10-QPeriod: Q2 FY2022

ADOBE INC. Quarterly Report for Q2 Ended Mar 4, 2022

Filed March 30, 2022For Securities:ADBE

Summary

Adobe Inc. reported solid financial results for the first quarter of fiscal year 2022, ending March 4, 2022. Total revenue increased by 9% year-over-year to $4.26 billion, driven by strong performance in the Digital Media and Digital Experience segments. Subscription revenue, comprising 93% of total revenue, grew by 10% to $3.96 billion, highlighting the company's recurring revenue model strength. Net income remained stable at $1.27 billion, demonstrating consistent profitability. The company also reported healthy operating cash flows of $1.77 billion, underscoring its operational efficiency and financial stability. The acquisition of Frame.io in the previous quarter was integrated into the Digital Media segment, contributing to its growth. Looking ahead, Adobe continues to focus on its subscription-based offerings, particularly Creative Cloud and Document Cloud within Digital Media, and its Digital Experience suite. Annualized Recurring Revenue (ARR) for Digital Media reached $12.57 billion, indicating robust future revenue streams. While the company navigates macroeconomic uncertainties and the ongoing impact of the Russia-Ukraine war (leading to an $87 million reduction in Digital Media ARR), its diversified business model and strong market position provide resilience. Adobe also continued its capital return program, repurchasing $2.4 billion in common stock through an accelerated share repurchase agreement.

Financial Highlights

54 data points
Beta

Revenue

$4.26B

88.0% Gross Margin

Net Income

$1.27B

29.7% Net Margin

EPS (Diluted)

$2.66

Total Assets

$25.98B

Cash & Equivalents

$2.74B

Free Cash Flow

$1.67B

Financial Statements
Beta
Revenue$4.26B
Cost of Revenue$512.00M
Gross Profit$3.75B
Operating Expenses$2.17B
Operating Income$1.58B
Interest Expense$28.00M
Net Income$1.27B
EPS (Basic)$2.68
EPS (Diluted)$2.66
Shares Outstanding (Basic)472.60M
Shares Outstanding (Diluted)475.40M

Key Highlights

  • 1Total revenue grew 9% year-over-year to $4.26 billion.
  • 2Subscription revenue, the primary revenue driver, increased 10% to $3.96 billion, representing 93% of total revenue.
  • 3Net income remained strong at $1.27 billion.
  • 4Digital Media segment revenue increased 9% to $3.11 billion, with Creative Cloud revenue up 7% and Document Cloud revenue up 17%.
  • 5Digital Experience segment revenue grew 13% to $1.06 billion.
  • 6Annualized Recurring Revenue (ARR) for Digital Media reached $12.57 billion.
  • 7The company repurchased $2.4 billion of common stock via an accelerated share repurchase (ASR) agreement.

Frequently Asked Questions

Adobe's total revenue for the first quarter of fiscal year 2022 increased by 9% to $4.26 billion, compared to $3.90 billion in the same period of fiscal year 2021. This growth was primarily driven by strong subscription revenue from its Digital Media and Digital Experience segments.

Adobe continued its stock repurchase program, entering into an accelerated share repurchase (ASR) agreement during the quarter for $2.4 billion and receiving an initial delivery of shares. The company has $9.5 billion remaining under its $15 billion repurchase authorization granted in December 2020, set to expire at the end of fiscal year 2024.

Adobe reported that its Digital Media ARR stood at $12.57 billion at the end of Q1 FY2022, an increase from $12.15 billion at the end of fiscal year 2021. This metric indicates continued growth and predictability in its subscription-based revenue streams.

Subsequent to the end of the first quarter of fiscal 2022, Adobe announced a halt to new sales in Russia and Belarus due to the war. This resulted in an $87 million reduction in Digital Media ARR, reflecting existing business in Russia, Belarus, and Ukraine. The company continues to monitor the evolving impacts of the conflict.