Adobe Reports Record Revenue in Q3 Fiscal 2024

A reconciliation between GAAP and non-GAAP earnings results and financial targets and a statement regarding use of non-GAAP financial information are provided at the end of this press release and on Adobe’s investor relations website.

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Condensed Consolidated Statements of Income (In millions, except per share data; unaudited)

	Three Months Ended						Nine Months Ended
	August 30, 2024			September 1, 2023			August 30, 2024			September 1, 2023
Revenue:
Subscription	$	5,180		$	4,631		$	15,156		$	13,521
Product		82			96			305			346
Services and other		146			163			438			494
Total revenue		5,408			4,890			15,899			14,361

Cost of revenue:
Subscription		413			447			1,324			1,317
Product		6			7			19			23
Services and other		135			126			399			380
Total cost of revenue		554			580			1,742			1,720

Gross profit		4,854			4,310			14,157			12,641

Operating expenses:
Research and development		1,022			881			2,945			2,584
Sales and marketing		1,431			1,337			4,228			3,983
General and administrative		366			353			1,073			1,041
Acquisition termination fee		—			—			1,000			—
Amortization of intangibles		43			42			127			126
Total operating expenses		2,862			2,613			9,373			7,734

Operating income		1,992			1,697			4,784			4,907

Non-operating income (expense):
Interest expense		(51	)		(27	)		(119	)		(85	)
Investment gains (losses), net		12			6			34			12
Other income (expense), net		89			67			241			157
Total non-operating income (expense), net		50			46			156			84
Income before income taxes		2,042			1,743			4,940			4,991
Provision for income taxes		358			340			1,063			1,046
Net income	$	1,684		$	1,403		$	3,877		$	3,945
Basic net income per share	$	3.78		$	3.07		$	8.63		$	8.62
Shares used to compute basic net income per share		445			456			449			458
Diluted net income per share	$	3.76		$	3.05		$	8.58		$	8.59
Shares used to compute diluted net income per share		448			459			452			459

Condensed Consolidated Balance Sheets (In millions; unaudited)

	August 30, 2024			December 1, 2023
ASSETS

Current assets:
Cash and cash equivalents	$	7,193		$	7,141
Short-term investments		322			701
Trade receivables, net of allowances for doubtful accounts of $17 and $16, respectively		1,802			2,224
Prepaid expenses and other current assets		1,399			1,018
Total current assets		10,716			11,084

Property and equipment, net		1,969			2,030
Operating lease right-of-use assets, net		368			358
Goodwill		12,814			12,805
Other intangibles, net		858			1,088
Deferred income taxes		1,548			1,191
Other assets		1,557			1,223
Total assets	$	29,830		$	29,779

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Trade payables	$	318		$	314
Accrued expenses		1,848			1,942
Debt		1,499			—
Deferred revenue		5,779			5,837
Income taxes payable		130			85
Operating lease liabilities		70			73
Total current liabilities		9,644			8,251

Long-term liabilities:
Debt		4,128			3,634
Deferred revenue		127			113
Income taxes payable		585			514
Operating lease liabilities		381			373
Other liabilities		420			376
Total liabilities		15,285			13,261

Stockholders’ equity:
Preferred stock		—			—
Common stock		—			—
Additional paid-in capital		13,026			11,586
Retained earnings		36,911			33,346
Accumulated other comprehensive income (loss)		(309	)		(285	)
Treasury stock, at cost		(35,083	)		(28,129	)
Total stockholders’ equity		14,545			16,518
Total liabilities and stockholders’ equity	$	29,830		$	29,779

Condensed Consolidated Statements of Cash Flows (In millions; unaudited)

	Three Months Ended
	August 30, 2024			September 1, 2023
Cash flows from operating activities:
Net income	$	1,684		$	1,403
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		213			218
Stock-based compensation		474			442
Unrealized investment (gains) losses, net		(10	)		(5	)
Other non-cash adjustments		(81	)		(87	)
Changes in deferred revenue		220			102
Changes in other operating assets and liabilities		(479	)		(200	)
Net cash provided by operating activities		2,021			1,873

Cash flows from investing activities:
Purchases, sales and maturities of short-term investments, net		86			236
Purchases of property and equipment		(57	)		(91	)
Purchases and sales of long-term investments, intangibles and other assets, net		(76	)		—
Net cash provided by (used for) investing activities		(47	)		145

Cash flows from financing activities:
Repurchases of common stock		(2,500	)		(1,000	)
Proceeds from treasury stock re-issuances, net of taxes paid related to net share settlement of equity awards		96			124
Other financing activities, net		(49	)		5
Net cash used for financing activities		(2,453	)		(871	)
Effect of exchange rate changes on cash and cash equivalents		12			(2	)
Net change in cash and cash equivalents		(467	)		1,145
Cash and cash equivalents at beginning of period		7,660			5,456
Cash and cash equivalents at end of period	$	7,193		$	6,601

Non-GAAP Results

The following table shows Adobe’s GAAP results reconciled to non-GAAP results included in this release.

(In millions, except per share data)	Three Months Ended
	August 30, 2024			September 1, 2023			May 31, 2024
Operating income:

GAAP operating income	$	1,992		$	1,697		$	1,885
Stock-based and deferred compensation expense		485			448			472
Amortization of intangibles		83			92			84
Acquisition-related expenses ⁽¹⁾		—			27			—
Loss contingency (reversal) ⁽²⁾		(45	)		—			—
Non-GAAP operating income	$	2,515		$	2,264		$	2,441

Net income:

GAAP net income	$	1,684		$	1,403		$	1,573
Stock-based and deferred compensation expense		485			448			472
Amortization of intangibles		83			92			84
Acquisition-related expenses ⁽¹⁾		—			27			—
Loss contingency (reversal) ⁽²⁾		(45	)		—			—
Investment (gains) losses, net		(12	)		(6	)		(4	)
Income tax adjustments		(115	)		(86	)		(102	)
Non-GAAP net income	$	2,080		$	1,878		$	2,023

Diluted net income per share:

GAAP diluted net income per share	$	3.76		$	3.05		$	3.49
Stock-based and deferred compensation expense		1.08			0.98			1.04
Amortization of intangibles		0.19			0.20			0.19
Acquisition-related expenses ⁽¹⁾		—			0.06			—
Loss contingency (reversal) ⁽²⁾		(0.10	)		—			—
Investment (gains) losses, net		(0.03	)		(0.01	)		(0.01	)
Income tax adjustments		(0.25	)		(0.19	)		(0.23	)
Non-GAAP diluted net income per share	$	4.65		$	4.09		$	4.48

Shares used to compute diluted net income per share		448			459			451

⁽¹⁾	Associated with the Figma transaction, and includes deal costs, certain professional fees and the termination fee
⁽²⁾	Associated with an IP litigation matter

Non-GAAP Results (continued)

The following table shows Adobe’s third quarter fiscal year 2024 GAAP tax rate reconciled to the non-GAAP tax rate included in this release.

	Third Quarter Fiscal 2024
Effective income tax rate:

GAAP effective income tax rate		17.5		%
Income tax adjustments		2.5
Stock-based and deferred compensation expense		(1.4	)
Amortization of intangibles		(0.2	)
Loss contingency reversal ⁽²⁾		0.1
Non-GAAP effective income tax rate ⁽³⁾		18.5		%

⁽²⁾	Associated with an IP litigation matter
⁽³⁾	Represents Adobe’s fixed long-term non-GAAP tax rate based on projections and currently available information through fiscal 2025

Reconciliation of GAAP to Non-GAAP Financial Targets

The following tables show Adobe's fourth quarter fiscal year 2024 financial targets reconciled to non-GAAP financial targets included in this release.

(Shares in millions)	Fourth Quarter Fiscal 2024
	Low			High
Diluted net income per share:

GAAP diluted net income per share	$	3.58		$	3.63
Stock-based and deferred compensation expense		1.03			1.03
Amortization of intangibles		0.19			0.19
Lease-related asset impairments and other charges ⁽⁴⁾		0.20			0.20
Income tax adjustments		(0.37	)		(0.37	)
Non-GAAP diluted net income per share	$	4.63		$	4.68

Shares used to compute diluted net income per share	445			445

	Fourth Quarter Fiscal 2024
Effective income tax rate:

GAAP effective income tax rate		16.0		%
Stock-based and deferred compensation expense		(1.1	)
Amortization of intangibles		(0.2	)
Lease-related asset impairments and other charges ⁽⁴⁾		(0.2	)
Income tax adjustments		4.0
Non-GAAP effective income tax rate ⁽³⁾		18.5		%

⁽³⁾	Represents Adobe’s fixed long-term non-GAAP tax rate based on projections and currently available information through fiscal 2025
⁽⁴⁾	Associated with the optimization of our leased facilities, and primarily includes impairment charges related to certain operating lease right-of-use assets and leasehold improvements

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