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Adobe Reports Record Revenue in Q1 Fiscal 2024

Adobe (Nasdaq:ADBE) today reported financial results for its first quarter fiscal year 2024 ended March 1, 2024. “Adobe drove record Q1 revenue demonstrating strong momentum across Creative Cloud, D...

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Record Q1 Net New Document Cloud ARR; Enterprise strength drives RPO growth of 16 percent year over year

SAN JOSE, Calif.: Adobe (Nasdaq:ADBE) today reported financial results for its first quarter fiscal year 2024 ended March 1, 2024.

“Adobe drove record Q1 revenue demonstrating strong momentum across Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu Narayen, chair and CEO, Adobe. “We’ve done an incredible job harnessing the power of generative AI to deliver groundbreaking innovation across our product portfolio.”

“Adobe’s Q1 results and record RPO reflect strong customer adoption of our innovative products and services,” said Dan Durn, executive vice president and CFO, Adobe. “As a result of our strong trajectory of growth and profitability, we are announcing a new $25 billion share repurchase program, which demonstrates Adobe’s continued commitment to returning capital to our shareholders.”

First Quarter Fiscal Year 2024 Financial Highlights

  • Adobe achieved revenue of $5.18 billion in its first quarter of fiscal year 2024, which represents 11 percent year-over-year growth or 12 percent in constant currency. Diluted earnings per share was $1.36 on a GAAP basis and $4.48 on a non-GAAP basis.
  • GAAP operating income in the first quarter was $907 million and non-GAAP operating income was $2.47 billion. GAAP net income was $620 million and non-GAAP net income was $2.05 billion.
  • Cash flows from operations were $1.17 billion.
  • Remaining Performance Obligations (“RPO”) exiting the quarter were $17.58 billion.
  • Adobe repurchased approximately 3.1 million shares during the quarter.

First Quarter Fiscal Year 2024 Business Segment Highlights

  • Digital Media segment revenue was $3.82 billion, which represents 12 percent year-over-year growth or 13 percent in constant currency. Creative revenue grew to $3.07 billion, representing 11 percent year-over-year growth or 12 percent in constant currency. Document Cloud revenue was $750 million, representing 18 percent year-over-year growth as reported and in constant currency.
  • Net new Digital Media Annualized Recurring Revenue (“ARR”) was $432 million, exiting the quarter with Digital Media ARR of $15.76 billion. Creative ARR grew to $12.78 billion and Document Cloud ARR grew to $2.98 billion.
  • Digital Experience segment revenue was $1.29 billion, representing 10 percent year-over-year growth as reported and in constant currency. Digital Experience subscription revenue was $1.16 billion, representing 12 percent year-over-year growth as reported and in constant currency.

Financial Targets

Adobe is providing second quarter targets, which factor in current expectations for the macroeconomic and foreign exchange environments.

The following table summarizes Adobe’s second quarter fiscal year 2024 targets:

Total revenue

$5.25 billion to $5.30 billion

Digital Media net new ARR

~$440 million

Digital Media segment revenue

$3.87 billion to $3.90 billion

Digital Experience segment revenue

$1.31 billion to $1.33 billion

Digital Experience subscription revenue

$1.165 billion to $1.185 billion

Tax rate

GAAP: ~18.5%

Non-GAAP: ~18.5%

Earnings per share1

GAAP: $3.35 to $3.40

Non-GAAP: $4.35 to $4.40

1 Targets assume diluted share count of ~453 million for second quarter fiscal year 2024.

Adobe to Host Conference Call

Adobe will webcast its first quarter fiscal year 2024 earnings conference call today at 2:00 p.m. Pacific Time from its investor relations website: http://www.adobe.com/ADBE. Earnings documents, including Adobe management’s prepared conference call remarks with slides and an investor datasheet are posted to Adobe’s Investor Relations Website in advance of the conference call for reference.

Adobe to Host Investor Meeting at Adobe Summit 2024

Adobe will host its Investor Meeting with financial analysts and investors on Tuesday, March 26, 2024 at 2:00 p.m. Pacific Time at Adobe Summit in Las Vegas, Nev. Adobe’s executives will discuss the company’s long-term market opportunity, strategy and innovation roadmap, including artificial intelligence. The event will be streamed live on the Adobe Investor Relations Website. Following the event, a recording and related materials will be available on the site.

Forward-Looking Statements, Non-GAAP and Other Disclosures

In addition to historical information, this press release contains “forward-looking statements” within the meaning of applicable securities laws, including statements related to our business, strategy, artificial intelligence and innovation momentum; our market opportunity and future growth; our stock repurchases, cash flows and use of cash; market trends; current macroeconomic conditions; fluctuations in foreign currency exchange rates; strategic investments; customer success; revenue; operating margin; and annualized recurring revenue; tax rate on a GAAP and non-GAAP basis; earnings per share on a GAAP and non-GAAP basis; and share count. Each of the forward-looking statements we make in this press release involves risks, uncertainties and assumptions based on information available to us as of the date of this press release. Such risks and uncertainties, many of which relate to matters beyond our control, could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to: failure to innovate effectively and meet customer needs; issues relating to development and use of AI; failure to realize the anticipated benefits of investments or acquisitions; failure to compete effectively; damage to our reputation or brands; service interruptions or failures in information technology systems by us or third parties; security incidents; failure to effectively develop, manage and maintain critical third-party business relationships; risks associated with being a multinational corporation and adverse macroeconomic conditions; failure to recruit and retain key personnel; complex sales cycles; changes in, and compliance with, global laws and regulations, including those related to information security and privacy; failure to protect our intellectual property; litigation, regulatory inquiries and intellectual property infringement claims; changes in tax regulations; complex government procurement processes; risks related to fluctuations in or the timing of revenue recognition from our subscription offerings; fluctuations in foreign currency exchange rates; impairment charges; our existing and future debt obligations; catastrophic events; and fluctuations in our stock price. Further information on these and other factors are discussed in the section titled “Risk Factors” in Adobe’s most recently filed Annual Report on Form 10-K and Adobe's most recently filed Quarterly Reports on Form 10-Q. The risks described in this press release and in Adobe’s filings with the U.S. Securities and Exchange Commission should be carefully reviewed.

Undue reliance should not be placed on the financial information set forth in this press release, which reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in Adobe’s Quarterly Report on Form 10-Q for our fiscal quarter ended March 1, 2024, which Adobe expects to file in March 2024. Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.

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.

About Adobe

Adobe is changing the world through personalized digital experiences. For more information, visit www.adobe.com.

©2024 Adobe. All rights reserved. Adobe, Creative Cloud, Document Cloud and the Adobe logo are either registered trademarks or trademarks of Adobe (or one of its subsidiaries) in the United States and/or other countries. All other trademarks are the property of their respective owners.

Condensed Consolidated Statements of Income

(In millions, except per share data; unaudited)

 

 

Three Months Ended

 

 

March 1, 2024

 

March 3, 2023

Revenue:

 

 

 

 

Subscription

 

$

4,916

 

 

$

4,373

 

Product

 

 

119

 

 

 

120

 

Services and other

 

 

147

 

 

 

162

 

Total revenue

 

 

5,182

 

 

 

4,655

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

Subscription

 

 

455

 

 

 

434

 

Product

 

 

5

 

 

 

8

 

Services and other

 

 

130

 

 

 

126

 

Total cost of revenue

 

 

590

 

 

 

568

 

 

 

 

 

 

Gross profit

 

 

4,592

 

 

 

4,087

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Research and development

 

 

939

 

 

 

827

 

Sales and marketing

 

 

1,352

 

 

 

1,301

 

General and administrative

 

 

352

 

 

 

331

 

Acquisition termination fee

 

 

1,000

 

 

 

 

Amortization of intangibles

 

 

42

 

 

 

42

 

Total operating expenses

 

 

3,685

 

 

 

2,501

 

 

 

 

 

 

Operating income

 

 

907

 

 

 

1,586

 

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

Interest expense

 

 

(27

)

 

 

(32

)

Investment gains (losses), net

 

 

18

 

 

 

1

 

Other income (expense), net

 

 

70

 

 

 

43

 

Total non-operating income (expense), net

 

 

61

 

 

 

12

 

Income before income taxes

 

 

968

 

 

 

1,598

 

Provision for income taxes

 

 

348

 

 

 

351

 

Net income

 

$

620

 

 

$

1,247

 

Basic net income per share

 

$

1.37

 

 

$

2.72

 

Shares used to compute basic net income per share

 

 

453

 

 

 

459

 

Diluted net income per share

 

$

1.36

 

 

$

2.71

 

Shares used to compute diluted net income per share

 

 

456

 

 

 

460

 

Condensed Consolidated Balance Sheets

(In millions; unaudited)

 

 

March 1, 2024

 

December 1, 2023

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

6,254

 

 

$

7,141

 

Short-term investments

 

 

566

 

 

 

701

 

Trade receivables, net of allowances for doubtful accounts of $16 for both periods

 

 

2,057

 

 

 

2,224

 

Prepaid expenses and other current assets

 

 

1,131

 

 

 

1,018

 

Total current assets

 

 

10,008

 

 

 

11,084

 

 

 

 

 

 

Property and equipment, net

 

 

1,988

 

 

 

2,030

 

Operating lease right-of-use assets, net

 

 

366

 

 

 

358

 

Goodwill

 

 

12,803

 

 

 

12,805

 

Other intangibles, net

 

 

1,011

 

 

 

1,088

 

Deferred income taxes

 

 

1,310

 

 

 

1,191

 

Other as

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