Adobe Reports Record Revenue in Q2 Fiscal 2024

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Adobe's financial performance in Q2 2024 demonstrates strong growth across its core segments, particularly in the Digital Media and Digital Experience segments. The company reported a record revenue of $5.31 billion, marking a 10% year-over-year increase. Notably, the Digital Media segment, which includes Creative Cloud and Document Cloud, showed solid growth with 11% year-over-year growth and a $3.91 billion revenue.

The Document Cloud revenue grew substantially by 19%, indicating strong demand for Adobe's document management and e-signature solutions. This growth is particularly important because it suggests that businesses are continuing to prioritize digital transformation, even in a challenging economic environment.

Adobe's Operating Income and Net Income figures are impressive as well, with Non-GAAP Operating Income at $2.44 billion and Non-GAAP Net Income at $2.02 billion. These figures provide a clear picture of Adobe’s profitability and financial health. Additionally, the company’s ability to generate substantial cash flows from operations at $1.94 billion indicates robust operational efficiency.

For the retail investor, these numbers suggest that Adobe is well-positioned for continued growth, especially considering their raised annual targets for Digital Media net new ARR, Digital Experience subscription revenue and EPS. However, it's essential to consider external factors, such as the broader economic environment and potential currency fluctuations, which could impact future performance.

Overall, Adobe's financial results reflect solid execution and strong demand for its products, signaling a positive outlook for the company in both the short and long term.

Adobe's success this quarter is not only financial but also rooted in its technological advancements. The company attributes its record revenue in part to its differentiated approach to AI and innovative product delivery. Adobe has been integrating AI capabilities across its product suite, enhancing features in Creative Cloud, Document Cloud and Experience Cloud. This integration helps users create more efficiently and effectively, which likely contributes to the increased revenue and customer base.

Particularly, the strong growth in the Document Cloud—with a revenue increase of 19%—shows how businesses are gravitating towards automated, AI-driven document management and e-signature solutions. In addition, the Creative Cloud continues to be a cornerstone for Adobe, with significant revenue growth driven by AI-enabled creative tools that offer simplified workflows and advanced capabilities for designers and content creators.

These technological advancements not only strengthen Adobe's market position but also enhance user experience, driving higher adoption rates and fostering customer loyalty. For retail investors, it's important to note that Adobe's ongoing investment in AI and innovation is likely to sustain and potentially accelerate its growth trajectory, making it a key area to watch in the tech industry.

Adobe’s performance in Q2 2024 showcases its ability to adapt and thrive in a competitive market. The company is seeing widespread adoption of its services across different business segments, evidenced by the impressive figures in Digital Media and Digital Experience. Notably, the Digital Experience segment showed a 9% year-over-year growth, with subscription revenue up by 13%. These metrics indicate a strong demand for Adobe's digital marketing solutions, driven by the ongoing digital transformation across industries.

The Annualized Recurring Revenue (ARR) growth is particularly noteworthy. Adobe reported Net new Digital Media ARR of $487 million, with Creative ARR reaching $13.11 billion and Document Cloud ARR at $3.15 billion. ARR is a critical metric as it provides a predictable and stable revenue stream, essential for long-term business sustainability. Retail investors should find this reassuring as it signals steady income and reduced financial volatility.

Additionally, Adobe’s updated financial targets for fiscal year 2024 show confidence in continued growth. The raised targets for Digital Media net new ARR and Digital Experience subscription revenue highlight the company’s expectation for ongoing robust performance. However, investors should remain mindful of external market conditions, such as macroeconomic factors and foreign exchange risks, which could impact these projections.

In summary, Adobe's Q2 results and updated targets reflect a strong market position and an optimistic outlook. The company’s focus on recurring revenue streams and expanded digital offerings positions it well for future growth.

06/13/2024 - 04:05 PM

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

SAN JOSE, Calif.--(BUSINESS WIRE)-- 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
Total non-operating income (expense), net		45			26			106			38
Income before income taxes		1,930			1,650			2,898			3,248
Provision for income taxes		357			355			705			706
Net income	$	1,573		$	1,295		$	2,193		$	2,542
Basic net income per share	$	3.50		$	2.83		$	4.86		$	5.55
Shares used to compute basic net income per share		449			458			451			458
Diluted net income per share	$	3.49		$	2.82		$	4.83		$	5.54
Shares used to compute diluted net income per share		451			459			454			459

Condensed Consolidated Balance Sheets (In millions; unaudited)

	May 31, 2024			December 1, 2023
ASSETS

Current assets:
Cash and cash equivalents	$	7,660		$	7,141
Short-term investments		405			701
Trade receivables, net of allowances for doubtful accounts of $19 and $16, respectively		1,612			2,224
Prepaid expenses and other current assets		1,346			1,018
Total current assets		11,023			11,084

Property and equipment, net		1,969			2,030
Operating lease right-of-use assets, net		381			358
Goodwill		12,803			12,805
Other intangibles, net		933			1,088
Deferred income taxes		1,436			1,191
Other assets		1,462			1,223
Total assets	$	30,007		$	29,779

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Trade payables	$	357		$	314
Accrued expenses		1,899			1,942
Debt		1,498			—
Deferred revenue		5,558			5,837
Income taxes payable		95			85
Operating lease liabilities		67			73
Total current liabilities		9,474			8,251

Long-term liabilities:
Debt		4,127			3,634
Deferred revenue		128			113
Income taxes payable		591			514
Operating lease liabilities		398			373
Other liabilities		446			376
Total liabilities		15,164			13,261

Stockholders’ equity:
Preferred stock		—			—
Common stock		—			—
Additional paid-in capital		12,504			11,586
Retained earnings		35,227			33,346
Accumulated other comprehensive income (loss)		(276	)		(285	)
Treasury stock, at cost		(32,612	)		(28,129	)
Total stockholders’ equity		14,843			16,518
Total liabilities and stockholders’ equity	$	30,007		$	29,779

Condensed Consolidated Statements of Cash Flows (In millions; unaudited)

	Three Months Ended
	May 31, 2024			June 2, 2023
Cash flows from operating activities:
Net income	$	1,573		$	1,295
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		214			220
Stock-based compensation		467			433
Unrealized investment (gains) losses, net		(1	)		(5	)
Other non-cash adjustments		(98	)		(102	)
Changes in deferred revenue		(424	)		(96	)
Changes in other operating assets and liabilities		209			394
Net cash provided by operating activities		1,940			2,139

Cash flows from investing activities:
Purchases, sales and maturities of short-term investments, net		163			446
Purchases of property and equipment		(41	)		(121	)
Purchases and sales of long-term investments, intangibles and other assets, net		(11	)		(3	)
Net cash provided by investing activities		111			322

Cash flows from financing activities:
Repurchases of common stock		(2,500	)		(1,000	)
Taxes paid related to net share settlement of equity awards, net of proceeds from treasury stock re-issuances		(135	)		(102	)
Proceeds from issuance of debt		1,997			—
Other financing activities, net		(4	)		22
Net cash used for financing activities		(642	)		(1,080	)
Effect of exchange rate changes on cash and cash equivalents		(3	)		3
Net change in cash and cash equivalents		1,406			1,384
Cash and cash equivalents at beginning of period		6,254			4,072
Cash and cash equivalents at end of period	$	7,660		$	5,456

Non-GAAP Results The following table shows Adobe’s GAAP results reconciled to non-GAAP results included in this release.

(In millions, except per share data)	Three Months Ended
	May 31, 2024			June 2, 2023			March 1, 2024
Operating income:

GAAP operating income	$	1,885		$	1,624		$	907
Stock-based and deferred compensation expense		472			439			469
Amortization of intangibles		84			95			83
Acquisition-related expenses ^(*)		—			22			1,007
Loss contingency ^(**)		—			—			1
Non-GAAP operating income	$	2,441		$	2,180		$	2,467

Net income:

GAAP net income	$	1,573		$	1,295		$	620
Stock-based and deferred compensation expense		472			439			469
Amortization of intangibles		84			95			83
Acquisition-related expenses ^(*)		—			22			1,007
Loss contingency ^(**)		—			—			1
Investment (gains) losses, net		(4	)		(5	)		(18	)
Income tax adjustments		(102	)		(52	)		(116	)
Non-GAAP net income	$	2,023		$	1,794		$	2,046

Diluted net income per share:

GAAP diluted net income per share	$	3.49		$	2.82		$	1.36
Stock-based and deferred compensation expense		1.04			0.96			1.03
Amortization of intangibles		0.19			0.21			0.18
Acquisition-related expenses ^(*)		—			0.05			2.21
Investment (gains) losses, net		(0.01	)		(0.01	)		(0.04	)
Income tax adjustments		(0.23	)		(0.12	)		(0.26	)
Non-GAAP diluted net income per share	$	4.48		$	3.91		$	4.48

Shares used to compute diluted net income per share		451			459			456

^(*) Associated with the Figma transaction, and includes deal costs, certain professional fees and the termination fee
^(**) Associated with an IP litigation matter

Reconciliation of GAAP to Non-GAAP Financial Targets The following tables show Adobe's third quarter fiscal year 2024 financial targets reconciled to non-GAAP financial targets included in this release.

(Shares in millions)	Third Quarter Fiscal 2024
	Low			High
Diluted net income per share:

GAAP diluted net income per share	$	3.45		$	3.50
Stock-based and deferred compensation expense		1.12			1.12
Amortization of intangibles		0.19			0.19
Income tax adjustments		(0.26	)		(0.26	)
Non-GAAP diluted net income per share	$	4.50		$	4.55

Shares used to compute diluted net income per share	447			447

	Third Quarter Fiscal 2024
Effective income tax rate:

GAAP effective income tax rate		18.0	%
Stock-based and deferred compensation expense		(1.3	)
Amortization of intangibles		(0.2	)
Income tax adjustments		2.0
Non-GAAP effective income tax rate ^(***)		18.5	%

^(***) Represents Adobe’s fixed long-term non-GAAP tax rate based on projections and currently available information through fiscal 2025

Reconciliation of GAAP to Non-GAAP Financial Targets (continued) The following tables show Adobe's updated annual fiscal year 2024 financial targets reconciled to non-GAAP financial targets included in this release.

(Shares in millions)	Fiscal Year 2024
	Low			High
Diluted net income per share:

GAAP diluted net income per share	$	11.80		$	12.00
Stock-based and deferred compensation expense		4.25			4.25
Amortization of intangibles		0.74			0.74
Acquisition-related expenses^(*)		2.24			2.24
Loss contingency ^(**)		0.01			0.01
Income tax adjustments		(1.04	)		(1.04	)
Non-GAAP diluted net income per share	$	18.00		$	18.20

Shares used to compute diluted net income per share	449			449

	Fiscal Year 2024
Effective income tax rate:

GAAP effective income tax rate		20.5	%
Stock-based and deferred compensation expense		(1.3	)
Amortization of intangibles		(0.2	)
Acquisition-related expenses ^(*)		(2.5	)
Income tax adjustments		2.0
Non-GAAP effective income tax rate ^(***)		18.5	%

^(*) Associated with the Figma transaction, and includes deal costs, certain professional fees and the termination fee
^(**)Associated with an IP litigation matter
^(***) Represents Adobe’s fixed long-term non-GAAP tax rate based on projections and currently available information through fiscal 2025

Use of Non-GAAP Financial Information

Adobe continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. Adobe's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe's operating results. Adobe believes these non-GAAP financial measures are useful because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. This allows institutional investors, the analyst community and others to better understand and evaluate our operating results and future prospects in the same manner as management.

Adobe's management believes it is useful for itself and investors to review, as applicable, both GAAP information as well as non-GAAP measures, which may exclude items such as stock-based and deferred compensation expenses, amortization of intangibles, investment gains and losses, income tax adjustments, and the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Adobe uses these non-GAAP measures in order to assess the performance of Adobe's business and for planning and forecasting in subsequent periods. Whenever such a non-GAAP measure is used, Adobe provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240613805724/en/

Investor Relations Contact

Jonathan Vaas

Adobe

ir@adobe.com

Public Relations Contact

Ashley Levine

Adobe

adobepr@adobe.com

Source: Adobe

FAQ

What was Adobe's revenue for Q2 fiscal year 2024?

Adobe reported a record revenue of $5.31 billion for Q2 fiscal year 2024.

What is Adobe's stock symbol?

Adobe's stock symbol is ADBE.

How much did Adobe's Digital Media segment grow in Q2 2024?

Adobe's Digital Media segment revenue grew 11% year-over-year to $3.91 billion in Q2 2024.

What was Adobe's diluted non-GAAP EPS for Q2 fiscal year 2024?

Adobe's diluted non-GAAP EPS was $4.48 for Q2 fiscal year 2024.

What are Adobe's updated revenue targets for fiscal year 2024?

Adobe updated its fiscal year 2024 revenue targets to $21.40-$21.50 billion.

How many shares did Adobe repurchase in Q2 2024?

Adobe repurchased approximately 4.6 million shares during Q2 fiscal year 2024.

What is Adobe's forecasted non-GAAP EPS for fiscal year 2024?

Adobe forecasted a non-GAAP EPS of $18.00 to $18.20 for fiscal year 2024.

Adobe Reports Record Revenue in Q2 Fiscal 2024

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What was Adobe's revenue for Q2 fiscal year 2024?

What is Adobe's stock symbol?

How much did Adobe's Digital Media segment grow in Q2 2024?

What was Adobe's diluted non-GAAP EPS for Q2 fiscal year 2024?

What are Adobe's updated revenue targets for fiscal year 2024?

How many shares did Adobe repurchase in Q2 2024?

What is Adobe's forecasted non-GAAP EPS for fiscal year 2024?

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