10-QPeriod: Q2 FY2024

ADOBE INC. Quarterly Report for Q2 Ended Mar 1, 2024

Filed March 27, 2024For Securities:ADBE

Summary

Adobe Inc. reported its first quarter fiscal year 2024 results, showcasing continued growth driven by its Digital Media and Digital Experience segments. Total revenue increased by 11% year-over-year to $5.18 billion, primarily fueled by a 12% rise in subscription revenue. The Digital Media segment, including Creative Cloud and Document Cloud, saw revenue grow 12% to $3.82 billion, with Annualized Recurring Revenue (ARR) reaching $15.76 billion. The Digital Experience segment also posted solid growth, with revenue up 10% to $1.29 billion. Despite strong top-line performance, net income for the quarter was $620 million, a significant decrease from $1.25 billion in the prior year. This reduction was largely due to a $1 billion acquisition termination fee paid to Figma. Operating expenses also saw a substantial increase, driven by this fee. However, cash flow from operations remained robust at $1.17 billion, although lower than the prior year due to the termination fee. Adobe continues to return capital to shareholders through its substantial stock repurchase program, repurchasing $2.13 billion in the current quarter.

Financial Highlights

54 data points
Beta

Revenue

$5.31B

88.7% Gross Margin

Net Income

$1.57B

29.6% Net Margin

EPS (Diluted)

$3.49

Total Assets

$30.01B

Cash & Equivalents

$7.66B

Free Cash Flow

$1.14B

Financial Statements
Beta
Revenue$5.31B
Cost of Revenue$598.00M
Gross Profit$4.71B
Operating Expenses$2.83B
Operating Income$1.89B
Interest Expense$41.00M
Net Income$1.57B
EPS (Basic)$3.50
EPS (Diluted)$3.49
Shares Outstanding (Basic)449.10M
Shares Outstanding (Diluted)451.40M

Key Highlights

  • 1Total revenue grew 11% year-over-year to $5.18 billion, driven by strong subscription revenue which increased 12% to $4.92 billion.
  • 2Digital Media segment revenue increased 12% to $3.82 billion, with Creative Cloud up 11% and Document Cloud up 18%.
  • 3Digital Experience segment revenue grew 10% to $1.29 billion, supported by a 12% increase in subscription revenue.
  • 4Net income decreased by 50% to $620 million, primarily due to a $1 billion acquisition termination fee related to the Figma deal.
  • 5Operating expenses increased significantly by 47% primarily due to the $1 billion Figma termination fee.
  • 6Cash flows from operating activities were $1.17 billion, down from $1.69 billion in the prior year, impacted by the termination fee.
  • 7Adobe repurchased $2.13 billion of its common stock during the quarter, demonstrating a continued commitment to returning capital to shareholders.

Frequently Asked Questions

The primary driver for the decrease in net income was a $1 billion acquisition termination fee paid to Figma, following the termination of their merger agreement. This fee significantly impacted operating expenses and consequently, net income.

Adobe's subscription revenue demonstrated strong performance, increasing by 12% year-over-year to $4.92 billion. This revenue stream is crucial, representing 95% of total revenue, and is driven by growth in both the Digital Media and Digital Experience segments.

Adobe continues its aggressive stock repurchase program, with $2.13 billion in repurchases during the quarter. The company also announced a new $25 billion repurchase authorization through March 2028, indicating a strong commitment to returning capital to shareholders.

Adobe is actively integrating AI, particularly generative AI like Adobe Firefly, across its product suite. Firefly is available in Creative Cloud applications such as Photoshop and Adobe Express, with the company focusing on responsible AI development and deployment to enhance creativity and productivity for its users.