10-QPeriod: Q2 FY2023

ADOBE INC. Quarterly Report for Q2 Ended Mar 3, 2023

Filed March 29, 2023For Securities:ADBE

Summary

Adobe Inc. (ADBE) reported solid financial results for the fiscal first quarter ending March 3, 2023, demonstrating continued revenue growth across its core segments. Total revenue increased by 9% year-over-year to $4.655 billion, driven by a robust 10% rise in subscription revenue, which now constitutes 94% of total revenue. The Digital Media segment, including Creative Cloud and Document Cloud, saw revenue grow by 9% to $3.395 billion, while the Digital Experience segment grew by 11% to $1.176 billion, indicating strong demand for Adobe's comprehensive digital solutions. Profitability remained strong, with operating income flat year-over-year at $1.586 billion, and net income slightly decreasing to $1.247 billion from $1.266 billion in the prior year. This slight dip in net income was influenced by increased operating expenses, including investments in research and development and sales & marketing, as well as transaction costs related to the planned acquisition of Figma. Adobe also continued its commitment to returning capital to shareholders, repurchasing $1.4 billion of its common stock under accelerated share repurchase agreements and showing a healthy cash flow from operations of $1.693 billion.

Financial Highlights

54 data points
Beta

Revenue

$4.66B

87.8% Gross Margin

Net Income

$1.25B

26.8% Net Margin

EPS (Diluted)

$2.71

Total Assets

$26.67B

Cash & Equivalents

$4.07B

Free Cash Flow

$1.59B

Financial Statements
Beta
Revenue$4.66B
Cost of Revenue$568.00M
Gross Profit$4.09B
Operating Expenses$2.50B
Operating Income$1.59B
Interest Expense$32.00M
Net Income$1.25B
EPS (Basic)$2.72
EPS (Diluted)$2.71
Shares Outstanding (Basic)459.00M
Shares Outstanding (Diluted)459.50M

Key Highlights

  • 1Total revenue increased 9% year-over-year to $4.655 billion.
  • 2Subscription revenue grew 10% to $4.373 billion, representing 94% of total revenue.
  • 3Digital Media segment revenue increased 9% to $3.395 billion, with Creative Cloud revenue up 8% and Document Cloud revenue up 13%.
  • 4Digital Experience segment revenue grew 11% to $1.176 billion.
  • 5Operating income remained stable at $1.586 billion.
  • 6Net income was $1.247 billion, a slight decrease from $1.266 billion in the prior year.
  • 7Adobe repurchased $1.4 billion of common stock during the quarter.

Frequently Asked Questions

Adobe reported a 9% year-over-year increase in total revenue to $4.655 billion, driven by strong subscription revenue growth. While net income saw a slight decrease to $1.247 billion, this was influenced by increased operating expenses and costs associated with the pending Figma acquisition. The company continues to generate significant operating cash flow.

Both segments showed healthy growth. Digital Media revenue increased by 9% to $3.395 billion, with Document Cloud showing particularly strong growth at 13%. Digital Experience revenue grew by 11% to $1.176 billion, indicating continued demand for Adobe's suite of enterprise solutions.

Adobe is proceeding with its agreement to acquire Figma for approximately $20 billion. The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in 2023. Adobe has secured a $3.5 billion delayed draw term loan to partially fund the acquisition.

Adobe continues to focus on returning capital to shareholders through its stock repurchase program. During the quarter, the company repurchased $1.4 billion of its common stock under accelerated share repurchase agreements. The company generated $1.693 billion in cash flow from operations, indicating strong underlying business liquidity.