《Adobe Inc.（ADBE）2024年第二季度财报「NASDAQ」（英文版）（54页）.pdf》由会员分享，可在线阅读，更多相关《Adobe Inc.（ADBE）2024年第二季度财报「NASDAQ」（英文版）（54页）.pdf（54页珍藏版）》请在三个皮匠报告上搜索。

1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_ FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended May 31,2024 orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT O

2、F 1934For the transition period from to Commission File Number:0-15175 ADOBE INC.(Exact name of registrant as specified in its charter)_Delaware77-0019522(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)345 Park Avenue,San Jose,California 95110-2704(Addr

3、ess of principal executive offices and zip code)(408)536-6000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock,$0.0001 par value per shareADBENASDAQ_ Indic

4、ate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing re

5、quirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the reg

6、istrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“sma

7、ller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extende

8、d transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of June 21,2024,443.4 million shares

9、 of the registrants common stock,$0.0001 par value per share,were issued and outstanding.ADOBE INC.FORM 10-Q TABLE OF CONTENTS Page No.PART IFINANCIAL INFORMATION Item 1.Condensed Consolidated Financial Statements:3 Condensed Consolidated Balance SheetsMay 31,2024 and December 1,20233 Condensed Cons

10、olidated Statements of IncomeThree and Six Months Ended May 31,2024 and June 2,20234Condensed Consolidated Statements of Comprehensive IncomeThree and Six Months Ended May 31,2024 and June 2,20235Condensed Consolidated Statements of Stockholders EquityThree and Six Months Ended May 31,2024 and June

11、2,20236 Condensed Consolidated Statements of Cash Flows Six Months Ended May 31,2024 and June 2,20238 Notes to Condensed Consolidated Financial Statements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations26Item 3.Quantitative and Qualitative Disclosures abou

12、t Market Risk38Item 4.Controls and Procedures38 PART IIOTHER INFORMATION Item 1.Legal Proceedings39Item 1A.Risk Factors39Item 2.Unregistered Sales of Equity Securities and Use of Proceeds51Item 5.Other Information51Item 6.Exhibits52Signature53Summary of Trademarks54 2PART IFINANCIAL INFORMATIONITEM

13、1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTSADOBE INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In millions,except par value)May 31,2024December 1,2023(Unaudited)(*)ASSETSCurrent assets:Cash and cash equivalents$7,660$7,141 Short-term investments 405 701 Trade receivables,net of allowances for doubtful

14、 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

15、 1,436 1,191 Other assets 1,462 1,223 Total assets$30,007$29,779 LIABILITIES AND STOCKHOLDERS EQUITYCurrent 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

16、,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,$0.0001 par value;2 shares authorized;none issued Common stock,$0.

17、0001 par value;900 shares authorized;601 shares issued;449 and 455 shares outstanding,respectively 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(152 and 146 shares,respectively)(32,612)(28,129)Tot

18、al stockholders equity 14,843 16,518 Total liabilities and stockholders equity$30,007$29,779 _(*)The condensed consolidated balance sheet as of December 1,2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes r

19、equired by generally accepted accounting principles for complete financial statements.See accompanying notes to condensed consolidated financial statements.Table of Contents3ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In millions,except per share data)(Unaudited)Three Months EndedSix Month

20、s Ended May 31,2024June 2,2023May 31,2024June 2,2023Revenue: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 c

21、ost 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 Tot

22、al 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

23、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

24、 net income per share 451 459 454 459 See accompanying notes to condensed consolidated financial statements.Table of Contents4ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)(Unaudited)Three Months EndedSix Months Ended May 31,2024June 2,2023May 31,2024June 2,2023Incr

25、ease/(Decrease)Increase/(Decrease)Net income$1,573$1,295$2,193$2,542 Other comprehensive income(loss),net of taxes:Available-for-sale securities:Unrealized gains/losses on available-for-sale securities 3 6 7 14 Reclassification adjustment for recognized gains/losses on available-for-sale securities

26、5 5 Net increase(decrease)from available-for-sale securities 3 11 7 19 Derivatives designated as hedging instruments:Unrealized gains/losses on derivative instruments(2)1 (9)Reclassification adjustment for realized gains/losses on derivative instruments 4 (7)8 (24)Net increase(decrease)from derivati

27、ves designated as hedging instruments 2 (7)9 (33)Foreign currency translation adjustments(4)6 (7)10 Other comprehensive income(loss),net of taxes 1 10 9 (4)Total comprehensive income,net of taxes$1,574$1,305$2,202$2,538 See accompanying notes to condensed consolidated financial statements.Table of C

28、ontents5ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(In millions)(Unaudited)Three Months Ended May 31,2024 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances at March 1,2024 601$12,03

29、7$33,809$(277)(148)$(30,109)$15,460 Net income 1,573 1,573 Other comprehensive income(loss),net of taxes 1 1 Re-issuance of treasury stock under stock compensation plans (155)1 20 (135)Repurchases of common stock (5)(2,521)(2,521)Stock-based compensation 467 467 Value of shares in deferred compensat

30、ion plan (2)(2)Balances at May 31,2024 601$12,504$35,227$(276)(152)$(32,612)$14,843 Three Months Ended June 2,2023 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances at March 3,2023 601$10,284$29,435$(307)

31、(142)$(25,206)$14,206 Net income 1,295 1,295 Other comprehensive income(loss),net of taxes 10 10 Re-issuance of treasury stock under stock compensation plans (121)19 (102)Repurchases of common stock (3)(1,004)(1,004)Stock-based compensation 433 433 Balances at June 2,2023 601$10,717$30,609$(297)(145

32、)$(26,191)$14,838 Table of Contents6ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(In millions)(Unaudited)Six Months Ended May 31,2024 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances

33、 at December 1,2023 601$11,586$33,346$(285)(146)$(28,129)$16,518 Net income 2,193 2,193 Other comprehensive income(loss),net of taxes 9 9 Re-issuance of treasury stock under stock compensation plans (312)2 52 (260)Repurchases of common stock (8)(4,534)(4,534)Stock-based compensation 918 918 Value of

34、 shares in deferred compensation plan (1)(1)Balances at May 31,2024 601$12,504$35,227$(276)(152)$(32,612)$14,843 Six Months Ended June 2,2023 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances at December

35、2,2022 601$9,868$28,319$(293)(139)$(23,843)$14,051 Net income 2,542 2,542 Other comprehensive income(loss),net of taxes (4)(4)Re-issuance of treasury stock under stock compensation plans (252)2 55 (197)Repurchases of common stock (8)(2,404)(2,404)Stock-based compensation 849 849 Value of shares in d

36、eferred compensation plan 1 1 Balances at June 2,2023 601$10,717$30,609$(297)(145)$(26,191)$14,838 See accompanying notes to condensed consolidated financial statements.Table of Contents7ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)Six Months Ended May 31,2024June

37、 2,2023Cash flows from operating activities:Net income$2,193$2,542 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation,amortization and accretion 426 432 Stock-based compensation 918 849 Reduction of operating lease right-of-use assets 37 36 Deferred income

38、taxes(238)(168)Unrealized losses(gains)on investments,net(14)(2)Other non-cash items 6 (3)Changes in operating assets and liabilities,net of acquired assets and assumed liabilities:Trade receivables,net 604 385 Prepaid expenses and other assets(641)(562)Trade payables 45 (29)Accrued expenses and oth

39、er liabilities(45)(36)Income taxes payable 87 421 Deferred revenue(264)(33)Net cash provided by operating activities 3,114 3,832 Cash flows from investing activities:Maturities of short-term investments 295 538 Proceeds from sales of short-term investments 7 195 Purchases of property and equipment(7

40、8)(222)Purchases of long-term investments,intangibles and other assets(49)(34)Proceeds from sale of long-term investments and other assets 2 1 Net cash provided by investing activities 177 478 Cash flows from financing activities:Repurchases of common stock(4,500)(2,400)Proceeds from re-issuance of

41、treasury stock 97 70 Taxes paid related to net share settlement of equity awards(357)(267)Proceeds from issuance of debt 1,997 Repayment of debt (500)Other financing activities,net(7)3 Net cash used for financing activities(2,770)(3,094)Effect of foreign currency exchange rates on cash and cash equi

42、valents(2)4 Net change in cash and cash equivalents 519 1,220 Cash and cash equivalents at beginning of period 7,141 4,236 Cash and cash equivalents at end of period$7,660$5,456 Supplemental disclosures:Cash paid for income taxes,net of refunds$901$435 Cash paid for interest$48$56 See accompanying n

43、otes to condensed consolidated financial statements.Table of Contents8NOTE 1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESWe have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S.Securities and Exc

44、hange Commission(the“SEC”).Pursuant to these rules and regulations,we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States(“

45、GAAP”).In managements opinion,we have made all adjustments(consisting only of normal,recurring adjustments,except as otherwise indicated)necessary to fairly present our financial position,results of operations and cash flows.Our interim period operating results do not necessarily indicate the result

46、s that may be expected for any other interim period or for the full fiscal year.These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 1,2023 on

47、file with the SEC(our“Annual Report”).Use of EstimatesIn preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC,we must make estimates and judgments that affect the amounts reported in the condens

48、ed consolidated financial statements and accompanying notes.Actual results may differ materially from these estimates.Significant Accounting PoliciesThere have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual R

49、eport.Recent Accounting Pronouncements Not Yet EffectiveIn November 2023,the Financial Accounting Standards Board(“the FASB”)issued Accounting Standards Update(“ASU”)No.2023-07,Segment Reporting,which expands annual and interim disclosure requirements for reportable segments,primarily through enhanc

50、ed disclosures about significant segment expenses.The updated standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the first quarter of fiscal 2026.Early adoption is permitted.We are currently evaluating the impact that the updated standard will have

51、 on our financial statement disclosures.In December 2023,the FASB issued ASU No.2023-09,Income Taxes,which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes,requires disclosure of disaggregated income taxes paid,and modifies othe

52、r income tax-related disclosure requirements.The updated standard is effective for us beginning with our fiscal year 2026 annual reporting period.Early adoption is permitted.We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.With the exc

53、eption of the new standards discussed above,there have been no other recent accounting pronouncements or changes in accounting pronouncements during the six months ended May 31,2024,as compared to the recent accounting pronouncements described in our Annual Report,that are of significance or potenti

54、al significance to us.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)9NOTE 2.REVENUESegment InformationOur segment results for the three months ended May 31,2024 and June 2,2023 were as follows:(dollars in millions)Digital MediaDigital ExperiencePublishing

55、and AdvertisingTotalThree months ended May 31,2024Revenue$3,908$1,327$74$5,309 Cost of revenue 181 395 22 598 Gross profit$3,727$932$52$4,711 Gross profit as a percentage of revenue 95%70%70%89%Three months ended June 2,2023Revenue$3,511$1,222$83$4,816 Cost of revenue 152 399 21 572 Gross profit$3,3

56、59$823$62$4,244 Gross profit as a percentage of revenue 96%67%75%88%Our segment results for the six months ended May 31,2024 and June 2,2023 were as follows:(dollars in millions)Digital MediaDigital ExperiencePublishing and AdvertisingTotalSix months ended May 31,2024Revenue$7,724$2,616$151$10,491 C

57、ost of revenue 352 792 44 1,188 Gross profit$7,372$1,824$107$9,303 Gross profit as a percentage of revenue 95%70%71%89%Six months ended June 2,2023Revenue$6,906$2,398$167$9,471 Cost of revenue 294 803 43 1,140 Gross profit$6,612$1,595$124$8,331 Gross profit as a percentage of revenue 96%67%74%88%Rev

58、enue by geographic area for the three and six months ended May 31,2024 and June 2,2023 were as follows:Three MonthsSix Months(in millions)2024202320242023Americas$3,188$2,879$6,298$5,658 EMEA 1,361 1,213 2,680 2,386 APAC 760 724 1,513 1,427 Total$5,309$4,816$10,491$9,471 Table of ContentsADOBE INC.N

59、OTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)10Revenue by major offerings in our Digital Media reportable segment for the three and six months ended May 31,2024 and June 2,2023 were as follows:Three MonthsSix Months(in millions)2024202320242023Creative Cloud$3,126$2,852$6

60、,192$5,613 Document Cloud 782 659 1,532 1,293 Total Digital Media revenue$3,908$3,511$7,724$6,906 Subscription revenue by segment for the three and six months ended May 31,2024 and June 2,2023 were as follows:Three MonthsSix Months(in millions)2024202320242023Digital Media$3,828$3,418$7,553$6,719 Di

61、gital Experience 1,204 1,070 2,368 2,112 Publishing and Advertising 28 29 55 59 Total subscription revenue$5,060$4,517$9,976$8,890 Contract BalancesA receivable is recorded when an unconditional right to invoice and receive payment exists,such that only the passage of time is required before payment

62、 of consideration is due.Included in trade receivables on the condensed consolidated balance sheets are unbilled receivable balances which have not yet been invoiced,and are typically related to license revenue or services which are delivered prior to invoicing.As of May 31,2024,the balance of trade

63、 receivables,net of allowances for doubtful accounts,was$1.61 billion,inclusive of unbilled receivables of$99 million.As of December 1,2023,the balance of trade receivables,net of allowances for doubtful accounts,was$2.22 billion,inclusive of unbilled receivables of$80 million.We maintain an allowan

64、ce for doubtful accounts which reflects our best estimate of potentially uncollectible trade receivables and is based on both specific and general reserves.We maintain general reserves on a collective basis by considering factors such as historical experience,credit-worthiness,the age of the trade r

65、eceivable balances,current economic conditions and a reasonable and supportable forecast of future economic conditions.The allowance for doubtful accounts was$19 million and$16 million as of May 31,2024 and December 1,2023,respectively.A contract asset is recognized when a conditional right to consi

66、deration exists and transfer of control has occurred.Contract assets are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets.We regularly review contract asset balances for impairment,co

67、nsidering factors such as historical experience,credit-worthiness,age of the balance,current economic conditions and a reasonable and supportable forecast of future economic conditions.Contract asset impairments were not material for the six months ended May 31,2024.Contract assets were$193 million

68、and$141 million as of May 31,2024 and December 1,2023,respectively.Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services,including non-cancellable and non-refundable committed funds and refundable customer deposits.Deferred

69、revenue is recognized as revenue when transfer of control to customers has occurred.As of May 31,2024,the balance of deferred revenue was$5.69 billion,which includes$55 million of refundable customer deposits.Arrangements with some of our enterprise customers with non-cancellable and non-refundable

70、committed funds provide options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services.Non-cancellable and non-refundable committed funds related to these agreements comprised approximately 4%of the total deferred revenue.As of De

71、cember 1,2023,the balance of deferred revenue was$5.95 billion.During the three and six months ended May 31,2024,approximately$1.69 billion and$4.36 billion of revenue,respectively,was recognized that was included in the balance of deferred revenue as of December 1,2023.Table of ContentsADOBE INC.NO

72、TES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)11Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized,which includes deferred revenue and unbilled amounts that will be recognized as revenue in future

73、periods.As of May 31,2024,remaining performance obligations were approximately$17.86 billion.Non-cancellable and non-refundable funds related to some of our enterprise customer agreements referred to above comprised approximately 4%of the total remaining performance obligations.Approximately 68%of t

74、he remaining performance obligations,excluding the aforementioned enterprise customer agreements,are expected to be recognized over the next 12 months with the remainder recognized thereafter.Incremental costs of obtaining a contract with a customer are capitalized if we expect the benefit of those

75、costs to be longer than one year and primarily relate to sales commissions paid to our sales force personnel.Capitalized contract acquisition costs are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidat

76、ed balance sheets.Capitalized contract acquisition costs were$716 million and$656 million as of May 31,2024 and December 1,2023,respectively.We record refund liabilities for amounts that may be subject to future refunds,which include sales returns reserves and customer rebates and credits.Refund lia

77、bilities are included in accrued expenses on the condensed consolidated balance sheets.Refund liabilities were$105 million and$111 million as of May 31,2024 and December 1,2023,respectively.NOTE 3.ACQUISITIONSFigmaOn September 15,2022,we entered into a definitive merger agreement under which we inte

78、nded to acquire Figma,Inc.(“Figma”)for approximately$20 billion,comprised of approximately half cash and half stock.On December 17,2023,we entered into a mutual termination agreement with Figma to terminate the proposed merger.In accordance with the terms of the termination agreement,we paid Figma a

79、 termination fee of$1 billion.The termination fee was recorded in operating expenses in our condensed consolidated statements of income during the six months ended May 31,2024,and was not tax-deductible for financial statement purposes.NOTE 4.CASH,CASH EQUIVALENTS AND SHORT-TERM INVESTMENTSCash equi

80、valents consist of highly liquid marketable securities with remaining maturities of three months or less at the date of purchase.We classify our investments in marketable debt securities as“available-for-sale.”We carry these investments at fair value,based on quoted market prices or other readily av

81、ailable market information.Unrealized gains and unrealized non-credit-related losses of marketable debt securities are included in accumulated other comprehensive income,net of taxes,in our condensed consolidated balance sheets.Unrealized credit-related losses are recorded to other income(expense),n

82、et in our condensed consolidated statements of income with a corresponding allowance for credit-related losses in our condensed consolidated balance sheets.Gains and losses are determined using the specific identification method and recognized when realized in our condensed consolidated statements o

83、f income.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)12Cash,cash equivalents and short-term investments consisted of the following as of May 31,2024:(in millions)AmortizedCostUnrealizedGainsUnrealizedLossesEstimatedFair ValueCurrent assets:Cas

84、h$564$564 Cash equivalents:Money market funds 7,012 7,012 Time deposits 84 84 Total cash equivalents 7,096 7,096 Total cash and cash equivalents 7,660 7,660 Short-term fixed income securities:Asset-backed securities 8 8 Corporate debt securities 202 (1)201 U.S.agency securities 13 13 U.S.Treasury se

85、curities 187 (4)183 Total short-term investments 410 (5)405 Total cash,cash equivalents and short-term investments$8,070$(5)$8,065 Cash,cash equivalents and short-term investments consisted of the following as of December 1,2023:(in millions)AmortizedCostUnrealizedGainsUnrealizedLossesEstimatedFair

86、ValueCurrent assets:Cash$618$618 Cash equivalents:Money market funds 6,498 6,498 Time deposits 25 25 Total cash equivalents 6,523 6,523 Total cash and cash equivalents 7,141 7,141 Short-term fixed income securities:Asset-backed securities 15 15 Corporate debt securities 438 (4)434 U.S.agency securit

87、ies 13 (1)12 U.S.Treasury securities 247 (7)240 Total short-term investments 713 (12)701 Total cash,cash equivalents and short-term investments$7,854$(12)$7,842 See Note 5 for further information regarding the fair value of our financial instruments.Table of ContentsADOBE INC.NOTES TO CONDENSED CONS

88、OLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)13The following table summarizes the estimated fair value of short-term fixed income debt securities classified as short-term investments based on stated effective maturities as of May 31,2024:(in millions)EstimatedFair ValueDue within one year$342

89、Due between one and two years 60 Due between two and three years 3 Total$405 We review our debt securities classified as short-term investments on a regular basis for impairment.For debt securities in unrealized loss positions,we determine whether any portion of the decline in fair value below the a

90、mortized cost basis is due to credit-related factors if we neither intend to sell nor anticipate that it is more likely than not that we will be required to sell prior to recovery of the amortized cost basis.We consider factors such as the extent to which the market value has been less than the cost

91、,any noted failure of the issuer to make scheduled payments,changes to the rating of the security and other relevant credit-related factors in determining whether or not a credit loss exists.During the six months ended May 31,2024 and June 2,2023,we did not recognize an allowance for credit-related

92、losses on any of our investments.NOTE 5.FAIR VALUE MEASUREMENTSAssets and Liabilities Measured and Recorded at Fair Value on a Recurring BasisThe fair value of our financial assets and liabilities at May 31,2024 was determined using the following inputs:(in millions)Fair Value Measurements at Report

93、ing Date Using Quoted Pricesin ActiveMarkets forIdentical AssetsSignificantOtherObservableInputsSignificantUnobservableInputs Total(Level 1)(Level 2)(Level 3)Assets:Cash equivalents:Money market funds$7,012$7,012$Time deposits 84 84 Short-term investments:Asset-backed securities 8 8 Corporate debt s

94、ecurities 201 201 U.S.agency securities 13 13 U.S.Treasury securities 183 183 Prepaid expenses and other current assets:Foreign currency derivatives 51 51 Other assets:Deferred compensation plan assets 251 251 Total assets$7,803$7,347$456$Liabilities:Accrued expenses:Foreign currency derivatives$4$4

95、$Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)14The fair value of our financial assets and liabilities at December 1,2023 was determined using the following inputs:(in millions)Fair Value Measurements at Reporting Date Using Quoted Pricesin Act

96、iveMarkets forIdentical AssetsSignificantOtherObservableInputsSignificantUnobservableInputs Total(Level 1)(Level 2)(Level 3)Assets:Cash equivalents:Money market funds$6,498$6,498$Time deposits 25 25 Short-term investments:Asset-backed securities 15 15 Corporate debt securities 434 434 U.S.agency sec

97、urities 12 12 U.S.Treasury securities 240 240 Prepaid expenses and other current assets:Foreign currency derivatives 52 52 Other assets:Deferred compensation plan assets 206 206 Total assets$7,482$6,729$753$Liabilities:Accrued expenses:Foreign currency derivatives$4$4$See Note 4 for further informat

98、ion regarding the fair value of our financial instruments.Our fixed income available-for-sale debt securities consist of high quality,investment grade securities from diverse issuers with a weighted average credit rating of AA.We value these securities based on pricing from independent pricing vendo

99、rs who use matrix pricing valuation techniques including market approach methodologies that model information generated by market transactions involving identical or comparable assets,as well as discounted cash flow methodologies.Inputs include quoted prices in active markets for identical assets or

100、 inputs other than quoted prices that are observable either directly or indirectly in determining fair value,including benchmark yields,issuer spreads off benchmark yields,interest rates and U.S.Treasury or swap curves.We therefore classify all of our fixed income available-for-sale securities as Le

101、vel 2.We perform routine procedures such as comparing prices obtained from multiple independent sources to ensure that appropriate fair values are recorded.The fair values of our money market funds,time deposits and deferred compensation plan assets,which consist of money market and other mutual fun

102、ds,are based on quoted prices in active markets at the measurement date.Our over-the-counter foreign currency derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date.Our other current finan

103、cial assets and current financial liabilities have fair values that approximate their carrying values.Assets and Liabilities Measured at Fair Value on a Nonrecurring BasisThe fair value of our senior notes was$5.39 billion as of May 31,2024,based on observable market prices in less active markets an

104、d categorized as Level 2.See Note 14 for further details regarding our debt.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)15NOTE 6.DERIVATIVE FINANCIAL INSTRUMENTSWe may use derivatives to partially offset our business exposure to foreign curren

105、cy and interest rate risk on expected future cash flows and certain existing assets and liabilities.We do not use any of our derivative instruments for trading purposes.We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transa

106、ctions with the same counterparty.We do not offset fair value amounts recognized for derivative instruments under master netting arrangements.We also enter into collateral security agreements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative

107、 instruments fluctuates from contractually established thresholds.Cash Flow HedgesIn countries outside the United States,we transact business in U.S.Dollars and in various other currencies.We may use foreign exchange option contracts and forward contracts to hedge a portion of our forecasted foreign

108、 currency denominated revenue and expenses.These foreign exchange contracts,carried at fair value,have maturities of up to 24 months.As of May 31,2024,we had net derivative losses on our foreign currency cash flow hedges expected to be recognized within the next 36 months,of which$4 million of net l

109、osses are expected to be recognized into revenue within the next 12 months.Non-Designated HedgesOur derivatives not designated as hedging instruments consist of foreign currency forward contracts that we primarily use to hedge monetary assets and liabilities denominated in non-functional currencies.

110、Fair value asset derivatives are included in prepaid expenses and other current assets and fair value liability derivatives are included in accrued expenses on our condensed consolidated balance sheets.The fair value of derivative instruments as of May 31,2024 and December 1,2023 were as follows:(in

111、 millions)20242023 Fair Value AssetDerivativesFair ValueLiabilityDerivativesFair Value AssetDerivativesFair ValueLiabilityDerivativesDerivatives designated as hedging instruments:Foreign exchange option contracts$44$42$Foreign exchange forward contracts 3 1 Derivatives not designated as hedging inst

112、ruments:Foreign exchange forward contracts 4 4 9 4 Total derivatives$51$4$52$4 For the three and six months ended May 31,2024 and June 2,2023,gains and losses on derivative instruments,net of tax,recognized in our condensed consolidated statements of comprehensive income and the effects of derivativ

113、e instruments on our condensed consolidated statements of income were immaterial.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)16NOTE 7.GOODWILL AND OTHER INTANGIBLESGoodwill as of May 31,2024 and December 1,2023 was$12.80 billion and$12.81 bill

114、ion,respectively.During the second quarter of fiscal 2024,we completed our annual goodwill impairment test associated with our reporting units and determined there was no impairment of goodwill.Other intangible assets subject to amortization as of May 31,2024 and December 1,2023 were as follows:(in

115、millions)20242023 Gross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNetCustomer contracts and relationships$1,204$(681)$523$1,204$(619)$585 Purchased technology 884 (630)254 984 (647)337 Trademarks 376 (239)137 376 (217)159 Other 28 (9)19 22 (15)7 Other int

116、angibles,net$2,492$(1,559)$933$2,586$(1,498)$1,088 Amortization expense related to other intangibles was$84 million and$168 million for the three and six months ended May 31,2024,respectively.Comparatively,amortization expense related to other intangibles was$96 million and$192 million for the three

117、 and six months ended June 2,2023,respectively.Of these amounts,$42 million and$84 million were included in cost of revenue for the three and six months ended May 31,2024,respectively,and$54 million and$108 million were included in cost of revenue for the three and six months ended June 2,2023,respe

118、ctively.As of May 31,2024,the estimated aggregate amortization expense in future periods was as follows:(in millions)Fiscal YearOther Intangibles(1)Remainder of 2024$166 2025 301 2026 149 2027 107 2028 65 Thereafter 125 Total expected amortization expense$913 _(1)Excludes capitalized in-process rese

119、arch and development which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)17NOTE 8.ACCRUED EXPENSESAccrued expenses as of May 31

120、,2024 and December 1,2023 consisted of the following:(in millions)20242023Accrued compensation and benefits$744$535 Accrued bonuses 305 547 Accrued corporate marketing 125 132 Sales and use taxes 105 122 Refund liabilities 105 111 Other 515 495 Accrued expenses$1,899$1,942 Other primarily includes g

121、eneral business accruals,accrued hosting fees,royalties payable,and derivative collateral liabilities.NOTE 9.STOCK-BASED COMPENSATIONRestricted Stock UnitsRestricted stock unit activity for the six months ended May 31,2024 was as follows:Number ofShares(in millions)Weighted AverageGrant Date Fair Va

122、lueAggregateFair Value(1)(in millions)Beginning outstanding balance 7.8$418.63 Awarded 2.6$590.97 Released(1.8)$431.10 Forfeited(0.2)$442.98 Ending outstanding balance 8.4$468.88$3,734 Expected to vest 7.7$467.98$3,435 _(1)The aggregate fair value is calculated using the closing stock price as of Ma

123、y 31,2024 of$444.76.The total fair value of restricted stock units vested during the six months ended May 31,2024 was$953 million.Performance Shares In the first quarter of fiscal 2024,the Executive Compensation Committee of our Board of Directors(the“ECC”)approved the 2024 Performance Share Program

124、,the terms of which are similar to the 2023 Performance Share Program that is still outstanding.For information regarding our outstanding Performance Share Programs,including the terms,see“Note 12.Stock-Based Compensation”of our Annual Report on Form 10-K for the fiscal year ended December 1,2023.As

125、 of May 31,2024,the performance shares awarded under our 2024,2023 and 2022 Performance Share Programs remained outstanding and unvested.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)18Performance share activity for the six months ended May 31,2

126、024 was as follows:Number ofShares(in millions)Weighted AverageGrant Date Fair ValueAggregateFair Value(1)(in millions)Beginning outstanding balance 0.5$465.71 Awarded 0.2$645.40 Released(0.1)$455.65 Forfeited(0.1)$474.70 Ending outstanding balance 0.5$536.56$238 Expected to vest 0.5$534.33$215 _(1)

127、The aggregate fair value is calculated using the closing stock price as of May 31,2024 of$444.76.Under our Performance Share Programs,participants generally have the ability to receive up to 200%of the target number of shares originally granted.Shares released during the six months ended May 31,2024

128、 resulted from 83%achievement of target for the 2021 Performance Share Program,as certified by the ECC in the first quarter of fiscal 2024.The total fair value of performance shares vested during the six months ended May 31,2024 was$63 million.Employee Stock Purchase Plan SharesEmployees purchased 0

129、.3 million shares at an average price of$299.89 and 0.2 million shares at an average price of$286.05 for the six months ended May 31,2024 and June 2,2023,respectively.The intrinsic value of shares purchased during the six months ended May 31,2024 and June 2,2023 was$96 million and$12 million,respect

130、ively.The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.Compensation CostsAs of May 31,2024,there was$3.56 billion of unrecognized compensation cost,adjusted for estimated forfeitures,related to unvested stock-ba

131、sed awards and purchase rights which will be recognized over a weighted average period of 2.31 years.Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.Total stock-based compensation costs included in our condensed consolidated statements of income for

132、the three and six months ended May 31,2024 and June 2,2023 were as follows:Three MonthsSix Months(in millions)2024202320242023Cost of revenue$31$29$60$58 Research and development 234 224 463 433 Sales and marketing 134 123 263 245 General and administrative 68 57 132 113 Total$467$433$918$849 Table

133、of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)19NOTE 10.ACCUMULATED OTHER COMPREHENSIVE INCOME(LOSS)The components of accumulated other comprehensive income(loss)and activity,net of related taxes,were as follows:(in millions)December 1,2023Increase/De

134、creaseReclassification AdjustmentsMay 31,2024Net unrealized gains/losses on available-for-sale securities$(12)$7$(1)$(5)Net unrealized gains/losses on derivative instruments designated as hedging instruments(26)1 8(2)(17)Cumulative foreign currency translation adjustments(247)(7)(254)Total accumulat

135、ed other comprehensive income(loss),net of taxes$(285)$1$8$(276)_(1)Reclassification adjustments for gains/losses on available-for-sale securities are classified in other income(expense),net.(2)Reclassification adjustments for gains/losses on foreign currency hedges are classified in revenue or oper

136、ating expenses,depending on the nature of the underlying transaction,and reclassification adjustments for gains/losses on Treasury lock hedges are classified in interest expense.Taxes related to each component of other comprehensive income(loss)for the three and six months ended May 31,2024 and June

137、 2,2023 were immaterial.NOTE 11.STOCK REPURCHASE PROGRAMTo 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

138、.In December 2020,our Board of Directors granted authority to repurchase up to$15 billion in our common stock,which became fully utilized during the six months ended May 31,2024.In March 2024,our Board of Directors granted additional authority to repurchase up to$25 billion in our common stock throu

139、gh March 14,2028.During the six months ended May 31,2024 and June 2,2023,we entered into accelerated share repurchase agreements(“ASRs”)with large financial institutions whereupon we provided them with prepayments totaling$4.5 billion and$1.4 billion,respectively.Under the terms of our ASRs,the fina

140、ncial institutions agree to deliver a portion of shares to us at contract inception and the remaining shares at settlement.The total number of shares delivered and average purchase price paid per share are determined upon settlement based on the Volume Weighted Average Price(“VWAP”)over the term of

141、the ASR,less an agreed upon discount.During the six months ended June 2,2023,we also entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of$1 billion.Under the terms of our structured stock repurchase agreements,the fin

142、ancial institutions agree to deliver shares to us at monthly intervals during the respective contract terms,and the number of shares delivered each month are determined based on the total notional amount of the contracts,the number of trading days in the intervals and the VWAP during the intervals,l

143、ess an agreed upon discount.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)20Share repurchase activity for the six months ended May 31,2024 and June 2,2023 was as follows:Number of Shares Delivered(in millions)Average Price Paid Per ShareSix mont

144、hs ended May 31,2024Structured stock repurchase agreement entered into in fiscal 2023 0.6$626.68 ASR entered into in December 2023 3.5$578.11 ASR entered into in March 2024 3.6$(1)Total shares delivered 7.7 Six months ended June 2,2023Structured stock repurchase agreements entered into in fiscal 202

145、2 and the six months ended June 2,2023 3.6$346.84 ASR entered into in December 2022 4.0$348.46 Total shares delivered 7.6 _(1)During the six months ended May 31,2024,we received the initial delivery of shares under the ASR entered into in March 2024,which remained outstanding as of May 31,2024.Subse

146、quent to May 31,2024,the outstanding ASR was settled which resulted in total repurchases of 5.2 million shares at an average price of$475.94.Prepayments for stock repurchases are classified as treasury stock,a component of stockholders equity on our condensed consolidated balance sheets,at the payme

147、nt date,though only shares physically delivered to us by the end of the respective period are excluded from the computation of net income per share.As of May 31,2024,a portion of the$2.5 billion prepayment under the ASR entered into in March 2024 was evaluated as an unsettled forward contract indexe

148、d to our own stock,classified within stockholders equity.Subsequent to May 31,2024,as part of the March 2024 stock repurchase authority,we entered into an ASR with a large financial institution whereupon we provided them with a prepayment of$2.5 billion and received an initial delivery of 3.6 millio

149、n shares,which represents approximately 75%of our prepayment.Upon completion of this$2.5 billion ASR,$20.15 billion remains under our March 2024 stock repurchase authority.NOTE 12.NET INCOME PER SHAREThe following table sets forth the computation of basic and diluted net income per share for the thr

150、ee and six months ended May 31,2024 and June 2,2023:Three MonthsSix Months(in millions,except per share data)2024202320242023Net income$1,573$1,295$2,193$2,542 Shares used to compute basic net income per share 449.1 457.8 450.9 458.4 Dilutive potential common shares from stock plans and programs 2.3

151、 0.9 3.0 0.7 Shares used to compute diluted net income per share 451.4 458.7 453.9 459.1 Basic net income per share$3.50$2.83$4.86$5.55 Diluted net income per share$3.49$2.82$4.83$5.54 Anti-dilutive potential common shares 2.5 3.8 1.7 5.0 Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FI

152、NANCIAL STATEMENTS(Continued)(Unaudited)21NOTE 13.COMMITMENTS AND CONTINGENCIESIndemnificationsIn the ordinary course of business,we provide indemnifications of varying scope to customers and channel partners against claims of intellectual property infringement made by third parties arising from the

153、 use of our products and from time to time,we are subject to claims by our customers under these indemnification provisions.Historically,costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification pro

154、visions on our future results of operations.To the extent permitted under Delaware law,we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity.The indemnification period cover

155、s all pertinent events and occurrences during the officers or directors lifetime.The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited;however,we have director and officer insurance coverage that reduces our exposure and enab

156、les us to recover a portion of any future amounts paid.We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.Legal ProceedingsWe are subject to legal proceedings,claims,including claims relating to intellectual property,commerci

157、al,employment and other matters,and investigations,including government investigations,that arise in the ordinary course of our business.Some of these disputes,legal proceedings and investigations may include speculative claims for substantial or indeterminate amounts of damages.We consider all clai

158、ms on a quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably possible or probable and estimable.Based upon this assessment,we then evaluate disclosure requirements and whether to accrue for such claims in our financial statements.

159、This determination is then reviewed and discussed with the Audit Committee of the Board of Directors.We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.These provisions are reviewed at least quarterly

160、 and adjusted to reflect the impacts of negotiations,settlements,rulings,advice of legal counsel and other information and events pertaining to a particular case.As of May 31,2024,we accrued provisions for legal liabilities that were probable and estimable,which were not material to our financial st

161、atements.Unless otherwise specifically disclosed in this note,we have determined that no disclosure is required related to any claim against us because:(a)there is not a reasonable possibility that a loss exceeding amounts already recognized(if any)may be incurred with respect to such claim;(b)a rea

162、sonably possible loss or range of loss cannot be estimated;or(c)such estimate is immaterial.All legal costs associated with litigation are expensed as incurred.Litigation is inherently unpredictable.However,we believe that we have valid defenses with respect to the legal matters pending against us.I

163、t is possible,nevertheless,that our consolidated financial position,results of operations or cash flows could be negatively affected by an unfavorable resolution of one or more of such proceedings,claims or investigations.Since June 2022,we have been cooperating with the Federal Trade Commission(the

164、“FTC”)staff in response to a Civil Investigative Demand seeking information regarding our disclosure and subscription cancellation practices relative to the Restore Online Shoppers Confidence Act(“ROSCA”).In November 2023,the FTC staff asserted that they had the authority to enter into consent negot

165、iations to determine if a settlement regarding their investigation of these issues could be reached.On March 20,2024,we were informed that the FTC had voted to authorize a filing of the case.The FTC then referred the case to the Department of Justice(the“DOJ”),and on June 17,2024,the DOJ filed a civ

166、il complaint in the United States District Court for the Northern District of California,naming Adobe and certain of our employees as defendants.The complaint alleges that Adobe failed to clearly and conspicuously disclose material terms,failed to obtain express informed consent and failed to provid

167、e a simple cancellation mechanism regarding our disclosure and subscription cancellation practices in violation of ROSCA and the FTC Act.The DOJ is seeking injunctive relief,civil penalties,equitable monetary relief and other relief.The defense or resolution of this matter could involve significant

168、monetary costs or penalties and have a significant impact on our financial results and operations.There can be no assurance that we will be successful in negotiating a favorable settlement or in litigation.Any remedies or compliance requirements could adversely affect our ability to operate our busi

169、ness or have a Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)22materially adverse impact on our financial results.At this stage,we are unable to estimate a reasonably possible financial loss or range of any potential financial loss,if any,as a r

170、esult of this litigation.On October 20,2023,a securities class action captioned Pembroke Pines Firefighters&Police Officers Pension Fund et al v.Adobe,Inc.et al,Case No.1:23-cv-09260,was filed in the U.S.District Court for the Southern District of New York(the“Securities Action”)naming Adobe and cer

171、tain of our current and former officers as defendants.The Securities Action purports to be brought on behalf of purchasers of the Companys stock between July 23,2021 and September 22,2022(the“Class Period”).The complaint,which was amended on February 23,2024,alleges that certain public statements ma

172、de by Adobe during the Class Period related to competition from Figma and the adequacy of Adobes existing offerings to counter harms Adobe may have faced due to Figmas growing market position were materially false and misleading.The Securities Action seeks unspecified compensatory damages,attorneys

173、fees and costs,and extraordinary equitable and/or injunctive relief.On November 16,2023,a shareholder derivative action captioned Shah v.Narayen et al,Case No.1:23-cv-01315,was filed in the U.S.District Court for the District of Delaware(the“Shah Action”),purportedly on behalf of Adobe.On January 3,

174、2024,a second shareholder derivative action captioned Gervat v.Narayen et al,Case No.1:24-cv-00006,was filed in the U.S.District Court for the District of Delaware(the“Gervat Action”),purportedly on behalf of Adobe.On January 24,2024,the Court consolidated the Shah and Gervat Actions(together,the“Co

175、nsolidated Derivative Action”).On January 18,2024,a shareholder derivative action captioned Sbriglio v.Narayen et al.,Case No.24-cv-429458,was filed in California Superior Court(the“Sbriglio Action”),purportedly on behalf of Adobe.On January 29,2024,a shareholder derivative action captioned Roy v.Na

176、rayen et al.,No.1:24-cv-00633,was filed in the U.S.District Court for the Southern District of New York,(the“Roy Action,”and together with the Consolidated Derivative Action and the Sbriglio Action,the“Derivative Actions”),purportedly on behalf of Adobe.The Derivative Actions are based largely on th

177、e same alleged facts and circumstances as the Securities Action,and name certain of our current and former officers and members of our Board of Directors as defendants and Adobe as a nominal defendant.The Derivative Actions together allege claims for breach of fiduciary duty and/or aiding and abetti

178、ng breach of fiduciary duties,unjust enrichment,waste of corporate assets,abuse of control,and violations of Section 10(b)(and Rule 10b-5 promulgated thereunder),Section 20(a),and/or Section 21D of the Securities Exchange Act of 1934,as amended,and seek recovery of unspecified damages,restitution,an

179、d attorneys fees and costs,as well as disgorgement of profits and certain payments and benefits,in the case of the Gervat Action,and improvements to Adobes corporate governance and internal procedures,in the case of the Shah Action,on behalf of Adobe.We dispute the allegations of wrongdoing in the S

180、ecurities Action and the Derivative Actions and intend to vigorously defend ourselves in these matters.In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries,at this time we are unable to estimate a reasonably possible financial loss or range of finan

181、cial loss,if any,that we may incur to resolve or settle the Securities Action and the Derivative Actions.In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights,including patent rights,we have been,are currently and may in the future b

182、e subject to claims,negotiations or complex,protracted litigation.Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel.Although we have successfully defended

183、 or resolved past litigation and disputes,we may not prevail in any ongoing or future litigation and disputes.Third-party intellectual property disputes could subject us to significant liabilities,require us to enter into royalty and licensing arrangements on unfavorable terms,prevent us from licens

184、ing certain of our products or offering certain of our services,subject us to injunctions restricting our sale of products or services,cause severe disruptions to our operations or the markets in which we compete,or require us to satisfy indemnification commitments with our customers including contr

185、actual provisions under various license arrangements and service agreements.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)23NOTE 14.DEBTThe carrying value of our borrowings as of May 31,2024 and December 1,2023 were as follows:(dollars in millio

186、ns)Issuance DateDue DateEffective Interest Rate202420231.90%2025 NotesFebruary 2020February 20252.07%$500$500 3.25%2025 NotesJanuary 2015February 20253.67%1,000 1,000 2.15%2027 NotesFebruary 2020February 20272.26%850 850 4.85%2027 NotesApril 2024April 20275.03%500 4.80%2029 NotesApril 2024April 2029

187、4.93%750 2.30%2030 NotesFebruary 2020February 20302.69%1,300 1,300 4.95%2034 NotesApril 2024April 20345.03%750 Total debt outstanding,at par$5,650$3,650 Less:Current portion of debt,at par(1,500)Unamortized discount and debt issuance costs(23)(16)Carrying value of long-term debt$4,127$3,634 Current

188、portion of debt,at par$1,500$Unamortized discount and debt issuance costs(2)Carrying value of current debt$1,498$Senior Notes In January 2015,we issued$1 billion of senior notes due February 1,2025.The related discount and issuance costs are amortized to interest expense over the term of the notes u

189、sing the effective interest method.Interest is payable semi-annually,in arrears,on February 1 and August 1.In February 2020,we issued$500 million of senior notes due February 1,2025,$850 million of senior notes due February 1,2027 and$1.30 billion of senior notes due February 1,2030.The related disc

190、ount and issuance costs are amortized to interest expense over the respective terms of the notes using the effective interest method.Interest is payable semi-annually,in arrears,on February 1 and August 1.In April 2024,we issued$500 million of senior notes due April 4,2027,$750 million of senior not

191、es due April 4,2029 and$750 million of senior notes due April 4,2034.Our total proceeds of approximately$1.99 billion,net of an issuance discount of$3 million and total issuance costs of$9 million.The related discount and issuance costs are amortized to interest expense over the respective terms of

192、the notes using the effective interest method.Interest is payable semi-annually,in arrears,on April 4 and October 4.During the first quarter of fiscal 2024,we reclassified the senior notes due February 1,2025 as current debt in our condensed consolidated balance sheets.As of May 31,2024,the carrying

193、 value of our current debt was$1.50 billion,net of the related discount and issuance costs.Though we intend to refinance the current portion of our debt on or before the due date,the timing of the refinancing may be impacted by market conditions.Our senior notes rank equally with our other unsecured

194、 and unsubordinated indebtedness,and do not contain financial covenants.We may redeem the notes at any time,subject to a make-whole premium.For the senior notes issued in January 2015 and February 2020,upon the occurrence of certain change of control triggering events,we may be required to repurchas

195、e the notes,at a price equal to 101%of their principal amount,plus accrued and unpaid interest to the date of repurchase.In addition,these notes include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions,subject to significant allowances.Table

196、 of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)24Revolving Credit AgreementIn June 2022,we entered into a credit agreement(the“Revolving Credit Agreement”),providing for a five-year$1.5 billion senior unsecured revolving credit facility,which replaced

197、 our previous five-year$1 billion senior unsecured revolving credit agreement entered into in October 2018.The Revolving Credit Agreement provides for loans to Adobe and certain of its subsidiaries that may be designated from time to time as additional borrowers.Pursuant to the terms of the Revolvin

198、g Credit Agreement,we may,subject to the agreement of lenders to provide additional commitments,obtain up to an additional$500 million in commitments,for a maximum aggregate commitment of$2 billion.At our election,loans under the Revolving Credit Agreement will bear interest at either(i)term Secured

199、 Overnight Financing Rate(“SOFR”),plus a margin,(ii)adjusted daily SOFR,plus a margin,(iii)alternative currency rate,plus a margin,or(iv)base rate,which is defined as the highest of(a)the federal funds rate plus 0.50%,(b)the agents prime rate,or(c)term SOFR plus 1.00%.The margin for term SOFR,adjust

200、ed daily SOFR and alternative currency rate loans is based on our debt ratings,and ranges from 0.460%to 0.900%.In addition,facility fees determined according to our debt ratings are payable on the aggregate commitments,regardless of usage,quarterly in an amount ranging from 0.040%to 0.100%per annum.

201、We are permitted to permanently reduce the aggregate commitment under the Revolving Credit Agreement at any time.Subject to certain conditions stated in the Revolving Credit Agreement,Adobe and any of its subsidiaries designated as additional borrowers may borrow,prepay and re-borrow amounts at any

202、time during the term of the Revolving Credit Agreement.The Revolving Credit Agreement contains customary representations,warranties,affirmative and negative covenants,including events of default and indemnification provisions in favor of the lenders.The negative covenants include restrictions regard

203、ing the incurrence of liens and indebtedness,certain merger transactions,dispositions and other matters,all subject to certain exceptions.The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless(a)the commitments are terminated earlier upon the

204、 occurrence of certain events,including an event of default,or(b)the maturity date is further extended upon our request,subject to the agreement of the lenders.As of May 31,2024,there were no outstanding borrowings under this Revolving Credit Agreement.Commercial Paper ProgramIn September 2023,we es

205、tablished 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 expected to be used for general corporate pu

206、rposes,which may include working capital,capital expenditures,acquisitions,stock repurchases,refinancing indebtedness or any other general corporate purposes.As of May 31,2024,there were no outstanding borrowings under the commercial paper program.Term Loan Credit AgreementIn January 2023,we entered

207、 into a delayed draw term loan credit agreement(the“Term Loan Credit Agreement”),providing for a senior unsecured term loan of up to$3.5 billion for the purpose of partially funding the purchase price for our intended acquisition of Figma and the related fees and expenses.During the six months ended

208、 May 31,2024,we entered into a mutual termination agreement with Figma to terminate the previously announced merger agreement.Consequently,the Term Loan Credit Agreement was terminated.There were no outstanding borrowings under the Term Loan Credit Agreement at the time of termination.Table of Conte

209、ntsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)25ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion should be read in conjunction with the condensed consolidated financial statements and notes th

210、ereto.In addition to historical information,this Quarterly Report on Form 10-Q contains forward-looking statements,including statements regarding product plans,future growth,market opportunities,fluctuations in foreign currency exchange rates,strategic investments,industry positioning,customer acqui

211、sition and retention,the amount of annualized recurring revenue and revenue growth.In addition,when used in this report,the words“will,”“expects,”“could,”“would,”“may,”“anticipates,”“intends,”“plans,”“believes,”“seeks,”“targets,”“estimates,”“looks for,”“looks to,”“continues”and similar expressions,a

212、s well as statements regarding our focus for the future,are generally intended to identify forward-looking statements.Each of the forward-looking statements we make in this report involves risks and uncertainties that could cause actual results to differ materially from these forward-looking stateme

213、nts.Factors that might cause or contribute to such differences include,but are not limited to,those discussed in the section titled“Risk Factors”in Part II,Item 1A of this report.The risks described herein and in other documents we file from time to time with the U.S.Securities and Exchange Commissi

214、on(the“SEC”),including our Annual Report on Form 10-K for fiscal 2023,should be carefully reviewed.Undue reliance should not be placed on these forward-looking statements,which speak only as of the date of this Quarterly Report on Form 10-Q.We undertake no obligation to publicly release any revision

215、s to the forward-looking statements or reflect events or circumstances after the date of this document,except as required by law.BUSINESS OVERVIEWAdobe is a global technology company with a mission to change the world through personalized digital experiences.For over four decades,Adobes innovations

216、have transformed how individuals,teams,businesses,enterprises,institutions,and governments engage and interact across all types of media.Our products,services and solutions are used around the world to imagine,create,manage,deliver,measure,optimize and engage with content across surfaces and fuel di

217、gital experiences.We have a diverse user base that includes consumers,communicators,creative professionals,developers,students,small and medium businesses and enterprises.We are also empowering creators by putting the power of artificial intelligence(“AI”)in their hands,and doing so in ways we belie

218、ve are responsible.Our products and services help unleash creativity,accelerate document productivity and power businesses in a digital world.We have operations in the Americas;Europe,Middle East and Africa(“EMEA”);and Asia-Pacific(“APAC”).OPERATIONS OVERVIEWFor our second quarter of fiscal 2024,we

219、experienced strong demand across our Digital Media and Digital Experience offerings,driven by our innovative product roadmap.As we execute on our long-term growth initiatives,with focus on delivering product innovation and driving adoption and usage of our AI-powered solutions,we have continued to e

220、xperience growth in software-based subscription revenue across our portfolio of offerings.Digital MediaIn our Digital Media segment,we are a market leader with Creative Cloud,our subscription-based offering which provides desktop tools,mobile applications(“apps”)and cloud-based services for designin

221、g,creating and publishing rich content and immersive 3D experiences.Creative Cloud includes Adobe Express,a web and mobile app designed to enable a broad spectrum of users,including novice content creators,communicators and creative professionals,to create,edit and customize content quickly and easi

222、ly with content-first,task-based solutions.Creative Cloud also includes Adobe Firefly,a group of creative generative AI models designed to generate high quality images and text effects.Adobe Firefly-powered generative AI features are also available across Creative Cloud apps including Adobe Photosho

223、p and Adobe Express.Creative Cloud delivers value with deep,cross-product integration,frequent product updates and feature enhancements,cloud-enabled services including storage and syncing of files across users devices,machine learning and artificial intelligence,access to marketplace,social and com

224、munity-based features with our Adobe Stock and Behance services,app creation capabilities,tools which assist with enterprise deployments and team collaboration,and affordable pricing for cost-sensitive customers.We offer Creative Cloud for individuals,students,teams and enterprises.We expect Creativ

225、e Cloud will drive sustained long-term revenue growth through a continued expansion of our customer base by attracting new users with new features and products like Adobe Express and Adobe Firefly that make creative tools accessible to first-time creators and communicators,and delivering new feature

226、s and technologies to existing customers with our latest releases such as share for review and generative AI capabilities.We have also built out a marketplace for Creative Cloud subscribers to enable the delivery and purchase of stock content in our Adobe Stock service.Overall,our strategy with Crea

227、tive Cloud is designed to enable us to Table of Contents26increase our revenue with existing users,continue to attract new customers,and grow our recurring and predictable revenue stream that is recognized ratably.We continue to implement strategies that are designed to accelerate awareness,consider

228、ation and purchase of subscriptions to our Creative Cloud offerings.These strategies include increasing the value Creative Cloud users receive,such as offering new and enhanced desktop,web and mobile apps,as well as targeted promotions and offers that attract past customers and potential users to ex

229、perience and ultimately subscribe to Creative Cloud.Because of the shift towards Creative Cloud subscriptions and Enterprise Term License Agreements(“ETLAs”),revenue from perpetual licensing of our Creative products has been immaterial to our business.We are also a market leader with our Document Cl

230、oud offerings built around our Adobe Acrobat family of products,with a set of integrated mobile apps and cloud-based document services which enable users to create,collaborate,review,approve,sign and track documents regardless of platform or application source type.Document Cloud,which enhances the

231、way people manage critical documents at home,in the office and across devices,includes Adobe Acrobat,Adobe Acrobat Sign and Adobe Scan.Adobe Acrobat is offered both through subscription and perpetual licenses,and is also included in our Creative Cloud All Apps subscription offering.In April 2024,we

232、introduced Acrobat AI Assistant,a new generative AI-powered product designed to deliver insights and enhance productivity through interactive document experiences,which is available as an add-on subscription to our Adobe Acrobat and Adobe Acrobat Reader products.As part of our Creative Cloud and Doc

233、ument Cloud strategies,we utilize a data-driven operating model(“DDOM”)and our Adobe Experience Cloud solutions to raise awareness of our products,drive new customer acquisition,engagement and retention,and optimize customer journeys,which continue to contribute strong product-led growth in the busi

234、ness.Annualized Recurring Revenue(“ARR”)is currently the key performance metric our management uses to assess the health and trajectory of our overall Digital Media segment.ARR should be viewed independently of revenue,deferred revenue and remaining performance obligations as ARR is a performance me

235、tric and is not intended to be combined with any of these items.We adjust our reported ARR on an annual basis to reflect any exchange rate changes.Our reported ARR results in the current fiscal year are based on currency rates set at the beginning of the year and held constant throughout the year fo

236、r measurement purposes.We calculate ARR as follows:Creative ARRAnnual Value of Creative Cloud Subscriptions and Services+Annual Creative ETLA Contract Value Document Cloud ARRAnnual Value of Document Cloud Subscriptions and Services+Annual Document Cloud ETLA Contract ValueDigital Media ARRCreative

237、ARR+Document Cloud ARRCreative ARR exiting the second quarter of fiscal 2024 was$13.11 billion,up from$12.49 billion at the end of fiscal 2023.Document Cloud ARR exiting the second quarter of fiscal 2024 was$3.15 billion,up from$2.84 billion at the end of fiscal 2023.Total Digital Media ARR grew to$

238、16.25 billion at the end of the second quarter of fiscal 2024,up from$15.33 billion at the end of fiscal 2023.Our success in driving growth in ARR has positively affected our revenue growth.Creative revenue in the second quarter of fiscal 2024 was$3.13 billion,up from$2.85 billion in the second quar

239、ter of fiscal 2023,representing 10%year-over-year growth.Document Cloud revenue in the second quarter of fiscal 2024 was$782 million,up from$659 million in the second quarter of fiscal 2023,representing 19%year-over-year growth.Total Digital Media segment revenue grew to$3.91 billion in the second q

240、uarter of fiscal 2024,up from$3.51 billion in the second quarter of fiscal 2023,representing 11%year-over-year growth driven by strong net new user growth.Table of Contents27Digital ExperienceWe are a market leader in the fast-growing category addressed by our Digital Experience segment.The Adobe Ex

241、perience Cloud apps and services are designed to manage customer journeys,enable personalized experiences at scale and deliver intelligence for businesses of any size in any industry.Our differentiation and competitive advantage are strengthened by our ability to use the Adobe Experience Platform to

242、 integrate our comprehensive set of solutions.Adobe Experience Cloud delivers solutions for our customers across the following strategic growth pillars:Data insights and audiences.Our products,including Adobe Analytics,Customer Journey Analytics,Adobe Product Analytics,Adobe Mix Modeler,and our Real

243、-time Customer Data Platform,deliver actionable data in real time to provide highly tailored and adaptive experiences across platforms.Content,commerce and workflows.Our products help customers manage,deliver,monetize,and optimize content delivery through Adobe Experience Manager;build multi-channel

244、 commerce experiences for B2B and B2C customers on a single platform with Adobe Commerce;and strategically plan,manage,collaborate,and execute on workflows for marketing campaigns and other projects at speed and scale with our enterprise work management app,Adobe Workfront.Customer journeys.Our prod

245、ucts help businesses manage,test,target and personalize customer journeys delivered as campaigns across B2B and B2C use cases,including through Adobe Marketo Engage,Adobe Campaign,Adobe Target and Adobe Journey Optimizer.In addition to chief marketing officers,chief revenue officers and digital mark

246、eters,users of our Digital Experience solutions include advertisers,campaign managers,publishers,data analysts,content managers,social marketers,marketing executives and information management and technology executives.These customers often are involved in workflows that integrate other Adobe produc

247、ts,such as our Digital Media offerings.By combining the creativity of our Digital Media business with the science of our Digital Experience business,such as with our new Adobe GenStudio solution,we help our customers to more efficiently and effectively make,manage,measure and monetize their content

248、across every channel with an end-to-end workflow and feedback loop.We utilize a direct sales force to market and license our Digital Experience solutions,as well as an extensive ecosystem of partners,including marketing agencies,systems integrators and independent software vendors that help license

249、and deploy our solutions to their customers.We have made significant investments to broaden the scale and size of all of these routes to market,and our recent financial results reflect the success of these investments and our experience-led growth strategy.Digital Experience revenue was$1.33 billion

250、 in the second quarter of fiscal 2024,up from$1.22 billion in the second quarter of fiscal 2023,representing 9%year-over-year growth.Driving this growth was the increase in subscription revenue,which grew to$1.20 billion in the second quarter of fiscal 2024 from$1.07 billion in the second quarter of

251、 fiscal 2023,representing 13%year-over-year growth.Macroeconomic ConditionsAs a corporation with an extensive global footprint,we are subject to risks and exposures from the evolving macroeconomic environment,including the effects of increased global inflationary pressures and interest rates,fluctua

252、tions in foreign currency exchange rates,potential economic slowdowns or recessions and geopolitical pressures,including the unknown impacts of current and future trade regulations.We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results.Wh

253、ile our revenue and earnings are relatively predictable as a result of our subscription-based business model,the broader implications of these macroeconomic events on our business,results of operations and overall financial position,particularly in the long term,remain uncertain.See Risk Factors for

254、 further discussion of the possible impact of these macroeconomic issues on our business.Table of Contents28CRITICAL ACCOUNTING POLICIES AND ESTIMATESIn preparing our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States(“GAAP”)a

255、nd pursuant to the rules and regulations of the SEC,we make assumptions,judgments and estimates that affect the reported amounts of assets,liabilities,revenue and expenses,and related disclosures of contingent assets and liabilities.We base our assumptions,judgments and estimates on historical exper

256、ience and various other factors that we believe to be reasonable under the circumstances.Actual results could differ materially from these estimates under different assumptions or conditions.We evaluate our assumptions,judgments and estimates on a regular basis.We also discuss our critical accountin

257、g policies and estimates with the Audit Committee of the Board of Directors.We believe that the assumptions,judgments and estimates involved in the accounting for revenue recognition and income taxes have the greatest potential impact on our condensed consolidated financial statements.These areas ar

258、e key components of our results of operations and are based on complex rules requiring us to make judgments and estimates,and consequently,we consider these to be our critical accounting policies.Historically,our assumptions,judgments and estimates relative to our critical accounting policies have n

259、ot differed materially from actual results.There have been no significant changes in our critical accounting policies and estimates during the six months ended May 31,2024,as compared to the critical accounting policies and estimates disclosed in Managements Discussion and Analysis of Financial Cond

260、ition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 1,2023.Recent Accounting PronouncementsSee Note 1 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or

261、potential significance to us.RESULTS OF OPERATIONSFinancial Performance SummaryTotal Digital Media ARR of approximately$16.25 billion as of May 31,2024 increased by$919 million,or 6%,from$15.33 billion as of December 1,2023.Creative revenue during the three months ended May 31,2024 of$3.13 billion i

262、ncreased by$274 million,or 10%,compared to the year-ago period.Document Cloud revenue during the three months ended May 31,2024 of$782 million increased by$123 million,or 19%,compared to the year-ago period.Digital Experience revenue of$1.33 billion during the three months ended May 31,2024 increase

263、d by$105 million,or 9%,compared to the year-ago period.Remaining performance obligations of$17.86 billion as of May 31,2024 increased by$644 million,or 4%,from$17.22 billion as of December 1,2023.Cost of revenue of$598 million during the three months ended May 31,2024 increased by$26 million,or 5%,c

264、ompared to the year-ago period.Operating expenses of$2.83 billion during the three months ended May 31,2024 increased by$206 million,or 8%,compared to the year-ago period.Net income of$1.57 billion during the three months ended May 31,2024 increased by$278 million,or 21%,compared to the year-ago per

265、iod.Cash flows from operations of$3.11 billion during the six months ended May 31,2024 decreased by$718 million,or 19%,compared to the year-ago period,primarily due to payment of the$1 billion Figma termination fee during the first quarter of fiscal 2024.Table of Contents29Revenue for the Three and

266、Six Months Ended May 31,2024 and June 2,2023(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeSubscription$5,060$4,517 12%$9,976$8,890 12%Percentage of total revenue 95%94%95%94%Product 104 130 (20)%223 250 (11)%Percentage of total revenue 2%3%2%3%Services and other 145 169 (

267、14)%292 331 (12)%Percentage of total revenue 3%3%3%3%Total revenue$5,309$4,816 10%$10,491$9,471 11%SubscriptionOur subscription revenue is comprised primarily of fees we charge for our subscription and hosted service offerings,and related support,including Creative Cloud and certain of our Adobe Exp

268、erience Cloud and Document Cloud 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 alig

269、ned to the pattern of performance,customer benefit and consumption,are recognized on a usage basis.We have the following reportable segments:Digital Media,Digital Experience,and Publishing and Advertising.Subscription revenue by reportable segment for the three and six months ended May 31,2024 and J

270、une 2,2023 is as follows:(dollars in millions)Three MonthsSix Months20242023%Change20242023%ChangeDigital Media$3,828$3,418 12%$7,553$6,719 12%Digital Experience 1,204 1,070 13%2,368 2,112 12%Publishing and Advertising 28 29 (3)%55 59 (7)%Total subscription revenue$5,060$4,517 12%$9,976$8,890 12%Pro

271、ductOur product revenue is comprised primarily of fees related to licenses for on-premise software purchased on a perpetual basis,for a fixed period of time or based on usage for certain of our original equipment manufacturer and royalty agreements.We primarily recognize product revenue at the point

272、 in time the software is available to the customer,provided all other revenue recognition criteria are met.Services and OtherOur services and other revenue is comprised primarily of fees related to consulting,training,maintenance and support for certain on-premise licenses that are recognized at a p

273、oint in time and our advertising offerings.We typically sell our 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

274、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.Tra

275、nsaction-based advertising revenue is recognized on a usage basis as we satisfy the performance obligations to our customers.Table of Contents30Segment Information(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeDigital Media$3,908$3,511 11%$7,724$6,906 12%Percentage of tota

276、l revenue 74%73%74%73%Digital Experience 1,327 1,222 9%2,616 2,398 9%Percentage of total revenue 25%25%25%25%Publishing and Advertising 74 83 (11)%151 167 (10)%Percentage of total revenue 1%2%1%2%Total revenue$5,309$4,816 10%$10,491$9,471 11%Digital MediaRevenue by major offerings in our Digital Med

277、ia reportable segment for the three and six months ended May 31,2024 and June 2,2023 were as follows:(dollars in millions)Three MonthsSix Months20242023%Change20242023%ChangeCreative Cloud$3,126$2,852 10%$6,192$5,613 10%Document Cloud 782 659 19%1,532 1,293 18%Total Digital Media revenue$3,908$3,511

278、 11%$7,724$6,906 12%Revenue from Digital Media increased$397 million and$818 million during the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 driven by increases in revenue associated with our Creative and Document Cloud subscription offerings due t

279、o continued demand amid an increasingly digital environment,strong engagement across customer segments and migrating our customers to higher valued subscription offerings with increased revenue per subscription.Digital ExperienceRevenue from Digital Experience increased$105 million and$218 million d

280、uring the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 primarily due to net new additions across our subscription offerings.Geographical Information(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeAmericas$3,188$2,879 11%$6

281、,298$5,658 11%Percentage of total revenue 60%60%60%60%EMEA 1,361 1,213 12%2,680 2,386 12%Percentage of total revenue 26%25%26%25%APAC 760 724 5%1,513 1,427 6%Percentage of total revenue 14%15%14%15%Total revenue$5,309$4,816 10%$10,491$9,471 11%Overall revenue during the three and six months ended Ma

282、y 31,2024 increased in all geographic regions as compared to the three and six months ended June 2,2023.Within each geographic region,the fluctuations in revenue by reportable segment were attributable to the factors noted in the segment information above.Included in the overall change in revenue fo

283、r the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 were impacts associated with foreign currency and our foreign currency hedging program.During the three and six months ended May 31,2024 as compared to the year-ago periods,the U.S.Dollar primarily

284、 weakened against EMEA foreign currencies and strengthened against APAC foreign currencies,which resulted in a net decrease in revenue in U.S.Dollar equivalents of approximately$15 million and$16 million,respectively.For the three and six months ended May 31,2024,we had net hedging losses from our c

285、ash flow hedging program of$5 million and$9 million,respectively.Table of Contents31Cost of Revenue for the Three and Six Months Ended May 31,2024 and June 2,2023(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeSubscription$456$436 5%$911$870 5%Percentage of total revenue 9%

286、9%9%9%Product 8 8%13 16 (19)%Percentage of total revenue*Services and other 134 128 5%264 254 4%Percentage of total revenue 3%3%3%3%Total cost of revenue$598$572 5%$1,188$1,140 4%_(*)Percentage is less than 1%.SubscriptionCost of subscription revenue consists of third-party hosting services and data

287、 center costs,including expenses related to operating our network infrastructure.Cost of subscription revenue also includes compensation costs associated with network operations,implementation,account management and technical support personnel,royalty fees,software costs and amortization of certain

288、intangible assets.Cost of subscription revenue increased during the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 primarily due to increases in hosting services and data center costs,partially offset by decreases in amortization of intangibles.Produ

289、ctCost of product revenue is primarily comprised of third-party royalties,localization costs and costs associated with the manufacturing of our products.Services and OtherCost of services and other revenue is primarily comprised of compensation and contracted costs incurred to provide consulting ser

290、vices,training and product support,and hosting services and data center costs.Cost of services and other revenue increased during the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 primarily due to increases in compensation costs.Operating Expenses f

291、or the Three and Six Months Ended May 31,2024 and June 2,2023(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeResearch and development$984$876 12%$1,923$1,703 13%Percentage of total revenue 19%18%18%18%Sales and marketing 1,445 1,345 7%2,797 2,646 6%Percentage of total reven

292、ue 27%28%27%28%General and administrative 355 357 (1)%707 688 3%Percentage of total revenue 7%7%7%7%Acquisition termination fee%1,000 *Percentage of total revenue*10%*Amortization of intangibles 42 42%84 84%Percentage of total revenue 1%1%1%1%Total operating expenses$2,826$2,620 8%$6,511$5,121 27%_(

293、*)Percentage is less than 1%.(*)Percentage is not meaningful.Table of Contents32Research and Development Research and development expenses consist primarily of compensation and contracted costs associated with software development,third-party hosting services and data center costs,related facilities

294、 costs and expenses associated with computer equipment and software used in development activities.Research and development expenses increased during the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 due to the following:Components of%Change2024-202

295、3QTDComponents of%Change2024-2023YTDHosting services and data center costs 5%5%Base compensation and related benefits 5 4 Incentive compensation,cash and stock-based 1 2 Various individually insignificant items 1 2 Total change 12%13%Investments in research and development,including the recruiting a

296、nd hiring of software developers,are critical to remain competitive in the marketplace and are directly related to continued timely development of new and enhanced offerings and solutions.We will continue to focus on long-term opportunities available in our end markets and make significant investmen

297、ts in the development of our subscription and service offerings,apps and tools.Sales and MarketingSales and marketing expenses consist primarily of compensation costs,amortization of contract acquisition costs,including sales commissions,travel expenses and related facilities costs for our sales,mar

298、keting,order management and global supply chain management personnel.Sales and marketing expenses also include the costs of programs aimed at increasing revenue,such as advertising,trade shows and events,public relations and other market development programs.Sales and marketing expenses increased du

299、ring the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 primarily due to increases in compensation costs.General and AdministrativeGeneral and administrative expenses consist primarily of compensation and contracted costs,travel expenses and related

300、facilities costs for our finance,facilities,human resources,legal,information services and executive personnel.General and administrative expenses also include outside legal and accounting fees,provision for bad debts,expenses associated with computer equipment and software used in the administratio

301、n of the business,charitable contributions and various forms of insurance.General and administrative expenses decreased during the three months ended May 31,2024 as compared to the three months ended June 2,2023 and increased during the six months ended May 31,2024 as compared to the six months ende

302、d June 2,2023 primarily due to the following:Components of%Change2024-2023QTDComponents of%Change2024-2023YTDIncentive compensation,cash and stock-based 2%3%Base compensation and related benefits 3 2 Professional and consulting fees(3)(4)Charitable contributions(3)(1)Various individually insignifica

303、nt items 3 Total change(1)%3%Acquisition Termination FeeDuring the six months ended May 31,2024,we incurred a$1 billion termination fee which resulted from termination of the Figma transaction.Table of Contents33Non-Operating Income(Expense),Net for the Three and Six Months Ended May 31,2024 and Jun

304、e 2,2023(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeInterest expense$(41)$(26)58%$(68)$(58)17%Percentage of total revenue(1)%(1)%(1)%(1)%Investment gains(losses),net 4 5*22 6*Percentage of total revenue*Other income(expense),net 82 47*152 90*Percentage of total revenue

305、2%1%1%1%Total non-operating income(expense),net$45$26*$106$38*_(*)Percentage is less than 1%.(*)Percentage is not meaningful.Interest ExpenseInterest expense represents interest associated with our debt instruments.Interest on our senior notes is payable semi-annually,in arrears.Interest expense inc

306、reased during the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 due to the senior notes issued in April 2024.See Note 14 for further details regarding our debt.Investment Gains(Losses),NetInvestment gains(losses),net consists principally of unrealiz

307、ed holding gains and losses associated with our deferred compensation plan assets.Other Income(Expense),Net Other income(expense),net consists primarily of interest earned on cash,cash equivalents and short-term fixed income investments.Other income(expense),net also includes realized gains and loss

308、es on fixed income investments and foreign exchange gains and losses.Other income(expense),net increased during the three and six months ended May 31,2024 as compared to the three and six months ended June 2,2023 primarily due to increases in interest income driven by higher average cash equivalent

309、balances and average interest rates.Provision for Income Taxes for the Three and Six Months Ended May 31,2024 and June 2,2023(dollars in millions)Three MonthsSix Months 20242023%Change20242023%ChangeProvision for income taxes$357$355 1%$705$706%Percentage of total revenue 7%7%7%7%Effective tax rate

310、18%22%24%22%Our effective tax rate decreased by approximately four percentage points for the three months ended May 31,2024,as compared to the three months ended June 2,2023,primarily due to an increase in the net tax benefit from effects of non-U.S.operations during the three months ended May 31,20

311、24.Our effective tax rate increased by approximately two percentage points for the six months ended May 31,2024,as compared to the six months ended June 2,2023,primarily due to the Figma acquisition termination fee incurred during the six months ended May 31,2024 which was not deductible for financi

312、al statement purposes.Our effective tax rate for the three months ended May 31,2024 was lower than the U.S.federal statutory tax rate of 21%primarily due to the net tax benefits from effects of non-U.S.operations and the U.S.federal research tax credit,partially offset by state taxes.Our effective t

313、ax rate for the six months ended May 31,2024 was higher than the U.S.federal statutory tax rate of 21%primarily due to the Figma acquisition termination fee which was not deductible for financial statement purposes and,to a lesser extent,from state taxes partially offset by the net tax benefits from

314、 effects of non-U.S.operations and the U.S.federal research tax credit.Table of Contents34We 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 evalu

315、ation,we continue to maintain a valuation allowance to reduce our deferred tax assets to the amount realizable.The total valuation allowance was$699 million as of May 31,2024,primarily related to certain state credits and capital loss carryforwards.We are a U.S.-based multinational company subject t

316、o tax in multiple domestic and foreign tax jurisdictions.The current U.S.tax law subjects the earnings of certain foreign subsidiaries to U.S.tax and generally allows an exemption from taxation for distributions from foreign subsidiaries.In the current global tax policy environment,the domestic and

317、foreign governing bodies continue to consider,and in some cases introduce,changes in regulations applicable to corporate multinationals such as Adobe.As regulations are issued,we account for finalized regulations in the period of enactment.The provision from the U.S.Tax Act which requires us to capi

318、talize and amortize research and development costs became effective in fiscal 2023.If the rule is not modified,there will continue to be an adverse impact on our effective rates for income taxes paid,which is partially offset by a benefit to our effective tax rates from the increase in the foreign-d

319、erived intangible income deduction.Accounting for Uncertainty in Income TaxesThe gross liabilities for unrecognized tax benefits excluding interest and penalties were$689 million and$352 million as of May 31,2024 and June 2,2023,respectively.If the total unrecognized tax benefits as of May 31,2024 a

320、nd June 2,2023 were recognized,$519 million and$230 million would decrease the respective effective tax rates.As of May 31,2024 and June 2,2023,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

321、 material.The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process.These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities.We belie

322、ve that within the next 12 months,it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire,or both.Although the timing of resolution,settlement and closing of audits is not certain,it is reasonably possible th

323、at the underlying unrecognized tax benefits may decrease by up to$70 million over the next 12 months.Our future effective tax rates may be materially affected by changes in the tax rates in jurisdictions where our income is earned,changes in jurisdictions in which our profits are determined to be ea

324、rned and taxed,changes in the valuation of our deferred tax assets and liabilities,changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business,or unexpected changes in business and market conditions that could reduce certain tax benefits.In addition,tax law

325、s in the United States as well as other countries and jurisdictions in which we conduct business are subject to change as new laws are passed and/or new interpretations are made available.These countries,governmental bodies,such as the European Commission of the European Union,and intergovernmental

326、economic organizations,such as the Organization for Economic Cooperation and Development,have made or could make unprecedented assertions about how taxation is determined and,in some cases,have proposed or enacted new laws that are contrary to the way in which rules and regulations have historically

327、 been interpreted and applied.Changes in our operating landscape,such as changes in laws and/or interpretations of tax rules,could adversely affect our effective tax rates and/or cause us to respond by making changes to our business structure which could adversely affect our operations and financial

328、 results.Moreover,we are subject to the examination of our income tax returns by domestic and foreign tax authorities.We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustmen

329、ts that may result from these examinations.Our policy is to record interest and penalties related to unrecognized tax benefits in income tax expense.While we believe our tax estimates are reasonable,we cannot provide assurance that the final determination of any of these examinations will not have a

330、n adverse effect on our financial position and results of operations.Table of Contents35LIQUIDITY AND CAPITAL RESOURCESCash FlowsOur primary source of cash is receipts from revenue.Other customary sources of cash include proceeds from maturities and sales of short-term investments.Our primary uses o

331、f cash are general business expenses including payroll and related benefits costs,income taxes,marketing and third-party hosting services,as well as our stock repurchase program as described below.Other customary uses of cash include purchases of property and equipment and payments for taxes related

332、 to net share settlement of equity awards.This data should be read in conjunction with our condensed consolidated statements of cash flows.As of(in millions)May 31,2024December 1,2023Cash and cash equivalents$7,660$7,141 Short-term investments$405$701 Working capital$1,549$2,833 Stockholders equity$

333、14,843$16,518 A summary of our cash flows is as follows:Six Months Ended(in millions)May 31,2024June 2,2023Net cash provided by operating activities$3,114$3,832 Net cash provided by investing activities 177 478 Net cash used for financing activities(2,770)(3,094)Effect of foreign currency exchange rates on cash and cash equivalents(2)4 Net change in cash and cash equivalents$519$1,220 Cash Flows f