Revenue $ 13,031   $ 4,347   $ 197   $ 17,575  
Cost of revenue 619   1,220   63   1,902  
Gross profit $ 12,412   $ 3,127   $ 134   $ 15,673  
Gross profit as a percentage of revenue 95   % 72   % 68   % 89   %
Nine months ended August 30, 2024

Revenue $ 11,719   $ 3,970   $ 210   $ 15,899  
Cost of revenue 489   1,187   66   1,742  
Gross profit $ 11,230   $ 2,783   $ 144   $ 14,157  
Gross profit as a percentage of revenue 96   % 70   % 69   % 89   %

Revenue by geographic area for the three and nine months ended August 29, 2025 and August 30, 2024 were as follows:

Three Months Nine Months
(in millions) 2025 2024 2025 2024
Americas
$ 3,555   $ 3,241   $ 10,460   $ 9,539  
EMEA 1,586   1,405   4,629   4,085  
APAC 847   762   2,486   2,275  
Total $ 5,988   $ 5,408   $ 17,575   $ 15,899  

10

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ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

Three Months Nine Months
(in millions) 2025 2024 2025 2024
Digital Media
$ 4,397   $ 3,921   $ 12,836   $ 11,474  
Digital Experience 1,368   1,231   3,999   3,599  
Publishing and Advertising 26   28   80   83  
Total subscription revenue $ 5,791   $ 5,180   $ 16,915   $ 15,156  

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:

Three Months Nine Months
(in millions) 2025 2024 2025 2024
Creative and Marketing Professionals
$ 4,117   $ 3,715   $ 12,058   $ 10,908  
Business Professionals and Consumers 1,648   1,437   4,777   4,165  
Total Digital Media and Digital Experience subscription revenue
$ 5,765   $ 5,152   $ 16,835   $ 15,073  

Contract Balances
A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the passage of time is required before payment of consideration is due. Included in trade receivables on the condensed consolidated balance sheets are unbilled receivable balances which have not yet been invoiced, and are typically related to license revenue or services which are delivered prior to invoicing. As of August 29, 2025, the balance of trade receivables, net of allowances for doubtful accounts, was $ 2.09  billion, inclusive of unbilled receivables of $ 82 million. As of November 29, 2024, the balance of trade receivables, net of allowances for doubtful accounts, was $ 2.07  billion, inclusive of unbilled receivables of $ 66 million.
We maintain an allowance for doubtful accounts which reflects our best estimate of potentially uncollectible trade receivables and is based on both specific and general reserves. We maintain general reserves on a collective basis by considering factors such as historical experience, credit-worthiness, the age of the trade receivable balances, current economic conditions and a reasonable and supportable forecast of future economic conditions. As of August 29, 2025 and November 29, 2024, the allowance for doubtful accounts was $ 14  million for both periods.
A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. We regularly review contract asset balances for impairment, considering factors such as historical experience, credit-worthiness, age of the balance, current economic conditions and a reasonable and supportable forecast of future economic conditions. Contract asset impairments were not material for the nine months ended August 29, 2025. Contract assets were $ 229 million and $ 248 million as of August 29, 2025 and November 29, 2024, respectively.
Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services, including non-cancellable and non-refundable committed funds and refundable customer deposits. Deferred revenue is recognized as revenue when transfer of control to customers has occurred. As of August 29, 2025, the balance of deferred revenue was $ 6.53 billion, which includes $ 64 million of refundable customer deposits. Arrangements with some of our enterprise customers with non-cancellable and non-refundable committed funds provide options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Non-cancellable and non-refundable committed funds related to these agreements comprised approximately 4 % of the total deferred revenue.
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(Unaudited)

As of November 29, 2024, the balance of deferred revenue was $ 6.26 billion. During the three and nine months ended August 29, 2025, approximately $ 1.08 billion and $ 5.72 billion of revenue, respectively, was recognized that was included in the balance of deferred revenue as of November 29, 2024.
Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and unbilled amounts that will be recognized as revenue in future periods. As of August 29, 2025, remaining performance obligations were approximately $ 20.44 billion. Non-cancellable and non-refundable funds related to some of our enterprise customer agreements referred to above comprised approximately 4 % of the total remaining performance obligations. Approximately 67 % of the remaining performance obligations, excluding the aforementioned enterprise customer agreements, are expected to be recognized over the next 12 months with the remainder recognized thereafter.
Incremental costs of obtaining a contract with a customer are capitalized if we expect the benefit of those costs to be longer than one year and primarily relate to sales commissions paid to our sales force personnel. Capitalized contract acquisition costs are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. Capitalized contract acquisition costs were $ 731 million and $ 717  million as of August 29, 2025 and November 29, 2024, respectively.
We record refund liabilities for amounts that may be subject to future refunds, which include sales returns reserves and customer rebates and credits. Refund liabilities are included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. Refund liabilities were $ 124 million and $ 141 million as of August 29, 2025 and November 29, 2024, respectively.

NOTE 3.   CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents consist of highly liquid marketable securities with remaining maturities of three months or less at the date of purchase. We classify our investments in marketable debt securities as “available-for-sale.” We carry these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and unrealized non-credit-related losses of marketable debt securities are included in accumulated other comprehensive income (loss), net of taxes, in our condensed consolidated balance sheets. Unrealized credit-related losses are recorded to other income (expense), net in our condensed consolidated statements of income with a corresponding allowance for credit-related losses in our condensed consolidated balance sheets. Gains and losses are determined using the specific identification method and recognized when realized in our condensed consolidated statements of income.
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(Unaudited)

Cash, cash equivalents and short-term investments consisted of the following as of August 29, 2025:

(in millions) Amortized
Cost Unrealized
Gains Unrealized
Losses Estimated
Fair Value
Current assets:        
Cash $ 940   $ —   $ —   $ 940  
Cash equivalents:
Corporate debt securities 607   —   —   607  
Money market funds 3,389   —   —   3,389  

Time deposits 46   —   —   46  

Total cash equivalents 4,042   —   —   4,042  
Total cash and cash equivalents 4,982   —   —   4,982  
Short-term fixed income securities:
Asset-backed securities 1   —   —   1  
Corporate debt securities 700   —   —   700  

U.S. Treasury securities 257   —   —   257  
Total short-term investments (1)
958   —   —   958  
Total cash, cash equivalents and short-term investments $ 5,940   $ —   $ —   $ 5,940  

_________________________________________
(1) As of August 29, 2025, all short-term fixed income debt securities classified as short-term investments had stated effective maturities within one year.
Cash, cash equivalents and short-term investments consisted of the following as of November 29, 2024:

(in millions) Amortized
Cost Unrealized
Gains Unrealized
Losses Estimated
Fair Value
Current assets:        
Cash $ 787   $ —   $ —   $ 787  
Cash equivalents:    
Corporate debt securities 41   —   —   41  
Money market funds 6,726   —   —   6,726  

Time deposits 57   —   —   57  
U.S. Treasury securities 2   —   —   2  
Total cash equivalents 6,826   —   —   6,826  
Total cash and cash equivalents 7,613   —   —   7,613  
Short-term fixed income securities:  
Asset-backed securities 4   —   —   4  

Corporate debt securities 120   —   —   120  

U.S. agency securities 11   —   —   11  
U.S. Treasury securities 139   —   ( 1 ) 138  

Total short-term investments 274   —   ( 1 ) 273  
Total cash, cash equivalents and short-term investments $ 7,887   $ —   $ ( 1 ) $ 7,886  

See Note 4 for further information regarding the fair value of our financial instruments.
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(Unaudited)

We review our debt securities classified as short-term investments on a regular basis for impairment. For debt securities in unrealized loss positions, we determine whether any portion of the decline in fair value below the amortized cost basis is due to credit-related factors if we neither intend to sell nor anticipate that it is more likely than not that we will be required to sell prior to recovery of the amortized cost basis. We consider factors such as the extent to which the market value has been less than the cost, any noted failure of the issuer to make scheduled payments, changes to the rating of the security and other relevant credit-related factors in determining whether or not a credit loss exists. During the nine months ended August 29, 2025 and August 30, 2024, we did not recognize an allowance for credit-related losses on any of our investments.

NOTE 4.   FAIR VALUE MEASUREMENTS
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The fair value of our financial assets and liabilities at August 29, 2025 was determined using the following inputs:

(in millions) Fair Value Measurements at Reporting Date Using
    Quoted Prices
in Active
Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
  Total (Level 1) (Level 2) (Level 3)
Assets:        
Cash equivalents:        
Corporate debt securities $ 607   $ —   $ 607   $ —  

Money market funds 3,389   3,389   —   —  

Time deposits 46   46   —   —  

Short-term investments:
Asset-backed securities 1   —   1   —  
Corporate debt securities 700   —   700   —  

U.S. Treasury securities 257   —   257   —  
Prepaid expenses and other current assets:      
Foreign currency derivatives 16   —   16   —  
Interest rate swap derivatives 5   —   5   —  

Other assets:  
Deferred compensation plan assets 329   329   —   —  
Foreign currency derivatives 4   —   4   —  
Interest rate swap derivatives 92   —   92   —  
Total assets $ 5,446   $ 3,764   $ 1,682   $ —  

Liabilities:        
Accrued expenses and other current liabilities:
       

Foreign currency derivatives $ 151   $ —   $ 151   $ —  
Interest rate swap derivatives 19   —   19   —  
Other liabilities:

Foreign currency derivatives 31   —   31   —  

Total liabilities $ 201   $ —   $ 201   $ —  

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(Unaudited)

The fair value of our financial assets and liabilities at November 29, 2024 was determined using the following inputs:

(in millions) Fair Value Measurements at Reporting Date Using
    Quoted Prices
in Active
Markets for
Identical Assets Significant
Other
Observable
Inputs Significant
Unobservable
Inputs
  Total (Level 1) (Level 2) (Level 3)
Assets:        
Cash equivalents:        
Corporate debt securities $ 41   $ —   $ 41   $ —  
Money market funds 6,726   6,726   —   —  

Time deposits 57   57   —   —  
U.S. Treasury securities 2   —   2   —  
Short-term investments:  
Asset-backed securities 4   —   4   —  
Corporate debt securities 120   —   120   —  

U.S. agency securities 11   —   11   —  
U.S. Treasury securities  138   —   138   —  
Prepaid expenses and other current assets:        
Foreign currency derivatives 105   —   105   —  
Other assets:        
Deferred compensation plan assets 283   283   —   —  

Foreign currency derivatives
24   —   24   —  
Total assets $ 7,511   $ 7,066   $ 445   $ —  

Liabilities:        
Accrued expenses and other current liabilities:
       

Foreign currency derivatives $ 9   $ —   $ 9   $ —  
Other liabilities:

Foreign currency derivatives 2   —   2   —  
Total liabilities $ 11   $ —   $ 11   $ —  

See Note 3 for further information regarding the fair value of our financial instruments.  
Our fixed income available-for-sale debt securities consist of high quality, investment grade securities from diverse issuers with a weighted average credit rating of AA. We value these securities based on pricing from independent pricing vendors who use matrix pricing valuation techniques including market approach methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Inputs include quoted prices in active markets for identical assets or inputs other than quoted prices that are observable either directly or indirectly in determining fair value, including benchmark yields, issuer spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. We therefore categorize all of our fixed income available-for-sale securities as Level 2. We perform routine procedures such as comparing prices obtained from multiple independent sources to ensure that appropriate fair values are recorded.
The fair values of our money market funds, time deposits and deferred compensation plan assets, which consist of money market and other mutual funds, are based on quoted prices in active markets at the measurement date.
Our over-the-counter foreign currency and interest rate swap derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date.
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(Unaudited)

Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The fair value of our senior notes was $ 6.16 billion as of August 29, 2025, excluding the associated interest rate swaps, based on observable market prices in less active markets and categorized as Level 2. See Note 13 for further details regarding our debt.

NOTE 5.   DERIVATIVE FINANCIAL INSTRUMENTS
We may use derivatives to partially offset our business exposure to foreign currency and interest rate risk on expected future cash flows and certain existing assets and liabilities. We do not use any of our derivative instruments for trading purposes.
We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. We also enter into collateral security agreements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. Collateral posted is included in prepaid expenses and other current assets and collateral received is included in accrued expenses and other current liabilities on our condensed consolidated balance sheets.
Cash Flow Hedges
In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange forward contracts and option contracts to hedge a portion of our forecasted foreign currency denominated revenue and expenses. These foreign exchange contracts, carried at fair value, have maturities of up to 24 months. As of August 29, 2025 and November 29, 2024, gross notional amounts of outstanding cash flow hedges were $ 5.48 billion and $ 5.51 billion, respectively, hedging exposures denominated in Euros, Japanese Yen, British Pounds, Australian Dollars, Canadian Dollars and Indian Rupees.
As of August 29, 2025, we had net derivative losses on our foreign currency cash flow hedges expected to be recognized within the next 36 months, of which $ 111 million of net losses are expected to be recognized into revenue within the next 12 months.
Fair Value Hedges
During the nine months ended August 29, 2025, we entered into interest rate swaps related to certain of our senior notes. The interest rate swaps effectively convert the fixed interest rates on the notes to floating interest rates based on the Secured Overnight Financing Rate Overnight Index Swap Rate (“SOFR OIS”). Under the terms of the swaps, we will pay quarterly interest at the daily compounded SOFR OIS plus a fixed number of basis points on the $ 2.70 billion notional amount through the respective par call dates for the notes. In exchange, we will receive the fixed rate interest on the notes from the swap counterparties on a semi-annual basis. See Note 13 for further details regarding our debt.
The interest rate swaps are designated as fair value hedges. We record changes in fair value on the swaps associated with the hedged risk in interest expense in our condensed consolidated statements of income with a corresponding offset to the value of the senior notes being hedged.
Non-Designated Hedges
Our derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies. As of August 29, 2025, gross notional amounts of outstanding contracts were $ 370 million, primarily hedging exposures denominated in Australian Dollars, Euros, British Pounds and Japanese Yen. As of November 29, 2024, total notional amounts of outstanding foreign currency forward contracts hedging monetary assets and liabilities were $ 381 million, primarily hedging exposures denominated in Indian Rupees, Australian Dollars, British Pounds and Euros.
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(Unaudited)

Fair value asset derivatives are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion, and fair value liability derivatives are included in accrued expenses and other current liabilities for the current portion and other liabilities for the long-term portion on our condensed consolidated balance sheets. The fair value of derivative instruments as of August 29, 2025 and November 29, 2024 were as follows:

(in millions) 2025 2024
  Fair Value
Asset
Derivatives Fair Value
Liability
Derivatives Fair Value
Asset
Derivatives Fair Value
Liability
Derivatives
Derivatives designated as hedging instruments:        

Foreign exchange contracts
$ 20   $ 181   $ 128   $ 10  

Interest rate swaps
97   19   —   —  
Derivatives not designated as hedging instruments:
 Foreign exchange contracts
—   1   1   1  
Total derivatives $ 117   $ 201   $ 129   $ 11  

Unrealized gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three and nine months ended August 29, 2025 were primarily associated with our foreign exchange contracts, for which we recognized $ 44 million and $ 231 million of net losses, respectively. Unrealized gains and losses on derivative instruments, net of tax, for the three and nine months ended August 30, 2024 were primarily associated with our foreign exchange contracts, for which we recognized $ 60 million and $ 59 million of net losses, respectively.
For the three and nine months ended August 29, 2025 and August 30, 2024, the effects of derivative instruments on our condensed consolidated statements of income were immaterial.

NOTE 6.   GOODWILL AND OTHER INTANGIBLES
Goodwill as of August 29, 2025 and November 29, 2024 was $ 12.86 billion and $ 12.79 billion, respectively. During the second quarter of fiscal 2025, we completed our annual goodwill impairment test associated with our reporting units and determined there was no impairment of goodwill.
Other intangible assets subject to amortization as of August 29, 2025 and November 29, 2024 were as follows: 

(in millions) 2025 2024
  Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net
Customer contracts and relationships $ 1,208   $ ( 832 ) $ 376   $ 1,203   $ ( 742 ) $ 461  
Purchased technology 881   ( 830 ) 51   877   ( 704 ) 173  
Trademarks 372   ( 290 ) 82   372   ( 258 ) 114  

Other 59   ( 13 ) 46   42   ( 8 ) 34  
Other intangibles, net
$ 2,520   $ ( 1,965 ) $ 555   $ 2,494   $ ( 1,712 ) $ 782  

Amortization expense related to other intangibles was $ 81 million and $ 248 million for the three and nine months ended August 29, 2025, respectively. Comparatively, amortization expense related to other intangibles was $ 84 million and $ 252 million for the three and nine months ended August 30, 2024, respectively. Of these amounts, $ 42 million and $ 127 million were included in cost of revenue for the three and nine months ended August 29, 2025, respectively, and $ 41 million and $ 125 million were included in cost of revenue for the three and nine months ended August 30, 2024, respectively.
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(Unaudited)

As of August 29, 2025, the estimated aggregate amortization expense in future periods was as follows:

(in millions)
Fiscal Year Other Intangibles

Remainder of 2025 $ 62  
2026 160  
2027 118  
2028 73  
2029 69  
Thereafter 73  
Total expected amortization expense $ 555  

NOTE 7.   ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities as of August 29, 2025 and November 29, 2024 consisted of the following:

(in millions) 2025 2024
Accrued compensation costs
$ 1,074   $ 1,221  
Accrued corporate marketing 191   176  
Refund liabilities 124   141  
Sales and use taxes
123   121  

Fair value of derivative liabilities
170   9  

Derivative collateral liability 88   168  
Other 519   500  
Accrued expenses and other current liabilities
$ 2,289   $ 2,336  

Other primarily includes general business accruals, accrued interest expense and royalties payable.

NOTE 8.   STOCK-BASED COMPENSATION
Restricted Stock Units
Restricted stock unit activity for the nine months ended August 29, 2025 was as follows:

Number of
Shares
(in millions)
Weighted Average
Grant Date
Fair Value Aggregate
Intrinsic Value
(in millions)

Beginning outstanding balance 7.0   $ 473.28  
Awarded 4.2   $ 423.98  
Released ( 2.7 ) $ 462.83  
Forfeited ( 0.5 ) $ 465.06  

Ending outstanding balance 8.0   $ 451.36   $ 2,842  

Expected to vest 7.3   $ 451.26   $ 2,617  

The total fair value of restricted stock units vested during the nine months ended August 29, 2025 was $ 1.06 billion.
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(Unaudited)

Performance Shares  
In the first quarter of fiscal 2025, the Executive Compensation Committee of our Board of Directors (the “ECC”) approved the 2025 Performance Share Program, the terms of which are similar to the 2024 Performance Share Program that is still outstanding. For information regarding our outstanding Performance Share Programs, including the terms, see “Note 12. Stock-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended November 29, 2024.
As of August 29, 2025, performance shares awarded under our 2025, 2024 and 2023 Performance Share Programs remained outstanding and unvested.
Performance share activity for the nine months ended August 29, 2025 was as follows:

Number of
Shares
(in millions)
Weighted Average
Grant Date
Fair Value Aggregate
Intrinsic Value
(in millions)

Beginning outstanding balance 0.5   $ 537.00  
Awarded 0.3   $ 448.63  
Released ( 0.1 ) $ 505.05  
Forfeited ( 0.1 ) $ 528.19  
Ending outstanding balance 0.6   $ 501.15   $ 206  

Expected to vest 0.5   $ 501.30   $ 190  

Under our Performance Share Programs, participants generally have the ability to receive up to 200 % of the target number of shares originally granted. Shares released during the nine months ended August 29, 2025 resulted from overall payout at 79 % of target for the 2022 Performance Share Program, as certified by the ECC in the first quarter of fiscal 2025.
The total fair value of performance shares vested during the nine months ended August 29, 2025 was $ 49 million.
Employee Stock Purchase Plan Shares
Employees purchased 1.1 million shares at an average price of $ 321.93 and 1.2 million shares at an average price of $ 298.53 for the nine months ended August 29, 2025 and August 30, 2024, respectively. The intrinsic value of shares purchased during the nine months ended August 29, 2025 and August 30, 2024 was $ 88 million and $ 324 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.
Compensation Costs
As of August 29, 2025, there was $ 3.47 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock-based awards and purchase rights which will be recognized over a weighted average period of 2.27 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.
Total stock-based compensation costs included in our condensed consolidated statements of income for the three and nine months ended August 29, 2025 and August 30, 2024 were as follows:

  Three Months Nine Months
(in millions) 2025 2024 2025 2024
Cost of revenue $ 32   $ 30   $ 93   $ 90  
Research and development 254   241   748   704  
Sales and marketing 145   140   423   403  
General and administrative 66   63   189   195  
Total $ 497   $ 474   $ 1,453   $ 1,392  

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(Unaudited)

NOTE 9.   ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss) and activity, net of related taxes, were as follows:

(in millions) November 29,
2024 Increase / Decrease Reclassification Adjustments August 29,
2025

Net unrealized gains / losses on available-for-sale securities $ ( 1 ) $ 1   $ —   $ —  
Net unrealized gains / losses on derivative instruments designated as hedging instruments
80   ( 231 ) ( 8 ) (1)
( 159 )
Cumulative foreign currency translation adjustments ( 280 ) 98   —   ( 182 )
Total accumulated other comprehensive income (loss), net of taxes
$ ( 201 ) $ ( 132 ) $ ( 8 ) $ ( 341 )

_________________________________________
(1)     Reclassification adjustments for gains / losses on foreign currency hedges are classified in revenue or operating expenses, depending on the nature of the underlying transaction, and reclassification adjustments for gains / losses on Treasury lock hedges are classified in interest expense.
Taxes related to each component of other comprehensive income (loss) for the three and nine months ended August 29, 2025 and August 30, 2024 were immaterial.

NOTE 10.   STOCK REPURCHASE PROGRAM
To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we may repurchase our shares in the open market or enter into structured repurchase agreements with third parties. In March 2024, our Board of Directors granted authority to repurchase up to $ 25 billion in our common stock through March 14, 2028. In June 2025, we entered into a stock repurchase arrangement with a large financial institution to execute up to $ 2.5  billion in open market repurchases, which remained partially outstanding as of August 29, 2025. Upon completion of this arrangement, $ 8.40 billion remains under our March 2024 stock repurchase authority.
Share repurchase activity for the nine months ended August 29, 2025 and August 30, 2024 was as follows:

(in millions) Number of Shares Delivered
Amount Paid

Nine months ended August 29, 2025

Accelerated share repurchase agreements
16.8   $ 6,250  

Open market repurchases
6.8   2,556  

Total
23.6   $ 8,806  
Nine months ended August 30, 2024

Accelerated share repurchase agreements
12.3   $ 7,000  
Other structured stock repurchases
0.6   —   (1)

Total 12.9   $ 7,000  

_________________________________________
(1)     During the nine months ended August 30, 2024, we received the final delivery of shares under a structured stock repurchase agreement entered into in fiscal 2023.
Prepayments for stock repurchases are classified as treasury stock, a component of stockholders’ equity on our condensed consolidated balance sheets, at the payment date, though only shares physically delivered to us by the end of the respective period are excluded from the computation of net income per share.
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(Unaudited)

NOTE 11.   NET INCOME PER SHARE
Basic net income per share is computed using the weighted average number of common shares outstanding for the period, excluding unvested stock-based awards and purchase rights. Diluted net income per share is based upon the weighted average common shares outstanding for the period plus dilutive potential common shares, including unvested restricted stock units, stock purchase rights and performance share awards using the treasury stock method. Performance share awards are included based on the number of shares that would be issued as if the end of the reporting period was the end of the performance period and the result was dilutive.
The following table sets forth the computation of basic and diluted net income per share for the three and nine months ended August 29, 2025 and August 30, 2024:

Three Months Nine Months
(in millions, except per share data) 2025 2024 2025 2024
Net income $ 1,772   $ 1,684   $ 5,274   $ 3,877  

Shares used to compute basic net income per share 423.5   445.3   429.3   449.1  
Dilutive potential common shares from stock plans and programs 0.6   2.3   0.9   2.7  

Shares used to compute diluted net income per share 424.1   447.6   430.2   451.8  

Basic net income per share $ 4.18   $ 3.78   $ 12.28   $ 8.63  
Diluted net income per share $ 4.18   $ 3.76   $ 12.26   $ 8.58  

Anti-dilutive potential common shares 5.9   2.0   5.0   1.8  

NOTE 12.   COMMITMENTS AND CONTINGENCIES
Indemnifications
In the ordinary course of business, we provide indemnifications of varying scope to our customers and channel partners against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.
To the extent permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.
Legal Proceedings
We are subject to legal proceedings, claims, including claims relating to intellectual property, commercial, employment and other matters, and investigations, including government investigations, that arise in the ordinary course of our business. Some of these disputes, legal proceedings and investigations may include speculative claims for substantial or indeterminate amounts of damages. We consider all claims on a quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably possible or probable and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue for such claims in our financial statements. This determination is then reviewed and discussed with the Audit Committee of the Board of Directors.
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ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. As of August 29, 2025, accrued provisions for legal proceedings were immaterial. Unless otherwise specifically disclosed in this note, we have determined that no disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.
All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, results of operations or cash flows could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations.
Since June 2022, we have been cooperating with the Federal Trade Commission (the “FTC”) staff in response to a Civil Investigative Demand seeking information regarding our disclosure and subscription cancellation practices relative to the Restore Online Shoppers’ Confidence Act (“ROSCA”). In November 2023, the FTC staff asserted that they had the authority to enter into consent negotiations to determine if a settlement regarding their investigation of these issues could be reached. On March 20, 2024, we were informed that the FTC had voted to authorize a filing of the case. The FTC then referred the case to the Department of Justice (the “DOJ”), and on June 17, 2024, the DOJ filed a civil complaint in the United States District Court for the Northern District of California, naming Adobe and certain of our employees as defendants. The complaint alleges that Adobe failed to clearly and conspicuously disclose material terms, failed to obtain express informed consent and failed to provide a simple cancellation mechanism regarding our disclosure and subscription cancellation practices in violation of ROSCA and the FTC Act. The DOJ is seeking injunctive relief, civil penalties, equitable monetary relief and other relief. On October 7, 2024, we filed a motion to dismiss the DOJ’s civil complaint, and that motion was fully briefed as of December 23, 2024. On May 2, 2025, the Court denied our motion to dismiss the complaint. The discovery phase is ongoing. The defense or resolution of this matter could involve significant monetary costs or penalties and have a significant impact on our financial results and operations. There can be no assurance that we will be successful in negotiating a favorable settlement or in litigation. Any remedies or compliance requirements could adversely affect our ability to operate our business or have a materially adverse impact on our financial results. At this stage, we are unable to estimate a reasonably possible financial loss or range of any potential financial loss, if any, as a result of this litigation.
On October 20, 2023, a securities class action captioned Pembroke Pines Firefighters & Police Officers Pension Fund et al v. Adobe, Inc. et al, renamed as In Re Adobe Inc. Securities Litigation, Case No. 1:23-cv-09260, was filed in the U.S. District Court for the Southern District of New York (the “Securities Action”) naming Adobe and certain of our current and former officers as defendants. The Securities Action purports to be brought on behalf of purchasers of the Company’s stock between July 23, 2021 and September 22, 2022 (the “Class Period”). The complaint, which was amended on February 23, 2024, alleges that certain public statements made by Adobe during the Class Period related to competition from Figma and the adequacy of Adobe’s existing offerings to counter harms Adobe may have faced due to Figma’s growing market position were materially false and misleading. The Securities Action seeks unspecified compensatory damages, attorneys’ fees and costs, and extraordinary equitable and/or injunctive relief. We filed a motion to dismiss the Securities Action, which was granted in full on March 27, 2025. Plaintiff has sought leave to amend the complaint in response to the court’s order.
On November 16, 2023, a shareholder derivative action captioned Shah v. Narayen et al, Case No. 1:23-cv-01315, was filed in the U.S. District Court for the District of Delaware (the “Shah Action”), purportedly on behalf of Adobe. On January 3, 2024, a second shareholder derivative action captioned Gervat v. Narayen et al, Case No. 1:24-cv-00006, was filed in the U.S. District Court for the District of Delaware (the “Gervat Action”), purportedly on behalf of Adobe. On January 24, 2024, the Court consolidated the Shah and Gervat Actions (together, the “Consolidated Derivative Action”). On January 18, 2024, a shareholder derivative action captioned Sbriglio v. Narayen et al., Case No. 24-cv-429458, was filed in California Superior Court (the “Sbriglio Action”), purportedly on behalf of Adobe. On January 29, 2024, a shareholder derivative action captioned Roy v. Narayen et al., No. 1:24-cv-00633, was filed in the U.S. District Court for the Southern District of New York, (the “Roy Action”), purportedly on behalf of Adobe. On May 28, 2025, a shareholder derivative action captioned Daniel v. Narayen et al., Case No. 25-cv-46762 was filed in California Superior Court (the “Daniel Action,” and together with the Consolidated Derivative Action, the Roy Action, and the Sbriglio Action, the “Derivative Actions”), purportedly on behalf of Adobe. On July 11, 2025, the Sbriglio and Daniel Actions were consolidated. The Derivative Actions are based largely on the same alleged
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ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

facts and circumstances as the Securities Action, and name certain of our current and former officers and members of our Board of Directors as defendants and Adobe as a nominal defendant. The Derivative Actions together allege claims for breach of fiduciary duty and/or aiding and abetting breach of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control, and violations of Section 10(b) (and Rule 10b-5 promulgated thereunder), Section 20(a), and/or Section 21D of the Securities Exchange Act of 1934, as amended, and seek recovery of unspecified damages, restitution, and attorney’s fees and costs, as well as disgorgement of profits and certain payments and benefits, in the case of the Gervat and Daniel Actions, and improvements to Adobe’s corporate governance and internal procedures, in the case of the Shah and Daniel Actions, on behalf of Adobe. The Derivative Actions are presently stayed.
We dispute the allegations of wrongdoing in the Securities Action and the Derivative Actions and intend to vigorously defend ourselves in these matters. In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible financial loss or range of financial loss, if any, that we may incur to resolve or settle the Securities Action and the Derivative Actions.
In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements.
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ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 13.   DEBT
The carrying value of our borrowings as of August 29, 2025 and November 29, 2024 were as follows:

(dollars in millions) Issuance Date Due Date Effective Interest Rate 2025 2024
1.90 % 2025 Notes
February 2020 February 2025 2.07 % $ —   $ 500  
3.25 % 2025 Notes
January 2015 February 2025 3.67 % —   1,000  
2.15 % 2027 Notes
February 2020 February 2027 2.26 % 850   850  
4.85 % 2027 Notes
April 2024 April 2027 5.03 % 500   500  
4.75 % 2028 Notes
January 2025 January 2028 4.93 % 800   —  
4.80 % 2029 Notes
April 2024 April 2029 4.93 % 750   750  
4.95 % 2030 Notes
January 2025 January 2030 5.09 % 700   —  
2.30 % 2030 Notes
February 2020 February 2030 2.69 % 1,300   1,300  
4.95 % 2034 Notes
April 2024 April 2034 5.03 % 750   750  
5.30 % 2035 Notes
January 2025 January 2035 5.40 % 500   —  
Total debt outstanding, at par $ 6,150   $ 5,650  
Less: Current portion of debt, at par
—   ( 1,500 )
Fair value of interest rate swaps
78   —  
Unamortized discount and debt issuance costs ( 28 ) ( 21 )
Carrying value of long-term debt $ 6,200   $ 4,129  

Current portion of debt, at par
$ —   $ 1,500  
Unamortized discount and debt issuance costs —   ( 1 )
Carrying value of current debt $ —   $ 1,499  

Senior Notes
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. Our total proceeds were approximately $ 1.99 billion, net of an issuance discount of $ 3 million and total issuance costs of $ 9 million.
In February 2025, $ 1.5 billion of senior notes became due and were repaid.
Discounts and issuance costs on our senior notes are amortized to interest expense over the terms of the respective notes using the effective interest method. Interest on the notes issued in February 2020 is payable semi-annually, in arrears, on February 1 and August 1. Interest on the notes issued in April 2024 is payable semi-annually, in arrears, on April 4 and October 4. Interest on the notes issued in January 2025 is payable semi-annually, in arrears, on January 17 and July 17.
During the nine months ended August 29, 2025, we entered into interest rate swaps related to certain of our senior notes. The interest rate swaps effectively convert the fixed interest rates on the notes to floating interest rates based on the SOFR OIS. Under the terms of the swaps, we will pay quarterly interest at the daily compounded SOFR OIS plus a fixed number of basis points on the notional amount through the respective par call dates for the notes. In exchange, we will receive the fixed rate interest on the notes from the swap counterparties on a semi-annual basis. The fair value of the interest rate swaps is included in the carrying value of our debt in the condensed consolidated balance sheets. See Note 5 for further details regarding our interest rate swap derivatives.
Our senior notes rank equally with our other unsecured and unsubordinated indebtedness, and do not contain financial covenants. We may redeem the notes at any time, subject to a make-whole premium.
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ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the senior notes issued in February 2020, upon the occurrence of certain change of control triggering events, we may be required to repurchase the notes, at a price equal to 101 % of their principal amount, plus accrued and unpaid interest to the date of repurchase. In addition, these notes include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances.
Revolving Credit Agreement
In June 2022, we entered into a credit agreement (the “Revolving Credit Agreement”), providing for a five-year $ 1.5  billion senior unsecured revolving credit facility. The Revolving Credit Agreement provides for loans to Adobe and certain of its subsidiaries that may be designated from time to time as additional borrowers. Pursuant to the terms of the Revolving Credit Agreement, we may, subject to the agreement of lenders to provide additional commitments, obtain up to an additional $ 500 million in commitments, for a maximum aggregate commitment of $ 2 billion. As of August 29, 2025, there were no outstanding borrowings under this Revolving Credit Agreement.
Commercial Paper Program
In September 2023, we established 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 August 29, 2025, there were no outstanding borrowings under the commercial paper program.
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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto.
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, 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,” “looks for,” “looks 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 2024, 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.
BUSINESS OVERVIEW
Adobe is a global technology company with a mission to change the world through personalized digital experiences. For over four decades, Adobe’s innovations have transformed how individuals, teams, businesses, enterprises, institutions, and governments engage and interact across all types of media. Our products, services and solutions are used around the world to imagine, create, manage, deliver, measure, optimize and engage with content across surfaces and fuel digital experiences. We have a diverse user base that includes consumers, communicators, creative professionals, developers, students, small and medium businesses and enterprises. We are also empowering creators by putting the power of artificial intelligence (“AI”) in their hands, and doing so in ways we believe are responsible. Our products and services help unleash creativity, accelerate document productivity and power businesses in a digital world. We have operations in the Americas; Europe, Middle East and Africa (“EMEA”); and Asia-Pacific (“APAC”).

OPERATIONS OVERVIEW
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.
Digital Media
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.
Annualized Recurring Revenue (“ARR”) is currently the key performance metric our management uses to assess the health and trajectory of our overall Digital Media segment. ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations as ARR is a performance metric and is not intended to be combined with any of these items. Digital Media ARR continues to be calculated as the sum of the annual value of Digital Media subscriptions and services and the annual value of Digital Media Enterprise Term License Agreements. We adjust our reported ARR on an annual basis to
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reflect any exchange rate changes. Our reported ARR results in the current fiscal year are based on currency rates set at the beginning of the year and held constant throughout the year for measurement purposes. Prior year ARR balances are also revalued at the new currency rates for comparative purposes.
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.
Digital Experience
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.
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.
Customer-Focused Strategy
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.
Spanning both our Digital Media and Digital Experience segments, we are driving continued business success through audience-specific product innovation and go-to-market strategy focused on the following two customer groups:
• 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.
• Creative and Marketing Professionals require agile and comprehensive solutions to create high volumes of compelling content, infused with commercially safe AI capabilities; and are benefiting from investments in powerful, integrated workflows through offerings such as Adobe Firefly and Adobe GenStudio. Revenue associated with the Creative and Marketing Professionals customer group consists of Digital Experience offerings as well as Creative Cloud flagship apps such as Photoshop, Lightroom and Illustrator within Digital Media.
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.
As part of our customer-focused strategy, we utilize a data-driven operating model and tailored go-to-market motion to raise awareness of our products and drive customer acquisition, engagement and retention. Overall, our strategy is designed to increase our revenue with existing users, continue to attract new customers, and grow our recurring and predictable revenue stream that is recognized ratably.
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Macroeconomic Conditions
As a corporation with an extensive global footprint, we are subject to risks and exposures from the evolving macroeconomic environment, including the effects of increased global inflationary pressures and interest rates, fluctuations in foreign currency exchange rates, potential economic slowdowns or recessions and geopolitical pressures, including the unknown impacts of current and future trade regulations. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results.
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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.
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.
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.
Recent Accounting Pronouncements
See Note 1 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.
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RESULTS OF OPERATIONS
Financial Performance Summary
• 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.
• 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.
• 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.
• 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.
• 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.
• Net income of $1.77 billion during the three months ended August 29, 2025 increased by $88 million, or 5%, compared to the year-ago period.
• 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.
• Remaining performance obligations of $20.44 billion as of August 29, 2025 increased by 13% from $18.14 billion as of August 30, 2024.

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

(dollars in millions) Three Months Nine Months
  2025 2024 % Change 2025 2024 % Change
Subscription $ 5,791  $ 5,180  12  % $ 16,915  $ 15,156  12  %
Percentage of total revenue 97  % 96  %   96  % 95  %  
Product 68  82  (17) % 251  305  (18) %
Percentage of total revenue 1  % 1  %   2  % 2  %  
Services and other 129  146  (12) % 409  438  (7) %
Percentage of total revenue 2  % 3  %   2  % 3  %  
Total revenue $ 5,988  $ 5,408  11  % $ 17,575  $ 15,899  11  %

Subscription
Our subscription revenue is comprised primarily of fees we charge for our subscription and hosted service offerings, and related support. We primarily recognize subscription revenue ratably over the term of agreements with our customers, beginning with commencement of service. Subscription revenue related to certain offerings, where fees are based on a number of transactions and invoicing is aligned to the pattern of performance, customer benefit and consumption, are recognized on a usage basis.
Product
Our product revenue is comprised primarily of fees related to licenses for on-premise software purchased on a perpetual basis, for a fixed period of time, or based on usage for certain of our original equipment manufacturer and royalty agreements. We primarily recognize product revenue at the point in time the software is available to the customer, provided all other revenue recognition criteria are met.
Services and Other
Our services and other revenue is comprised primarily of fees related to consulting, training, maintenance and support for certain on-premise licenses that are recognized at a point in time and our advertising offerings. We typically sell our consulting
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contracts on a time-and-materials or fixed-fee basis. These revenues are recognized as the services are performed for time-and-materials contracts and on a relative performance basis for fixed-fee contracts. Training revenues are recognized as the services are performed. Our maintenance and support offerings, which entitle customers, partners and developers to receive desktop product upgrades and enhancements or technical support, depending on the offering, are generally recognized ratably over the term of the arrangement. Transaction-based advertising revenue is recognized on a usage basis as we satisfy the performance obligations to our customers.
Segment Information
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:

(dollars in millions) Three Months Nine Months
  2025 2024 % Change 2025 2024 % Change
Digital Media $ 4,459  $ 3,995  12  % $ 13,031  $ 11,719  11  %
Percentage of total revenue 74  % 74  %   74  % 74  %  
Digital Experience 1,476  1,354  9  % 4,347  3,970  9  %
Percentage of total revenue 25  % 25  %   25  % 25  %  
Publishing and Advertising 53  59  (10) % 197  210  (6) %
Percentage of total revenue 1  % 1  %   1  % 1  %  
Total revenue $ 5,988  $ 5,408  11  % $ 17,575  $ 15,899  11  %

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

(dollars in millions) Three Months Nine Months
2025 2024 % Change 2025 2024 % Change
Digital Media $ 4,397  $ 3,921  12  % $ 12,836  $ 11,474  12  %
Digital Experience 1,368  1,231  11  % 3,999  3,599  11  %
Publishing and Advertising 26  28  (7) % 80  83  (4) %
Total subscription revenue $ 5,791  $ 5,180  12  % $ 16,915  $ 15,156  12  %

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.
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:

(dollars in millions) Three Months Nine Months
2025 2024 % Change 2025 2024 % Change
Creative and Marketing Professionals
$ 4,117  $ 3,715  11  % $ 12,058  $ 10,908  11  %
Business Professionals and Consumers
1,648  1,437  15  % 4,777  4,165  15  %
Total Digital Media and Digital Experience subscription revenue $ 5,765  $ 5,152  12  % $ 16,835  $ 15,073  12  %

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.
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Geographical Information

(dollars in millions) Three Months Nine Months
  2025 2024 % Change 2025 2024 % Change
Americas $ 3,555  $ 3,241  10  % $ 10,460  $ 9,539  10  %
Percentage of total revenue 59  % 60  %   60  % 60  %  
EMEA 1,586  1,405  13  % 4,629  4,085  13  %
Percentage of total revenue 27  % 26  %   26  % 26  %  
APAC 847  762  11  % 2,486  2,275  9  %
Percentage of total revenue 14  % 14  %   14  % 14  %  
Total revenue $ 5,988  $ 5,408  11  % $ 17,575  $ 15,899  11  %

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.
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.

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

(dollars in millions) Three Months Nine Months
  2025 2024 % Change 2025 2024 % Change
Subscription $ 510  $ 413  23  % $ 1,505  $ 1,324  14  %
Percentage of total revenue 9  % 8  % 9  % 8  %
Product 5  6  (17) % 17  19  (11) %
Percentage of total revenue * *   * *  
Services and other 127  135  (6) % 380  399  (5) %
Percentage of total revenue 2  % 2  %   2  % 3  %  
Total cost of revenue $ 642  $ 554  16  % $ 1,902  $ 1,742  9  %

_________________________________________
(*)     Percentage is less than 1%.
Subscription
Cost of subscription revenue consists primarily of third-party hosting services and data center costs, including expenses related to operating our network infrastructure and AI inferencing costs. Cost of subscription revenue also includes compensation costs associated with network operations, implementation, account management and technical support personnel, royalty fees, software costs and amortization of certain intangible assets.
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.
Product
Cost of product revenue is primarily comprised of third-party royalties, localization costs and costs associated with the manufacturing of our products.
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Services and Other
Cost of services and other revenue is primarily comprised of compensation and contracted costs incurred to provide consulting services, training and product support, and hosting services and data center costs.

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

(dollars in millions)
Three Months Nine Months
  2025 2024  % Change 2025 2024  % Change
Research and development $ 1,088  $ 1,022  6  % $ 3,196  $ 2,945  9  %
Percentage of total revenue 18  % 19  % 18  % 19  %
Sales and marketing 1,639  1,431  15  % 4,760  4,228  13  %
Percentage of total revenue 27  % 26  % 27  % 27  %
General and administrative 408  366  11  % 1,152  1,073  7  %
Percentage of total revenue 7  % 7  % 7  % 7  %

Acquisition termination fee
—  —  ** —  1,000  **
Percentage of total revenue * * * 6  %
Amortization of intangibles
38  43  (12) % 120  127  (6) %
Percentage of total revenue 1  % 1  % 1  % 1  %
Total operating expenses $ 3,173  $ 2,862  11  % $ 9,228  $ 9,373  (2) %

  _________________________________________
(*)     Percentage is less than 1%.
(**)     Percentage is not meaningful.
Research and Development
Research and development expenses consist primarily of compensation and contracted costs associated with software development, third-party hosting services and data center costs including AI training costs, related facilities costs and expenses associated with computer equipment and software used in development activities.
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.
Investments in research and development, including the recruiting and hiring of software developers, are critical to remain competitive in the marketplace and are directly related to continued timely development of new and enhanced offerings and solutions. We will continue to focus on long-term opportunities available in our end markets and make significant investments in the development of our subscription and service offerings, apps and tools.
Sales and Marketing
Sales and marketing expenses consist primarily of compensation costs, amortization of contract acquisition costs, including sales commissions, travel expenses and related facilities costs for our sales, marketing, order management and global supply chain management personnel. Sales and marketing expenses also include the costs of programs aimed at increasing revenue, such as advertising, trade shows and events, public relations and other market development programs.
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.
General and Administrative
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.
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.
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Acquisition Termination Fee
During the nine months ended August 30, 2024, we incurred a $1 billion termination fee which resulted from termination of the Figma transaction.

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

(dollars in millions) Three Months Nine Months
  2025 2024 % Change 2025 2024 % Change
Interest expense $ (67) $ (51) 31  % $ (197) $ (119) 66  %

Investment gains (losses), net 23  12  ** 31  34  **

Other income (expense), net
58  89  ** 191  241  **

Total non-operating income (expense), net
$ 14  $ 50  ** $ 25  $ 156  **

  _________________________________________
(**)     Percentage is not meaningful.
Interest Expense
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.
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 i nterest rate swaps and debt, respectively .
Investment Gains (Losses), Net
Investment gains (losses), net consists principally of unrealized holding gains and losses associated with our deferred compensation plan assets.
Other Income (Expense), Net  
Other income (expense), net consists primarily of interest earned on cash, cash equivalents and short-term fixed income investments. Other income (expense), net also includes realized gains and losses on fixed income investments and foreign exchange gains and losses.

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

(dollars in millions) Three Months Nine Months
  2025 2024 % Change 2025 2024 % Change
Provision for income taxes $ 415  $ 358  16  % $ 1,196  $ 1,063  13  %

Effective tax rate 19  % 18  % 18  % 22  %

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.
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.
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
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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.
We are a U.S.-based multinational company subject to tax in multiple domestic and foreign tax jurisdictions. The current U.S. tax law subjects the earnings of certain foreign subsidiaries to U.S. tax and generally allows an exemption from taxation for distributions from foreign subsidiaries.
In the current global tax policy environment, the domestic and foreign governing bodies continue to consider, and in some cases introduce, changes in regulations applicable to corporate multinationals such as Adobe. As regulations are issued, we account for finalized regulations in the period of enactment.
Several countries have enacted, or have committed to enact, the Organization for Economic Cooperation and Development’s 15% global minimum tax regime effective for our fiscal 2025. The currently enacted legislation is not expected to have a material impact on our provision for income taxes, however we continue to monitor developments and evaluate impacts, if any, of these provisions on our results of operations and cash flows.
On July 4, 2025, the One Big Beautiful Bill Act (“2025 U.S. Tax Act”) was enacted in the United States. Among the changes, the 2025 U.S. Tax Act restores immediate expensing of domestic research and development costs and modifies certain international provisions effective for us starting in fiscal 2026 and 2027, respectively. We do not expect a material impact on our current fiscal year effective rates for income taxes or for cash taxes paid. While we continue to evaluate the impact for future years, we anticipate a reduction to our effective rates for cash taxes paid in years after fiscal 2025.
Accounting for Uncertainty in Income Taxes
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.
As of August 29, 2025 and August 30, 2024, the combined amounts of accrued interest and penalties included in long-term income taxes payable related to tax positions taken on our tax returns were not material.
The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Although the timing of resolution, settlement and closing of audits is not certain, it is reasonably possible that the underlying unrecognized tax benefits may decrease by up to $55 million over the next 12 months.
Our future effective tax rates may be materially affected by changes in the tax rates in jurisdictions where our income is earned, changes in jurisdictions in which our profits are determined to be earned and taxed, changes in the valuation of our deferred tax assets and liabilities, changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business, or unexpected changes in business and market conditions that could reduce certain tax benefits.
In addition, tax laws in the United States as well as other countries and jurisdictions in which we conduct business are subject to change as new laws are passed and/or new interpretations are made available. These countries, governmental bodies, such as the European Commission of the European Union, and intergovernmental economic organizations, such as the Organization for Economic Cooperation and Development, have made or could make unprecedented assertions about how taxation is determined and, in some cases, have proposed or enacted new laws that are contrary to the way in which rules and regulations have historically been interpreted and applied. Changes in our operating landscape, such as changes in laws and/or interpretations of tax rules, could adversely affect our effective tax rates and/or cause us to respond by making changes to our business structure which could adversely affect our operations and financial results.
Moreover, we are subject to the examination of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. Our policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. While we believe our tax estimates are reasonable, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our financial position and results of operations.
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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
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.
This data should be read in conjunction with our condensed consolidated statements of cash flows.

As of
(in millions) August 29, 2025 November 29, 2024
Cash and cash equivalents $ 4,982  $ 7,613 
Short-term investments $ 958  $ 273 
Working capital $ 173  $ 711 
Stockholders’ equity $ 11,770  $ 14,105 

A summary of our cash flows is as follows:

  Nine Months Ended
(in millions) August 29, 2025 August 30, 2024
Net cash provided by operating activities $ 6,871  $ 5,135 
Net cash provided by (used for) investing activities (1,041) 130 
Net cash used for financing activities (8,505) (5,223)
Effect of foreign currency exchange rates on cash and cash equivalents 44  10 
Net change in cash and cash equivalents $ (2,631) $ 52 

Cash Flows from Operating Activities
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.
Cash Flows from Investing Activities
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.
Cash Flows from Financing Activities
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.
Liquidity and Capital Resources Considerations
Our existing cash, cash equivalents and investment balances may fluctuate during fiscal 2025 due to changes in our planned cash outlay.
Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, risks detailed in the section titled “Risk Factors” in titled Part II, Item 1A of this report. Based on our current business plan and revenue prospects, we believe that our existing cash, cash equivalents and investment balances, our anticipated cash flows from operations and our available revolving credit facility will be sufficient to meet our working capital, operating resource expenditure and capital expenditure requirements for the next twelve months and for the foreseeable future.
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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.
We expect to continue our investing activities, including short-term and long-term investments, purchases of computer and server hardware to operate our network infrastructure, sales and marketing, product support and administrative staff. Furthermore, cash reserves may be used to repurchase stock under our stock repurchase program and to strategically acquire companies, products or technologies that are complementary to our business.
Revolving Credit Agreement
We have a $1.5 billion senior unsecured revolving credit agreement (the “Revolving Credit Agreement”) with a syndicate of lenders, providing for loans to us and certain of our subsidiaries through June 30, 2027. Subject to the agreement of lenders, we may obtain up to an additional $500 million in commitments, for a maximum aggregate commitment of $2 billion. As of August 29, 2025, there were no outstanding borrowings under the Revolving Credit Agreement and the entire $1.5 billion credit line remains available for borrowing. Under the terms of our Revolving Credit Agreement, we are not prohibited from paying cash dividends unless payment would trigger an event of default or if one currently exists. We do not anticipate paying any cash dividends in the foreseeable future.
Commercial Paper Program
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 August 29, 2025, there were no outstanding borrowings under the commercial paper program.
Senior Notes
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.
Contractual Obligations
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.
Stock Repurchase Program
To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we may repurchase our shares in the open market or enter into structured repurchase agreements with third parties. In March 2024, our Board of Directors granted authority to repurchase up to $25 billion in our common stock through March 14, 2028. In June 2025, we entered into a stock repurchase arrangement with a large financial institution to execute up to $2.5 billion in open market repurchases, which remained partially outstanding as of August 29, 2025. Upon completion of this arrangement, $8.40 billion remains under our March 2024 stock repurchase authority.
During the nine months ended August 29, 2025, we entered into stock repurchase arrangements with large financial institutions and made payments totaling $8.81 billion to repurchase shares. Subsequent to August 29, 2025, as part of the March 2024 stock repurchase authority, we entered into a stock repurchase arrangement with a large financial institution under which we may execute up to $2.5 billion in open market repurchases. See Note 10 of our notes to condensed consolidated financial statements for further details regarding our stock repurchase program.
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Indemnifications
In the ordinary course of business, we provide indemnifications of varying scope to our customers and channel partners against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.
To the extent permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Senior Notes
During the nine months ended August 29, 2025, we entered into interest rate swaps related to certain of our senior notes that effectively convert the fixed interest rates to floating interest rates based on SOFR OIS plus a fixed number of basis points through their respective par call dates. Accordingly, our exposure to fluctuations in market interest rates is on the hedged fixed-rate debt of $2.70 billion. As of August 29, 2025, an immediate hypothetical 50 basis point increase or decrease in market interest rates would not have a significant impact on our results of operations.
There have been no other material changes in our market risk exposures for the nine months ended August 29, 2025, as compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended November 29, 2024.

ITEM 4.  CONTROLS AND PROCEDURES
Based on their evaluation as of August 29, 2025, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during the quarter ended August 29, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adobe have been detected.
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PART II—OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
See Note 12 of our notes to condensed consolidated financial statements for information regarding our legal proceedings.

ITEM 1A.  RISK FACTORS
As previously discussed, our actual results could differ materially from our forward-looking statements. Below we discuss some of the factors that could cause these differences. The occurrence of these and many other factors described in this report, and factors that we do not presently know or that we currently believe to be immaterial, could materially and adversely affect our operations, performance and financial condition. Many factors affect more than one category and the factors are not in order of significance or probability of occurrence because they have been grouped by categories.
Risks Related to Our Ability to Grow Our Business
We may be unsuccessful at innovating in response to rapid technological or industry changes to meet customer needs, which could cause our operating results to suffer.
We operate in rapidly evolving industries and expect the pace of innovation to continue to accelerate. We must continually introduce new, and enhance existing, products, services and solutions to retain customers and attract new customers. Developing new products, services and solutions is complex, requires significant investment and operational costs and may not be profitable, and our investments in new technologies are speculative and may not yield the expected business or financial benefits. The commercial success of new or enhanced products, services and solutions depends on a number of factors, including timely and successful development; effective distribution and marketing; market acceptance; compatibility with existing and emerging standards, platforms, software delivery methods and technologies; accurately predicting and anticipating customer needs and expectations and the direction of technological change; identifying and innovating in the right technologies; and differentiation from other products, services and solutions. If we fail to anticipate or identify technological, creative or marketing trends or fail to devote appropriate resources to adapt to such trends, our business could be harmed. For example, generative and agentic artificial intelligence technologies enable users of all skill levels to create and provide new ways of marketing, creating content and interacting with documents, which could significantly disrupt industries in which we operate and our existing products, services and solutions and our business may be harmed if we fail to invest or adapt. While we have released new generative artificial intelligence products, such as Adobe Firefly, and are focused on enhancing the artificial intelligence (“AI”) capabilities of our products and incorporating AI across existing products, services and solutions, there can be no assurance that our new or enhanced products and AI innovations will be successful, adopted or monetizable or that we will innovate effectively to keep pace with the rapid evolution of AI across our offerings. If we do not successfully innovate, adapt to rapid technological or industry changes and meet customer needs, our business and our financial results may be harmed.
Issues relating to the development and use of AI in our offerings may result in reputational harm, liability and adverse financial results.
Social, ethical and operational issues relating to the use of AI, including generative AI and agentic AI, in our offerings may result in reputational harm, liability and additional costs. We are increasingly incorporating AI technologies, developed by us and by third parties, into many of our offerings. If our AI development, deployment, content labeling or governance is ineffective or inadequate, it may result in incidents that impair the public acceptance of AI solutions or cause harm to individuals, customers or society, or result in our offerings not working as intended or producing unexpected outcomes.
Jurisdictions around the world are developing and passing new regulations that apply specifically to the use of AI. For example, the EU AI Act was adopted in 2024 and will be implemented in phases through 2030, and other jurisdictions are considering similarly focused legislation. These regulations and the evolving AI regulatory environment may, among other impacts, result in inconsistencies among AI regulations and frameworks across jurisdictions, increase our compliance, governance and research and development costs, increase our exposure to claims related to our AI models and increase liability related to the use of AI by our customers or users that are beyond our control. While we have taken a responsible approach to the development and use of AI, such as in our Adobe Firefly offerings, there can be no guarantee that future AI regulations will not adversely impact us or conflict with our approach to AI, including affecting our ability to make our AI offerings available without costly changes, delaying or halting development of AI offerings, requiring us to change our AI development practices, monetization strategies and/or indemnity protections and subjecting us to additional compliance requirements, regulatory action, competitive harm, reputational harm and/or legal liability. To the extent we rely on third-party AI models in our products, services and solutions, we will face risks inherent in how those models have been developed and deployed, including
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situations in which the third party may lack a proper license or consent for the training data used for their model. In addition, new competition regulations on AI development and deployment could impose new requirements on our markets that could impact our business and financial results.
Uncertainty around new and evolving AI uses may require significant, additional investment to develop models and proprietary datasets, responsible-use frameworks and new approaches and processes to attribute or compensate content creators. We have experienced, and may in the future experience, challenges accessing AI models, datasets or hardware. Developing, testing and deploying AI systems may also increase the cost of our offerings, including due to the nature of the computing costs involved in such systems. These costs could adversely impact our margins as we continue to make significant investments in AI development, add AI capabilities to our offerings and scale our AI offerings without assurance that our customers and users will adopt them. Further, as with any new offerings based on new technologies, consumer reception and monetization pathways are uncertain, our strategies may not be successful and our business and financial results could be adversely impacted. New AI offerings and technologies could modify workforce needs, result in negative publicity about AI and decrease demand for our existing products, services and solutions, all of which could adversely impact our business.
We participate in rapidly evolving and intensely competitive markets, and, if we do not compete effectively, our operating results could suffer.
The markets for our products, services and solutions are rapidly evolving and intensely competitive. We expect competition to continue to intensify. Our numerous competitors range in size from diversified global companies with significant sales and research and development resources, broad brand awareness, long operating histories or access to large customer bases to small companies whose specialized focuses may allow them to more easily and effectively deploy technical, marketing and financial resources. Our competitors may develop or acquire products, services or solutions that are similar to ours or that achieve greater or faster acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns or may adopt more aggressive pricing policies. As a result, current and potential customers may select the products, services or solutions of our competitors. Further, our future success depends on our continued ability to effectively appeal to businesses and consumers. New industry standards, evolving distribution models, limited barriers to entry, short product life cycles, customer price sensitivity, global market conditions and the frequent entry of new products or competitors may increase downward pressure on pricing and gross margins and adversely affect our renewal, upsell and cross-sell rates as well as our ability to attract new customers. In addition, we expect to face more competition as AI continues to advance and be integrated into the markets in which we compete. Our competitors or other third parties may incorporate AI into their offerings more successfully and efficiently than we do and achieve greater and faster adoption, which could impair our ability to compete effectively and adversely affect our business and financial results. Other companies have, or in the future may obtain, proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our AI offerings. Further, we expect AI offerings to be highly competitive and rapidly evolving. For example, we face increasing competition from companies offering generative AI capabilities, including text-to-image, text-to-video and multi-modal offerings that compete directly with our creative offerings. If we are not able to provide products, services and solutions that compete effectively, we could experience reduced sales and our business could be adversely affected. For additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section titled “Competition” contained in Part I, Item 1 of our Annual Report on Form 10-K.
If our reputation or our brands are damaged, our business and financial results may be adversely affected.
We believe our reputation and brands have been, and we expect them to continue to be, important to our business and financial results. Maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful. We have experienced, and may in the future experience, reputational harm from, among other things, the introduction of new products, features, services, or terms that do not meet customer expectations; our position on or approach to new and evolving technologies, including AI; backlash from customers, the creative community, government entities or other stakeholders that disagree with our product offering decisions or public policy, ethical or political positions; significant litigation or regulatory or government actions that negatively reflect on our business practices; data security breaches or compliance failures; and public scrutiny or negative publicity, including being the target of media and social media campaigns, criticizing our actual or perceived actions or inactions, policies, terms, agreements, handling of user privacy, data practices or content. Further, our brands may be negatively affected by uses of our products, services or solutions, particularly our AI offerings, in ways that are out of our control, such as to create or disseminate content that is deemed to be misleading, deceptive or intended to manipulate public opinion, or for illicit, objectionable or illegal ends, or by our failure to respond appropriately and in a timely manner to such uses. Such uses may result in controversy or claims related to defamation, rights of publicity, illegal content, intellectual property infringement, harmful content, misinformation and disinformation, harmful bias, misappropriation, data privacy, derivative uses of third-party AI and personal injury torts. If we fail to appropriately respond to objectionable content created using our products, services or solutions or shared on our platforms, our users may lose confidence in our brands. Entry into markets with weaker protection of brands or changes in the legal systems in countries in
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which we operate may also impact our ability to protect our brands. If we fail to maintain, enhance or protect our brands, or if we incur excessive expenses in our efforts to do so, our users’ trust in us and purchasing decisions and our business and financial results may be adversely affected.
We may not realize the anticipated benefits of investments or acquisitions, and they may disrupt our business and divert management’s attention.
Investments and acquisitions involve numerous risks and uncertainties, the occurrence of which may have an adverse effect on our business. These risks and uncertainties include:
• inability to achieve the financial and strategic goals of the investment or acquisition;
• difficulty in effectively integrating the operations, technologies, products, services, solutions, culture or personnel of the acquired business;
• disruption of our ongoing business and distraction of our management and other personnel;
• challenges to completing or failure to complete an announced investment or acquisition related to the failure to obtain regulatory approval, or the need to satisfy certain conditions precedent to closing such transaction (such as divestitures, ownership or operational restrictions or other structural or behavioral remedies) that could limit the anticipated benefits of the transaction;
• entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions;
• inability to retain personnel, key customers, distributors, vendors and other business partners of the acquired business;
• delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings;
• incurring higher than anticipated costs to effectively integrate an acquired business, to bring an acquired company into compliance with applicable laws and regulations, additional compensation issued or assumed in connection with an acquisition, to divest products, services or solutions acquired in unsuccessful investments or acquisitions, to amortize costs for acquired intangible assets or because of our inability to take advantage of anticipated tax benefits;
• increased collection times, elevated delinquency or bad debt write-offs related to receivables of an acquired business we assume;
• difficulty in maintaining controls, procedures and policies during the transition and integration and inability to conclude that our internal controls over financial reporting are effective;
• potential identified or unknown security vulnerabilities in acquired products that expose us to additional security risks or delay our ability to integrate the product into our offerings;
• exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition;
• incurrence of additional debt to finance an acquisition, which will increase our interest expense and leverage, and/or issuance of equity securities to finance acquisitions, which will dilute current shareholders’ percentage ownership and earnings per share; and
• failure to identify significant problems, liabilities or other challenges during due diligence.
Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may also be impaired by adverse economic and political events, including trade tensions, and increased global scrutiny and evolving regulatory expectations relating to acquisitions and strategic investments. We may not be able to complete acquisitions or other strategic transactions to realize the anticipated benefits of such acquisitions or transactions on favorable terms, or at all, including as a result of challenges in obtaining regulatory approvals, and may incur additional costs. For example, we have experienced difficulties in obtaining regulatory approvals, resulting in the termination of a previously announced acquisition and the incurrence of additional costs. Any of these factors may adversely affect our financial condition or results of operations.
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Risks Related to the Operation of Our Business
Service interruptions or failures of our or third-party information technology systems may impair the availability of our products, services and solutions, which may expose us to liability, damage our reputation and harm our future financial results.
Much of our business, including our online store at adobe.com and our cloud solutions, relies on hardware and services that are hosted, managed and controlled directly by us or third-party service providers to be available to our customers and users without disruption. We do not have redundancy for all our systems, many of our critical applications (“Apps”) reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities. If any critical third-party service provider of hosting or content delivery services is negatively affected or becomes unavailable to us for any reason, we may not be able to deliver the corresponding products, services or solutions to our customers and users. Failure of our systems or those of our third-party service providers could cause large, system-wide failures, disrupt our business operations and those of our customers, subject us to reputational harm, require costly and time-intensive notifications, and cause us to lose customers, users and future business. Occasionally, we migrate data among data centers and to third-party hosted environments. If a transition among data centers or to third-party service providers encounters unexpected interruptions, unforeseen complexity or unplanned disruptions despite precautions undertaken during the process, this may impair our delivery of products, services and solutions to customers and result in increased costs and liabilities, which may harm our operating results, reputation and our business.
It is also possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption, cause the information that we collect or maintain to be incomplete or contain inaccuracies that our customers regard as significant, or cause us to fail to meet committed service levels or comply with applicable notification requirements or other relevant contractual obligations to our customers. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors, including access to the internet, the failure of our network or software systems, security breaches or significant variability in visitor traffic on customer websites. We may also find, on occasion, that we cannot deliver data and reports to our customers in near real-time due to factors such as significant spikes in customer activity on their websites or failures of our network or software (or that of a third-party service provider). If we fail to plan infrastructure capacity appropriately and expand it proportionally with the needs of our customer and user base, and we experience a rapid and significant demand on the capacity of our data centers or those of third parties, service outages or performance issues could occur, which may impact our customers. Such a strain on our infrastructure capacity may subject us to regulatory and customer notification requirements, violations of service level agreement commitments or financial liabilities and result in customer dissatisfaction or harm our business. If we supply materially inaccurate information or experience significant interruptions in our systems, our reputation could be harmed, we could lose customers and we could be found liable for damages or incur other losses.
Security incidents, improper access to or disclosure of our customers’ data or other cybersecurity incidents may harm our reputation and materially and adversely affect our business.
Our products, services and solutions collect, store, manage and otherwise process third-party data, including our customers’ data and our own data. Such products, services and solutions as well as our technologies, systems and networks have been subject to, and may in the future be subject to, cyberattacks, computer viruses, ransomware or other malware, fraud, worms, social engineering, denial-of-service attacks, malicious software programs, insider threats and other cybersecurity incidents that have in the past, and may in the future, result in the unauthorized access, disclosure, acquisition, use, loss or destruction of sensitive personal or business data belonging to us, our employees and our customers.
Cybersecurity incidents can be caused by human error from our workforce or that of our third-party service providers, by malicious third parties, acting alone or in groups, or by more sophisticated organizations, including nation-states and state-sponsored organizations. Such risks may be elevated in connection with geopolitical tensions, including the Russia-Ukraine war and the conflict in the Middle East. Certain unauthorized parties have in the past managed, and may in the future manage, to overcome our security measures and those of our third-party service providers to access and misuse systems and software by exploiting defects in design or manufacture, including bugs, vulnerabilities and other problems that unexpectedly compromise the security or operation of a product or system. Further, unauthorized parties may also gain physical access to our facilities and infiltrate our information systems or attempt to gain logical access to our products, services or information systems to access content and data and may result in computer viruses, worms, ransomware or other malware. Malicious third parties have in the past, and may in the future, fraudulently induce our employees or users of our products, services or solutions to disclose sensitive, personal or confidential information via illegal electronic spamming, phishing, social engineering or other tactics, and this risk is heightened in our current hybrid model working environment. Malicious actors may also engage in fraudulent or abusive activities through our products, services and solutions, including unauthorized use of accounts through stolen credentials, use of stolen credit cards or other payment vehicles, failure to pay for services accessed, or other activities that
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violate our terms of service. While we actively combat such fraudulent activities, we have experienced, and may in the future experience, impacts to our revenue from such activities.
Maintaining the security of our products, services and solutions is a critical issue for us and our customers. We devote significant resources to address security vulnerabilities through various methods, including, but not limited to, engineering more secure products, enhancing security and reliability features in our products and systems, regularly reviewing our service providers’ security controls, and continually assessing and improving, as appropriate, our incident response process. However, it is impossible to accurately predict the extent, frequency or impact cybersecurity issues may have on us, and our security measures do not provide full effective protection from all such events. The costs to prevent, eliminate, mitigate or remediate cybersecurity or other security problems and vulnerabilities are significant and may reduce our margins. Breaches of our security measures and the accidental loss, inadvertent disclosure or unauthorized dissemination of proprietary information or sensitive, personal or confidential data about us, our employees, our customers or their end users, including the potential loss or disclosure of such information or data have in the past, and could in the future, expose us, our employees, our customers or other individuals affected to a risk of loss or misuse of this information. Further, our efforts to address these problems, including notifying affected third parties when appropriate, have in the past been, and may in the future be, unsuccessful or delayed, which could result in business interruptions, cessation of service, loss of existing or potential customers and reputational harm. Actual or perceived security vulnerabilities or incidents have resulted in, and may result in additional, claims or litigation and liability or fines, costly and time-intensive notice requirements, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business and damage our brand and reputation. Our customers may also adopt security measures to protect their computer systems and their instances of our software from attack and may suffer a cybersecurity breach on their own systems, unrelated to our systems. Even if such breach is unrelated to our security systems, solutions or programs, such breach could cause us reputational harm and require us to incur significant economic and operational consequences to adequately assess and respond to their breach, and to implement additional safeguards designed to protect against future breaches.
While we maintain insurance to cover operational risks, such as cybersecurity risk and technology outages, our insurance may not be sufficient to cover all liability described herein. These risks will likely increase as we expand our hosted offerings, integrate our products, services and solutions and store and process more data. Moreover, delayed sales, lower margins or lost customers resulting from disruptions caused by cyberattacks, overly burdensome preventative security measures or failure to fully meet information security control certification requirements could materially and adversely affect our financial results, stock price and reputation.
If we are unable to develop, manage and maintain critical third-party relationships, such as our sales, partner and distribution channels, suppliers and service providers, our revenue and business may be adversely affected.
We rely on a number of third-party distributors and sales partners to distribute our products, services and solutions. The successful management of such third-party relationships is a complex, global process. If an agreement with one of our distributors or partners was terminated, any prolonged delay in securing a replacement distributor or partner could have a negative impact on our results of operations. We also face legal risk and potential reputational harm from the activities of these independent third parties including, but not limited to, export control violations, workplace conditions, corruption and anti-competitive behavior.
If our partner and distribution channels are not effective or if we stop or change our partner or distribution channels, we may lose sales opportunities, customers and revenue. We rely on third-party distribution platforms and are subject to changes in pricing structure, terms of service, privacy practices and other policies at the discretion of the platform provider. Any adverse changes to the terms with such third-party distribution platforms which we rely on to distribute our products, services and solutions may adversely affect our financial results. Additionally, our distribution channels may not continue to market or sell our products, services and solutions effectively and may favor products, services and solutions of other companies.
We sell many products, services and solutions through our direct sales force. Risks associated with this sales channel include challenges related to hiring, retaining and motivating our direct sales force, and substantial amounts of ongoing training for sales representatives. Our business could be harmed if our direct sales expansion efforts do not generate the corresponding efficiencies and revenue we anticipated from such investment. In addition, the loss of key sales employees could impact our customer relationships and future ability to sell to certain accounts covered by such employees.
We rely on third-party service providers and technologies to deliver our products, services and business operations and to operate critical business systems, such as cloud-based infrastructure, data center facilities, generative AI, encryption and authentication technology, company email and communications with customers. If such third parties are negatively affected, if we fail to effectively develop, manage and maintain our relationships with such third parties, or if we are unable to renew our agreements with them on favorable terms or at all, our expenses could significantly increase, and we and our customers may
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experience service interruptions. Any disruption or damage to, or failure of our systems generally, including the systems of our third-party platform providers, could result in interruptions in our services and harm our business. Further, interruptions in our services caused by us or our third-party service providers may cause us to issue credits or pay penalties, cause customers to make warranty or other claims against us or to terminate their subscriptions or contracts, and adversely affect our attrition rates and our ability to attract new customers, all of which may adversely affect our financial results. Our business and reputation would also be harmed if our customers and potential customers believe our services are unreliable.
We face various risks associated with our operating as a multinational corporation, and global adverse economic conditions may harm our business and financial condition.
We derive a large portion of our total revenue from, and have significant operations, outside of the United States. As a multinational corporation, we are subject to a number of risks, including from global adverse economic conditions, that are uncertain and beyond our control and that make forecasting operating results and decisions about future investments difficult, such as:
• inflation and actions taken by central banks to counter inflation, including increasing interest rates;
• international and regional economic, political and labor conditions, including any instability or security concerns abroad, such as uncertainty caused by economic sanctions, downturns and recessions, trade disputes, tariffs, armed conflicts and wars;
• tax laws (including U.S. taxes on foreign subsidiaries);
• increased financial accounting and reporting burdens and complexities;
• changes in, or impositions of, legislative or regulatory requirements, including antitrust and competition regulations, or other government actions;
• changes in laws governing the free flow of data across international borders;
• inadequate local infrastructure and difficulties in managing and staffing international operations;
• costs, potential liability, delays or loss of sales resulting from trade restrictions imposed by the United States and other countries, as well as trade laws, including but not limited to economic sanctions and export controls;
• costs and delays associated with developing products in multiple languages; and
• operating in locations with a higher rate of corruption and fraudulent business practices.
Additionally, third parties we do business with and our customers have international operations and are also subject to the above risks. Adverse changes in global economic conditions have in the past resulted and may in the future result in our customers’ and business partners’ insolvency, inability to obtain credit to finance or purchase our products, services and solutions, or a delay in paying or an inability to pay their obligations to us. Other third parties, such as our service providers, suppliers and distributors, may be unable to deliver or be delayed in delivering critical services, products or technologies that we rely on, and our business and reputation may be harmed. Our customers’ spending rate and demand for our products, services and solutions may also be adversely affected by the above risks. If our global sales are reduced, delayed or canceled because of any of the above risks, our revenue may decline.
Further, a disruption in global financial markets could impair our banking partners, on which we rely for operating cash management, capital market transactions and derivative programs. Such disruption could also negatively impact our customers’ ability to pay us due to delays or inability to access their existing cash.
As of August 29, 2025, our investment portfolio primarily consisted of money market funds, corporate debt securities, U.S. Treasury securities and time deposits. These investments are subject to credit, liquidity, market, and interest rate risks as well as economic downturns or events that affect global or regional financial markets that may cause the value of our investments to decline, requiring impairment charges, which could adversely affect our financial condition.
Some of our enterprise offerings have extended and complex sales cycles, which may increase our costs and make our sales cycles unpredictable.
As we continue to target enterprise customers for certain of our offerings, including Adobe Experience Cloud in our Digital Experience business and our Enterprise Term License Agreements in our Digital Media business, we may face increased costs, longer sales cycles, greater competition and less predictability in completing our sales. For our enterprise customers, the
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