ADBE 10-K & 10-Q changes, risk factors and insider trading

We may be unsuccessful at innovating in response to rapid technological or industry changes to meet customer needs, which could cause our operatingbusiness and financial results to suffer.suffer materially.

We operate in rapidly evolving industries and expect the pace of innovation to continue to accelerate. We must continually introduce new,new and enhance existing, products, services andexisting 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, creativecreative, productivity or marketing trends or fail to devote appropriate resources to adapt to such trends, our business could be harmed. For example, generative artificial intelligence technologies(“AI”), enableincluding generative and agentic, enables users of all skill levels to create and provide new ways of marketing, creating and editing content and interacting with documents,documents. which could significantly disrupt industries in whichWhile we operatecontinue andto ourrelease existingnew products, services andAI 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 focusedfocus on enhancing the artificial intelligence (“AI”) capabilities of our productssolutions and incorporating AI across existing products, services and solutions, there can be no assurance that our new or enhanced productssolutions 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.solutions. 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 materially harmed.

We participate in rapidly evolving and intensely competitive markets, and, if we do not compete effectively, our operatingbusiness and financial results could materially 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 rangeinclude incompanies sizeof fromvarious diversifiedsizes and both public and private companies, including large, global companies and smaller companies with more specialized focuses, new entrants, and AI or cloud-native companies. Our competitors include companies with significant sales and research and development resources, broad brand awareness, long operating histories or access to large customer basesbases. toOur small companies whose specialized focusescompetitors may allow them to more easily and effectively deploy technical, marketing and financial resources.resources more easily and effectively. Our competitors may develop or acquire additional products, services or solutions that are similar to ours or that achieve greater or faster acceptance,acceptance. Our competitors may undertake faster and more far-reaching and successful product development efforts or marketing campaigns orcampaigns, may adopt more aggressive pricing policies.policies or may more effectively appeal to customers. 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 and sales models, limited barriers to entry, short product life cycles, customer price sensitivity, global marketeconomic conditions and the frequent entry of new productssolutions 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.compete and to change the software industry. Our competitors or other third parties may incorporatedevelop AI into their offeringssolutions more successfullyrapidly andor efficientlysuccessfully, thanincluding webut donot andlimited to different data training strategies or proprietary access to data and, as a result, other AI solutions may 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.adoption. For example, we face increasing competition from companies offering generative and agentic AI capabilities,solutions, including text-to-image,but text-to-videonot limited to prompt-based and multi-modal offeringscreation thatand competeediting, directlydocument productivity and understanding, ad distribution and creation, and purpose-built AI agents. Other companies have in the past, and may in the future prevent, limit or interfere with our creativeability offerings.to use third-party models in our solutions. If we are not able to provide products, services and solutions that compete effectively, we could experience reduced salessales, which could materially and adversely impact our business couldand befinancial adversely affected.results. 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 this report.

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 harmharm, reduced customer demand and customer attrition 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, social, 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, dispute resolution requirements, handling of user privacy, data practices or content. Further, ourOur brands may be negatively affected by the actual or perceived failure to meet our sustainability commitments or appropriately respond to climate concerns; and uses of our products, services or solutions, particularly our AI offerings,solutions, 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. SuchFurther, such uses of our solutions 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 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 acquisitions, investments or acquisitions,other strategic transactions, and they may disrupt our business and divertadversely management’saffect attention.our business and financial results.

InvestmentsWe have acquired and acquisitionsmay continue to acquire businesses, products, talent and technologies as part of our business strategy. Acquisitions, investments and other strategic transactions 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 expected financial and strategic goalsbenefits ofon thea investmenttimely basis or acquisitionat all;

•difficulty in effectively integrating the operations, technologies, products, services, solutions, culture or personnel of the acquired business;

•challenges to completing or failure to complete an announced investment or acquisitiontransaction 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;

•delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offeringssolutions;

•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,acquisitions to amortize costs for acquired intangible assets or because of our inability to take advantage of anticipated tax benefits;

•difficulty in maintaining controls, procedures and policies during the transition and integration of an acquired business and inability to conclude that our internal controls over financial reporting are effective;

•potential identified or unknown security vulnerabilities in acquired or integrated entities’ systems, technologies, or products that expose us to additional security risks or delay our ability to integrate the productacquired products into our offeringsexisting solutions;

•exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, ana acquisitiontransaction;

•incurrence of additional debt to finance ana acquisition,transaction, which will increase our interest expense and leverage, and/or issuance of equity securities to finance acquisitions,transactions, which will dilute current shareholders’ percentage ownership and earnings per share; and

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 other strategic investments.transactions. 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 business and financial condition or results of operations.results.

Service interruptions or failures of our or third-party information technology systems or those of third parties 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 andadobe.com, our cloud solutions,solutions and various business processes such as our enterprise resource planning system and customer and sales support, 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 (“Appsapps”) 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 operatingfinancial results, reputation and 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. Some of our solutions include third-party open-source software, which may contain security vulnerabilities that may be exploited, potentially compromising our solutions. Increasing use of AI in our internal systems and solutions may create new attack methods.

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.East, as well as malicious third parties utilizing emerging technologies, such as AI and machine learning. 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 designdesign, configuration or manufacture, including bugs, vulnerabilitiesvulnerabilities, change management errors and other problems that unexpectedly compromise the security or operation of a product or system. Further, unauthorized parties or authorized parties that exceed their authorized access may also gain physical access to our facilities and infiltrate our information systems or attempt to gain logical access to our products, servicessolutions 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 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. There can be no assurance that we have the capability to detect all vulnerabilities or new attack methods and our internal security controls may not keep pace with quickly evolving threats. 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 couldhave in the past and may in the future 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,solutions, 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, data breaches, overly burdensome preventativepreventive 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 criticalour sales channels, including our direct sales force, third-party relationships, such as our sales, partnerdistributors, and distributionsales channels,partners, suppliersor andthird-party servicerelationships providers,upon which we rely for critical business operations, our revenue and business may be adversely affected.

We rely on our direct sales channel and a number of third-party distributors and sales partners to distribute our solutions. The successful management of these relationships is a complex, global process. 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 also rely on third-party service providers and technologies to deliver our products, servicessolutions and business operations and to operate critical business systems, such as cloud-based infrastructure, data center facilities, generative AI, large language models, encryption and authentication technology, company email and other communication channels, 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 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 and geopolitical 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 and geopolitical conditions, that are uncertain and beyond our control and that make forecasting operatingfinancial results and decisions about future investments difficult, such as:

•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 warswars, and epidemics and pandemics like COVID-19;

•changes in, or impositions of, legislative or regulatory requirements,requirements in the United States and other countries, including antitrust and competition regulationsregulations, consumer protection laws, or other government actions;

•changes in laws governing the free flow of data across internationalborders bordersincluding into the United States;

•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 sanctionssanctions, tariffs and export controls;

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 conditionsconditions, including, but not limited to recessions or slow economic growth 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 raterate, ability to pay 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.

As of November 29,28, 2024,2025, our investment portfolio consisted of money market funds, corporate debt securities, U.S. Treasury securities, time deposits, U.S. agency securitiesdeposits and asset-backedother securities.investments. 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 offeringssolutions 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,solutions, we may face increased costs, longer sales cycles, greater competition and less predictability in completing our sales. For our enterprise customers, the evaluation process may be longer and more involved, and require us to invest more in educating our customers about our products, services and solutions, particularly because the decision to use our products, services and solutions is often an enterprise-wide decision. We are increasingly offering end-to-end solutions that include cross-cloudgenerative and generativeagentic AI capabilities, which have in the past, and may in the future, increase the complexity of technical or contractual assurances or requirements that we or our customers requirerequire, whether pursuant to regulations or internal policies, as part of the contracting process, leading to extended sales cycles. We may be required to submit more robust proposals, participate in extended proof-of-concept evaluation cycles and engage in more extensive contract negotiations. In addition, our enterprise customers often demand more complex configurations and additional integration services and product features. Adverse macroeconomic conditionsand geopolitical events such as trade disputes and tariffs have caused, and may continue to cause, additional spend scrutiny and delays in our enterprise customers’ purchasing decisions.decisions, particularly for larger and more complex deals. Due to these factors, we often must devote greater sales support to certain enterprise customers, which increases our costs and time required to complete a sale, without assurance that potential customers will ultimately purchase our solutions. We also may be required to devote more services resources to implementation, which increases our costs, without assurance that customers receiving these services will renew or renew at the same level. Since the sales cycles for our enterprise offerings are multi-phased and complex, it is often unpredictable when a given sales cycle will close. Our revenue from enterprise customers may be affected by longer-than-expected sales, contract negotiation and implementation cycles, extended collection cycles, potential deferral of revenue and alternative licensing arrangements. Additionally, our enterprise sales pattern has historically been, and is expected to remain, uneven, where a higher percentage of a quarter’s total sales occur during the final weeks of each quarter, which is common in our industry.

We are, and may in the future become, subject to litigation, regulatory inquiriesinquiries, investigations and other claims,actions, which could result in an unfavorable outcome and have an adverse effect on our business, financial condition, results of operationoperations and cash flows.

We are, and may in the future become, subject to various legal proceedings (including class action lawsuits), claims, negotiations andnegotiations, regulatory inquiriesinquiries, and additional claims,investigations, enforcement actions and inquiriesother mayactions, arise in the future, such as thoseincluding relating to antitrust, consumer protection, data privacy and security, consumeremployment protection,practices, product liability and the validity or alleged infringement of third-party intellectual property rights, including patent rights, among others. Such activity has increased over time with evolving global regulatory and enforcement landscapes and as our products, services and solutions have become more available to, and used by, more enterprises and consumers.consumers worldwide. For example, there is an increase in enforcementregulatory activity in connection with federal and state consumer protection laws, including some suits which seek civil penalties. Any proceedings, actions, claims or inquiries initiated by or against us, whether successful or not, may be highly time consuming; result in costly litigation, damage awards, consent decrees, injunctive relief or increased costs of business; require us to change our business practices or products; result in negative publicity; require significant amounts of management time; result in the diversion of significant operational resources; or otherwise harm our business and financial results.

Disputes and litigation can be complex and are typically costly and can be disruptive to our business operations by diverting the attention of management and key personnel. For example, third-party intellectual property disputes, including those initiated by patent assertion entities,entities or competitors, could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from offering certain products, services or solutions, subject us to injunctions restricting our sales, 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. In addition, we have incurred, and may in the future incur, significant costs in acquiring the necessary third-party intellectual property rights for use in our products, in some cases to fulfill contractual obligations with our customers. Any of these occurrences could significantly harm our business.

We are a global company subject to varied and complex laws, regulationsregulations, government actions and customs, both domestically and internationally. These local, state, federal and international laws and regulations relate to a number of aspects of our business, including trade laws such as import and export controls, anti-boycott, economic sanctions and embargoes, data and transaction processing security, payment card industry data security standards, antitrust and competition, consumer protection, records management, user-generated content hosted on websites we operate, privacy practices, data residency,residency AIand regulations,transfer, AI, corporate governance, antitrustemployment andpractices, competition,immigration, employee and third-party complaints, anti-corruption, conflicts of interest, securities regulationsregulations, sustainability and other regulatory requirements affecting trade and investment. The application of these laws and regulations to our business is often unclear and evolving, and may at times conflict. Further, we are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption and anti-bribery laws, which may conflict with local customs and practices in other foreign countries, particularly those with developing economies where it is common to engage in practices that would be prohibited under such laws. We cannot provide assurance that our employees, contractors, agents, business partners and vendors will not take actions in violation of our internal policies, U.S. laws or other applicable international laws. Compliance with the above laws and regulations may involve significant costs or require additional changes to our business practices that result in reduced revenue and profitability. Non-compliance could also result in fines, damages, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.

The following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto. Discussion regarding our financial condition and results of operations for fiscal 20232024 as compared to fiscal 20222023 is included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended DecemberNovember 1,29, 2023,2024, filed with the SEC on January 17,13, 2024.2025.

Overview of 2024Fiscal 2025

For our fiscal 2024,2025, we experienced strong demand across our Digital Media and Digital Experience offerings, driven by ourtransformative innovativeand customer-focused product roadmap.innovation. As we execute on our long-term growth initiatives, with focusemphasis on delivering productvalue innovationthrough AI-powered and drivinghighly adoptiondifferentiated andsolutions usageto meet the needs of our AI-powereddiverse solutions,and expanding customer base, we have continued to experience growth in software-based subscription revenue across our portfolio of offerings.

Digital ExperienceMedia ARR grew to $19.20 billion at the end of fiscal 2025, representing 11.5% year-over-year growth. Our success in driving growth in ARR has positively affected our revenue wasgrowth. $5.37Digital Media segment revenue grew to $17.65 billion in fiscal 2025, up from $15.86 billion in fiscal 2024, up from $4.89 billion in fiscal 2023, representing 10%11% year-over-year growth. Subscription revenue grew to $4.86 billion in fiscal 2024, up from $4.33 billion in fiscal 2023, representing 12% year-over-year growth.

•Total Digital Media ARR of approximately $17.33$19.20 billion as of November 28, 2025 increased by 11.5% from $17.22 billion as of November 29, 2024 increasedrevalued byusing $2.00currency billion,rates ordetermined 13%,at fromthe $15.33 billion asbeginning of Decemberfiscal 1, 2023.2025.

•Digital ExperienceMedia revenue of $5.37$17.65 billion during fiscal 20242025 increased by $473$1.79 million,billion, or 10%,11%, fromcompared $4.89 billion into fiscal 2023.2024.

•NetDigital incomeExperience revenue of $5.56$5.86 billion during fiscal 20242025 increased by $132$498 million, or 2%,9%, fromcompared $5.43 billion into fiscal 2023.2024.

•Cash flows from operationsCost of $8.06revenue of $2.55 billion during fiscal 20242025 increased by $754$193 million, or 10%,8%, fromcompared $7.30 billion into fiscal 2023.2024.

•RemainingNet performance obligationsincome of $19.96$7.13 billion asduring offiscal November 29, 20242025 increased by $2.75$1.57 billion, or 16%,28%, fromcompared $17.22to billionfiscal as of December 1, 2023.2024.

Our subscription revenue is comprised primarily of fees we charge for our subscription and hosted service offerings, and relatedalso support,includes includingsubscription-based Creative Cloud and certain of our Adobe Experience Cloud and Document Cloudconsulting services. 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.

Our services and other revenue is comprised primarily of fees related to consulting,project-based consulting and training, as well as maintenance and support for certain on-premise licenses that are recognized at a point in time and our advertising offerings. We typically sell our project-based consulting 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.

•Digital Media—Our Digital Media segment provides products and services that enable individuals, teams, businesses, and enterprises to create, publish and promote their content anywhere and accelerate their productivity by transforming how they view, share, engage with and collaborate on documents and creative content. Our customers includespan creative professionals, including graphic designers, photographers, videovideographers, editors, graphicillustrators and experience3D designersartists; creators, including social media influencers and game developerssolopreneurs; communicators,business professionals, including contentsocial creators,media students,teams, marketerssmall business owners and knowledge workers; and consumers.

•Digital Experience—Our Digital Experience segment provides marketing professionals with an integrated platform and set of products, services and solutions that enable businesses to create, manage, execute, measure, monetize and optimize customer experiences that span from analytics to commerce. Our customers include marketers, advertisers, agencies,brand publishers,managers, campaign strategists, merchandisers, merchants, webdata analysts, data scientists, developers and executives across the C-suite.

RevenueTotal revenue by major offerings in our Digital Media reportable segment for fiscal 2024,2025, 20232024 and 20222023 were as follows:

Revenue from Digital Media increased $1.79 billion and revenue from Digital Experience increased $473$498 million during fiscal 20242025 as compared to fiscal 20232024. drivenThe byincreases in total revenue were due to subscription revenue growth across our Digital Media and Digital Experience offerings.

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, performanceperformance, financial condition and financialthe condition.trading price of our common stock. 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. Disclosures in this section are based on our beliefs and opinions regarding factors that could materially and adversely affect us in the future and are not representations as to whether such factors have or have not occurred in the past.

As of MayAugust 29,28, 2026, our investment portfolio consisted of money market funds, corporate debt securities, U.S. Treasury securities, time deposits and other investments. 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.

As of MayAugust 29,28, 2026, we had $6.15 billion in senior unsecured notes outstanding and a $3 billion commercial paper program with $500$250 million outstanding. We also had a $1.5 billion senior unsecured revolving credit agreement, which was undrawn. This debt or future additional indebtedness may adversely affect our financial condition and future financial results by, among other things:

In our secondthird quarter of fiscal 2026, we experienced strong demand across our portfolio of subscription-based solutions, 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.

Our offerings help our customers—spanning business professionals, consumers, creators, creative professionals and marketing professionals—to be more creative, productive and successful. We are driving continued business success through audience-specific product innovation and go-to-market strategy focused on two customer groups: Creative & Marketing Professionals and Business Professionals & Consumers and Creative & Marketing Professionals.Consumers.

Creative & Marketing Professionals customer group subscription revenue was $4.54$4.65 billion in the secondthird quarter of fiscal 2026, up from $4.02$4.12 billion in the secondthird quarter of fiscal 2025, representing 13% year-over-year growth.

Business Professionals & Consumers customer group subscription revenue was $1.85$1.91 billion in the secondthird quarter of fiscal 2026, up from $1.60$1.65 billion in the secondthird quarter of fiscal 2025, representing 16% year-over-year growth.

Our success will be achieved through continued customer 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. Due to the nature of certain offerings which contain cross-product integrations or benefits, revenue attributable to certain product entitlements may be recognized in either customer group.

Total Adobe ARR grew to $27.10$27.50 billion at the end of the secondthird quarter of fiscal 2026, representing 12.5%11.2% year-over-year growth, including approximately $480 million from the Semrush acquisition and further driven by strength in Creative Cloud Pro,flagship apps, Acrobat, and Adobe Experience PlatformManager and relatedagentic apps.web apps, including the contribution from Semrush. Our success in driving growth in ARR has positively affected our revenue growth. Total customer group subscription revenue grew to $6.39 billion in the second quarter of fiscal 2026, up from $5.61 billion in the second quarter of fiscal 2025, representing 14% year-over-year growth.

There have been no other changes in our critical accounting policies and estimates during the sixnine months ended MayAugust 29,28, 2026, 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 28, 2025.

•Total Adobe ARR of $27.10$27.50 billion as of MayAugust 29,28, 2026 increased by 12.5%11.2% from $24.08$24.74 billion as of MayAugust 30,29, 2025 revalued using currency rates determined at the beginning of fiscal 2026.

•Total revenue of $6.62$6.76 billion during the three months ended MayAugust 29,28, 2026 increased by $745$772 million, or 13%, compared to the year-ago period.

•Total subscription revenue of $6.42$6.58 billion during the three months ended MayAugust 29,28, 2026 increased by $775$791 million, or 14%, compared to the year-ago period.

•Cost of revenue of $715$763 million during the three months ended MayAugust 29,28, 2026 increased by $77$121 million, or 12%,19%, compared to the year-ago period.

•Operating expenses of $3.67$3.64 billion during the three months ended MayAugust 29,28, 2026 increased by $539$470 million, or 17%,15%, compared to the year-ago period.

•Net income of $1.71$1.83 billion during the three months ended MayAugust 29,28, 2026 remainedincreased relativelyby flat$55 million, or 3%, compared to the year-ago period.

•Cash flows from operations of $5.12$7.65 billion during the sixnine months ended MayAugust 29,28, 2026 increased by $450$775 million, or 10%,11%, compared to the year-ago period.

•Remaining performance obligations of $22.27$22.16 billion as of MayAugust 29,28, 2026 increased by 13%8% from $19.69$20.44 billion as of MayAugust 30,29, 2025.

Revenue for the Three and SixNine Months Ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025

Subscription revenue by customer group for the three and sixnine months ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025 were as follows:

Increases in subscription revenue for the Creative & Marketing Professionals customer group were driven by strength in Creative Cloud Pro and other flagship apps, Adobe Experience Platform and related apps,apps and Adobe Experience Manager.Manager and agentic web apps, including the contribution from Semrush. Increases in subscription revenue for the Business Professionals & Consumers customer group were driven by strength in Acrobat.

Revenue by geographic area for the three and sixnine months ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025 were as follows:

Overall revenue during the three and sixnine months ended MayAugust 29,28, 2026 increased in all geographic regions as compared to the three and sixnine months ended MayAugust 30,29, 2025. Within each geographic region, the fluctuations in revenue were attributable to the factors noted in the customer group subscription revenue information above.

Included in the overall change in revenue were impacts associated with foreign currency which were mitigated in part byand our foreign currency hedging program. During the three and sixnine months ended MayAugust 29,28, 2026 as compared to the three and sixnine months ended MayAugust 30,29, 2025, the U.S. Dollar primarily weakened against EMEA currencies, which resulted in a net increase in revenue in U.S. Dollar equivalents of approximately $116$40 million and $240$280 million in the respective periods. TheDuring foreignthe currencythree impactsand tonine revenuemonths wereended partiallyAugust offset28, by net hedging losses from2026, our cash flow hedging program resulted in net hedging gains of $22$10 million and $71losses of $61 million, respectively, as compared to the year-ago periods.

Cost of Revenue for the Three and SixNine Months Ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025

Cost of subscription revenue increased during the three and sixnine months ended MayAugust 29,28, 2026 as compared to the three and sixnine months ended MayAugust 30,29, 2025 primarily due to the following:

Operating Expenses for the Three and SixNine Months Ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025

Research and development expenses increased during the three and sixnine months ended MayAugust 29,28, 2026 as compared to the three and sixnine months ended MayAugust 30,29, 2025 primarily due to increases in compensation costs and, to a lesser extent, hosting services and data center costs.

Sales and marketing expenses increased during the three and sixnine months ended MayAugust 29,28, 2026 as compared to the three and sixnine months ended MayAugust 30,29, 2025 primarily due to increases in advertising expenses and, to a lesser extent,and compensation costs.

General and administrative expenses increased during the three and sixnine months ended MayAugust 29,28, 2026 as compared to the three and sixnine months ended MayAugust 30,29, 2025 due to the following:

During the sixnine months ended MayAugust 29,28, 2026, we recorded a goodwill impairment charge related to our Publishing & Advertising reporting unit. During the sixnine months ended MayAugust 29,28, 2026, we also incurred loss contingencies associated with a legal settlement and other legal matters. See Note 13 for further details regarding the legal settlement.

Non-Operating Income (Expense), Net for the Three and SixNine Months Ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025

Investment gains (losses), net consists principally of unrealized holding gains and losses associated with our deferred compensation plan assets.assets, and gains and losses associated with our direct investments in privately held companies.

Other income (expense), net decreased during the three and nine months ended MayAugust 29,28, 2026 as compared to the three monthsand ended May 30, 2025 primarily due to higher foreign exchange losses. Other income (expense), net decreased during the sixnine months ended MayAugust 29, 2026 as compared to the six months ended May 30, 2025 primarily due to decreases in interest income driven by lower average overall cash balances and interest rates, as well as higher foreign exchange losses.balances.

Provision for Income Taxes for the Three and SixNine Months Ended MayAugust 29,28, 2026 and MayAugust 30,29, 2025

Our effective tax rates for the three and sixnine months ended MayAugust 29,28, 2026 were higher than the U.S. federal statutory tax rate of 21% primarily due to state taxes and a net tax expense related to stock-based compensation, partially offset by net tax benefits from the effects of non-U.S. operations and the U.S. federal research tax credit.

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 valuation allowance to reduce our deferred tax assets to the amount realizable. The total valuation allowance was $862$799 million as of MayAugust 29,28, 2026, primarily related to certain U.S. state and federal credits and capital loss carryforwards.

The gross liabilities for unrecognized tax benefits excluding interest and penalties were $736$755 million and $685$715 million as of MayAugust 29,28, 2026 and MayAugust 30,29, 2025, respectively. If the total unrecognized tax benefits as of MayAugust 29,28, 2026 and MayAugust 30,29, 2025 were recognized, $563$576 million and $516$542 million would decrease the respective effective tax rates.

As of MayAugust 29,28, 2026 and MayAugust 30,29, 2025, 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.

Net cash provided by operating activities of $5.12$7.65 billion for the sixnine months ended MayAugust 29,28, 2026 was primarily comprised of net income adjusted for the net effect of non-cash items. Working capital sources of cash included decreases in trade receivables driven by strong cash collections and increases in deferred revenue due to the timing of billings during the period.collections. The primary working capital uses of cash included increases in prepaid expenses and other assets and decreases in accrued expenses and other liabilities.

Net cash used for investing activities of $1.24$1.91 billion for the sixnine months ended MayAugust 29,28, 2026 was primarily due to our acquisition of Semrush in the second quarter of fiscal 2026, asongoing wellcapital asexpenditures and purchases of short-term investments, partiallynet offset byof proceeds from maturities of short-term investments. See Note 3 for further details regarding this acquisition.

Net cash used for financing activities of $4.40$6.81 billion for the sixnine months ended MayAugust 29,28, 2026 was primarily due to payments for our common stock repurchases and taxes paid related to the net share settlement of equity awards. These uses of cash were offset in part by proceeds from the issuance of commercial paper.repurchases. See the section titled “Stock Repurchase Program” below.

Our cash equivalent and short-term investment portfolio as of MayAugust 29,28, 2026 consisted of money market funds, corporate debt securities, U.S. Treasury securities, time deposits and other investments.

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 MayAugust 29,28, 2026, 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 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 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 MayAugust 29,28, 2026, the carrying value of our commercial paper was $494$248 million, net of the related discount.

We have $6.15 billion of senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. As of MayAugust 29,28, 2026, the carrying value of our senior notes was $6.15$6.12 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 $974$941 million 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 14 of our notes to condensed consolidated financial statements for further details regarding our debt.

During the sixnine months ended MayAugust 29,28, 2026, we reclassified the senior notes due February 1, 2027 and April 4, 2027 as current debt in our condensed consolidated balance sheets. As of MayAugust 29,28, 2026, the carrying value of the current portion of our senior notes was $1.35 billion, net of the related discount and issuance costs. We intend to refinance the current portion of our debt on or before the due date, subject to market conditions.

Our principal commitments as of MayAugust 29,28, 2026 consisted of purchase obligations resulting from agreements to purchase goods and services in the ordinary course of business and obligations under operating lease arrangements. There have been no material changes in those obligations during the sixnine months ended MayAugust 29,28, 2026.

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 stockstock, throughwhich Marchbecame 14,fully 2028.utilized during the nine months ended August 28, 2026. In April 2026, our Board of Directors granted additional authority to repurchase up to $25 billion in our common stock through April 30, 2030. As of MayAugust 29,28, 2026, a total of $26.78$24.55 billion remained under our April 2026 stock repurchase authorities.authority.

During the sixnine months ended MayAugust 29,28, 2026, we entered into stock repurchase arrangements with large financial institutions and made payments totaling $4.59$6.82 billion to repurchase shares. See Note 11 of our notes to condensed consolidated financial statements for further details regarding our stock repurchase program.