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Adobe Reports Record Revenue in Q2 Fiscal 2024

Adobe (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2024 ended May 31, 2024. “Adobe achieved record revenue of $5.31 billion driven by strong growth across Creati...

Business Wire

Company raises annual targets for Digital Media net new ARR, Digital Experience subscription revenue and EPS

SAN JOSE, Calif.: Adobe (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2024 ended May 31, 2024.

“Adobe achieved record revenue of $5.31 billion driven by strong growth across Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu Narayen, chair and CEO, Adobe. “Our highly differentiated approach to AI and innovative product delivery are attracting an expanding universe of customers and providing more value to existing users.”

“Adobe delivered outstanding Q2 results, positioning us to raise our annual targets,” said Dan Durn, executive vice president and CFO, Adobe. “Our market-leading products, strong execution and world-class financial discipline position us well for the second half of 2024 and beyond.”

Second Quarter Fiscal Year 2024 Financial Highlights

  • Adobe achieved revenue of $5.31 billion in its second quarter of fiscal year 2024, which represents 10 percent year-over-year growth or 11 percent in constant currency. Diluted earnings per share was $3.49 on a GAAP basis and $4.48 on a non-GAAP basis.
  • GAAP operating income in the second quarter was $1.89 billion and non-GAAP operating income was $2.44 billion. GAAP net income was $1.57 billion and non-GAAP net income was $2.02 billion.
  • Cash flows from operations were $1.94 billion.
  • Remaining Performance Obligations (“RPO”) exiting the quarter were $17.86 billion.
  • Adobe repurchased approximately 4.6 million shares during the quarter.

Second Quarter Fiscal Year 2024 Business Segment Highlights

  • Digital Media segment revenue was $3.91 billion, which represents 11 percent year-over-year growth or 12 percent in constant currency. Creative revenue grew to $3.13 billion, representing 10 percent year-over-year growth or 11 percent in constant currency. Document Cloud revenue was $782 million, representing 19 percent year-over-year growth as reported and in constant currency.
  • Net new Digital Media Annualized Recurring Revenue (“ARR”) was $487 million, exiting the quarter with Digital Media ARR of $16.25 billion. Creative ARR grew to $13.11 billion and Document Cloud ARR grew to $3.15 billion.
  • Digital Experience segment revenue was $1.33 billion, representing 9 percent year-over-year growth as reported and in constant currency. Digital Experience subscription revenue was $1.20 billion, representing 13 percent year-over-year growth as reported and in constant currency.

Financial Targets

Adobe is providing third quarter targets and updated fiscal year 2024 targets. These targets factor in current expectations for the macroeconomic environment and FX outlook.

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

Total revenue

$5.33 billion to $5.38 billion

Digital Media net new ARR

~$460 million

Digital Media segment revenue

$3.95 billion to $3.98 billion

Digital Experience segment revenue

$1.325 billion to $1.345 billion

Digital Experience subscription revenue

$1.20 billion to $1.22 billion

Tax rate

GAAP: ~18.0%

Non-GAAP: ~18.5%

Earnings per share1

GAAP: $3.45 to $3.50

Non-GAAP: $4.50 to $4.55

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

Total revenue

$21.40 billion to $21.50 billion

Digital Media net new ARR

~$1.95 billion

Digital Media segment revenue

$15.80 billion to $15.85 billion

Digital Experience segment revenue

$5.325 billion to $5.375 billion

Digital Experience subscription revenue

$4.775 billion to $4.825 billion

Tax rate

GAAP: ~20.5%

Non-GAAP: ~18.5%

Earnings per share1

GAAP: $11.80 to $12.00

Non-GAAP: $18.00 to $18.20

 

1 Targets assume diluted share count of ~447 million for third quarter and ~449 million for fiscal year 2024.

Adobe to Host Conference Call

Adobe will webcast its second 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.

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; 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 May 31, 2024, which Adobe expects to file in June 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

 

Six Months Ended

 

May 31, 2024

 

June 2, 2023

 

May 31, 2024

 

June 2, 2023

Revenue:

 

 

 

 

 

 

 

Subscription

$

5,060

 

 

$

4,517

 

 

$

9,976

 

 

$

8,890

 

Product

 

104

 

 

 

130

 

 

 

223

 

 

 

250

 

Services and other

 

145

 

 

 

169

 

 

 

292

 

 

 

331

 

Total revenue

 

5,309

 

 

 

4,816

 

 

 

10,491

 

 

 

9,471

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

Subscription

 

456

 

 

 

436

 

 

 

911

 

 

 

870

 

Product

 

8

 

 

 

8

 

 

 

13

 

 

 

16

 

Services and other

 

134

 

 

 

128

 

 

 

264

 

 

 

254

 

Total cost of revenue

 

598

 

 

 

572

 

 

 

1,188

 

 

 

1,140

 

 

 

 

 

 

 

 

 

Gross profit

 

4,711

 

 

 

4,244

 

 

 

9,303

 

 

 

8,331

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

984

 

 

 

876

 

 

 

1,923

 

 

 

1,703

 

Sales and marketing

 

1,445

 

 

 

1,345

 

 

 

2,797

 

 

 

2,646

 

General and administrative

 

355

 

 

 

357

 

 

 

707

 

 

 

688

 

Acquisition termination fee

 

 

 

 

 

 

 

1,000

 

 

 

 

Amortization of intangibles

 

42

 

 

 

42

 

 

 

84

 

 

 

84

 

Total operating expenses

 

2,826

 

 

 

2,620

 

 

 

6,511

 

 

 

5,121

 

 

 

 

 

 

 

 

 

Operating income

 

1,885

 

 

 

1,624

 

 

 

2,792

 

 

 

3,210

 

 

 

 

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

 

 

 

Interest expense

 

(41

)

 

 

(26

)

 

 

(68

)

 

 

(58

)

Investment gains (losses), net

 

4

 

 

 

5

 

 

 

22

 

 

 

6

 

Other income (expense), net

 

82

 

 

 

47

 

 

 

152

 

 

 

90

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