Adobe Reports Record Revenue in Q1 Fiscal 2023

Company raises Digital Media net new ARR and EPS annual targets

Adobe (Nasdaq:ADBE) today reported financial results for its first quarter fiscal year 2023 ended March 3, 2023.

“Adobe drove record Q1 revenue and we are raising our annual targets based on the tremendous market opportunity and continued confidence in our execution,” said Shantanu Narayen, chairman and CEO, Adobe. “Creative Cloud, Document Cloud and Experience Cloud are mission-critical in fueling the global digital economy.”

“Our strong engine of innovation combined with world-class operational rigor drove profitable growth in Q1, setting us up to deliver another strong fiscal year,” said Dan Durn, executive vice president and CFO, Adobe. “Adobe is better positioned today than we’ve ever been to serve our customers globally.”

First Quarter Fiscal Year 2023 Financial Highlights

• Adobe achieved revenue of $4.66 billion in its first quarter of fiscal year 2023, which represents 9 percent year-over-year growth or 13 percent in constant currency. Diluted earnings per share was $2.71 on a GAAP basis and $3.80 on a non-GAAP basis.
• GAAP operating income in the first quarter was $1.59 billion and non-GAAP operating income was $2.13 billion. GAAP net income was $1.25 billion and non-GAAP net income was $1.75 billion.
• Cash flows from operations were $1.69 billion.
• Remaining Performance Obligations (“RPO”) exiting the quarter were $15.21 billion.
• Adobe repurchased approximately 5.0 million shares during the quarter.

First Quarter Fiscal Year 2023 Business Segment Highlights

• Digital Media segment revenue was $3.40 billion, which represents 9 percent year-over-year growth or 14 percent in constant currency. Creative revenue grew to $2.76 billion, representing 8 percent year-over-year growth or 13 percent in constant currency. Document Cloud revenue was $634 million, representing 13 percent year-over-year growth or 16 percent in constant currency.
• Net new Digital Media Annualized Recurring Revenue (“ARR”) was $410 million, exiting the quarter with Digital Media ARR of $13.67 billion. Creative ARR grew to $11.28 billion and Document Cloud ARR grew to $2.39 billion.
• Digital Experience segment revenue was $1.18 billion, representing 11 percent year-over-year growth or 14 percent in constant currency. Digital Experience subscription revenue was $1.04 billion, representing 12 percent year-over-year growth or 14 percent in constant currency.

Financial Targets

Adobe is providing second quarter targets and updated fiscal year 2023 targets for Digital Media net new ARR and earnings per share. These targets factor in current expectations for the macroeconomic and foreign exchange environments.

The following table summarizes Adobe’s updated fiscal year 2023 targets:

The following table summarizes Adobe’s second quarter fiscal year 2023 targets:

Adobe to Host Conference Call

Adobe will webcast its first quarter fiscal year 2023 earnings conference call today at 2:00 p.m. Pacific Time from its investor relations website: 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

This press release contains forward-looking statements, including those related to business momentum, our market opportunity, market trends, current macroeconomic conditions, fluctuations in foreign currency exchange rates, strategic investments, customer success, revenue, operating margin, 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, all of which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure to compete effectively; failure to develop, acquire, market and offer products and services that meet customer requirements; introduction of new technology; failure to realize the anticipated benefits of past or future acquisitions; information security and privacy; potential interruptions or delays in hosted services provided by us or third parties; risks associated with cyber-attacks; complex sales cycles; failure to effectively manage critical strategic third-party business relationships; changes in accounting principles and tax regulations; fluctuations in subscription renewal rates; risks related to the timing of revenue recognition from our subscription offerings; uncertainty in the financial markets and economic conditions in the countries where we operate; geopolitical and macroeconomic conditions, including the Russia-Ukraine war; and other various risks associated with being a multinational corporation. For a discussion of these and other risks and uncertainties, please refer to Adobe’s Annual Report on Form 10-K for our fiscal year 2022 ended Dec. 2, 2022, and Adobe's Quarterly Reports on Form 10-Q issued in fiscal year 2023.

The financial information set forth in this press release 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 3, 2023, which Adobe expects to file in late March or early April 2023. 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 is provided at the end of this press release and on Adobe’s investor relations website.

About Adobe

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

©2023 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.

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, the related tax impact of all of these items, 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.

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