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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 August 30,2024 orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE AC

2、T OF 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(A

3、ddress 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_ In

4、dicate 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

5、 requirements 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

6、registrant 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,”“

7、smaller 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 exte

8、nded 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 September 20,2024,440.2 millio

9、n shares 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 SheetsAugust 30,2024 and December 1,20233 Con

10、densed Consolidated Statements of IncomeThree and Nine Months Ended August 30,2024 and September 1,20234Condensed Consolidated Statements of Comprehensive IncomeThree and Nine Months Ended August 30,2024 and September 1,20235Condensed Consolidated Statements of Stockholders EquityThree and Nine Mont

11、hs Ended August 30,2024 and September 1,20236 Condensed Consolidated Statements of Cash Flows Nine Months Ended August 30,2024 and September 1,20238 Notes to Condensed Consolidated Financial Statements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations26Item

12、3.Quantitative and Qualitative Disclosures about Market Risk39Item 4.Controls and Procedures39 PART IIOTHER INFORMATION Item 1.Legal Proceedings40Item 1A.Risk Factors40Item 2.Unregistered Sales of Equity Securities and Use of Proceeds52Item 5.Other Information52Item 6.Exhibits53Signature54Summary of

13、 Trademarks55 2PART IFINANCIAL INFORMATIONITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTSADOBE INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In millions,except par value)August 30,2024December 1,2023(Unaudited)(*)ASSETSCurrent assets:Cash and cash equivalents$7,193$7,141 Short-term investments 322 70

14、1 Trade receivables,net of allowances for doubtful accounts of$17 and$16,respectively 1,802 2,224 Prepaid expenses and other current assets 1,399 1,018 Total current assets 10,716 11,084 Property and equipment,net 1,969 2,030 Operating lease right-of-use assets,net 368 358 Goodwill 12,814 12,805 Oth

15、er intangibles,net 858 1,088 Deferred income taxes 1,548 1,191 Other assets 1,557 1,223 Total assets$29,830$29,779 LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade payables$318$314 Accrued expenses 1,848 1,942 Debt 1,499 Deferred revenue 5,779 5,837 Income taxes payable 130 85 Operating

16、lease liabilities 70 73 Total current liabilities 9,644 8,251 Long-term liabilities:Debt 4,128 3,634 Deferred revenue 127 113 Income taxes payable 585 514 Operating lease liabilities 381 373 Other liabilities 420 376 Total liabilities 15,285 13,261 Stockholders equity:Preferred stock,$0.0001 par val

17、ue;2 shares authorized;none issued Common stock,$0.0001 par value;900 shares authorized;601 shares issued;445 and 455 shares outstanding,respectively Additional paid-in capital 13,026 11,586 Retained earnings 36,911 33,346 Accumulated other comprehensive income(loss)(309)(285)Treasury stock,at cost(

18、156 and 146 shares,respectively)(35,083)(28,129)Total stockholders equity 14,545 16,518 Total liabilities and stockholders equity$29,830$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

19、 not include all of the information and footnotes required 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 pe

20、r share data)(Unaudited)Three Months EndedNine Months Ended August 30,2024September 1,2023August 30,2024September 1,2023Revenue:Subscription$5,180$4,631$15,156$13,521 Product 82 96 305 346 Services and other 146 163 438 494 Total revenue 5,408 4,890 15,899 14,361 Cost of revenue:Subscription 413 447

21、 1,324 1,317 Product 6 7 19 23 Services and other 135 126 399 380 Total cost of revenue 554 580 1,742 1,720 Gross profit 4,854 4,310 14,157 12,641 Operating expenses:Research and development 1,022 881 2,945 2,584 Sales and marketing 1,431 1,337 4,228 3,983 General and administrative 366 353 1,073 1,

22、041 Acquisition termination fee 1,000 Amortization of intangibles 43 42 127 126 Total operating expenses 2,862 2,613 9,373 7,734 Operating income 1,992 1,697 4,784 4,907 Non-operating income(expense):Interest expense(51)(27)(119)(85)Investment gains(losses),net 12 6 34 12 Other income(expense),net 8

23、9 67 241 157 Total non-operating income(expense),net 50 46 156 84 Income before income taxes 2,042 1,743 4,940 4,991 Provision for income taxes 358 340 1,063 1,046 Net income$1,684$1,403$3,877$3,945 Basic net income per share$3.78$3.07$8.63$8.62 Shares used to compute basic net income per share 445

24、456 449 458 Diluted net income per share$3.76$3.05$8.58$8.59 Shares used to compute diluted net income per share 448 459 452 459 See accompanying notes to condensed consolidated financial statements.Table of Contents4ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)(Un

25、audited)Three Months EndedNine Months Ended August 30,2024September 1,2023August 30,2024September 1,2023Increase/(Decrease)Increase/(Decrease)Net income$1,684$1,403$3,877$3,945 Other comprehensive income(loss),net of taxes:Available-for-sale securities:Unrealized gains/losses on available-for-sale s

26、ecurities 3 5 10 19 Reclassification adjustment for recognized gains/losses on available-for-sale securities 5 Net increase(decrease)from available-for-sale securities 3 5 10 24 Derivatives designated as hedging instruments:Unrealized gains/losses on derivative instruments(60)8 (59)Reclassification

27、adjustment for realized gains/losses on derivative instruments 1 (4)9 (28)Net increase(decrease)from derivatives designated as hedging instruments(59)4 (50)(28)Foreign currency translation adjustments 23 3 16 12 Other comprehensive income(loss),net of taxes(33)12 (24)8 Total comprehensive income,net

28、 of taxes$1,651$1,415$3,853$3,953 See accompanying notes to condensed consolidated financial statements.Table of Contents5ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(In millions)(Unaudited)Three Months Ended August 30,2024 Common StockAdditionalPaid-InCapitalRetainedEarningsAc

29、cumulatedOtherComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances at May 31,2024 601$12,504$35,227$(276)(152)$(32,612)$14,843 Net income 1,684 1,684 Other comprehensive income(loss),net of taxes (33)(33)Re-issuance of treasury stock under stock compensation plans 48 1 48 96

30、 Repurchases of common stock (5)(2,519)(2,519)Stock-based compensation 474 474 Balances at August 30,2024 601$13,026$36,911$(309)(156)$(35,083)$14,545 Three Months Ended September 1,2023 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOtherComprehensiveIncome(Loss)Treasury Stock Share

31、sAmountSharesAmountTotalBalances at June 2,2023 601$10,717$30,609$(297)(145)$(26,191)$14,838 Net income 1,403 1,403 Other comprehensive income(loss),net of taxes 12 12 Re-issuance of treasury stock under stock compensation plans 36 2 48 84 Repurchases of common stock (2)(1,003)(1,003)Stock-based com

32、pensation 442 442 Balances at September 1,2023 601$11,195$32,012$(285)(145)$(27,146)$15,776 Table of Contents6ADOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY(In millions)(Unaudited)Nine Months Ended August 30,2024 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumulatedOthe

33、rComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances at December 1,2023 601$11,586$33,346$(285)(146)$(28,129)$16,518 Net income 3,877 3,877 Other comprehensive income(loss),net of taxes (24)(24)Re-issuance of treasury stock under stock compensation plans 48 (312)3 100 (164)

34、Repurchases of common stock (13)(7,053)(7,053)Stock-based compensation 1,392 1,392 Value of shares in deferred compensation plan (1)(1)Balances at August 30,2024 601$13,026$36,911$(309)(156)$(35,083)$14,545 Nine Months Ended September 1,2023 Common StockAdditionalPaid-InCapitalRetainedEarningsAccumu

35、latedOtherComprehensiveIncome(Loss)Treasury Stock SharesAmountSharesAmountTotalBalances at December 2,2022 601$9,868$28,319$(293)(139)$(23,843)$14,051 Net income 3,945 3,945 Other comprehensive income(loss),net of taxes 8 8 Re-issuance of treasury stock under stock compensation plans 36 (252)4 103 (

36、113)Repurchases of common stock (10)(3,407)(3,407)Stock-based compensation 1,291 1,291 Value of shares in deferred compensation plan 1 1 Balances at September 1,2023 601$11,195$32,012$(285)(145)$(27,146)$15,776 See accompanying notes to condensed consolidated financial statements.Table of Contents7A

37、DOBE INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)Nine Months Ended August 30,2024September 1,2023Cash flows from operating activities:Net income$3,877$3,945 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation,amortization and a

38、ccretion 639 650 Stock-based compensation 1,392 1,291 Reduction of operating lease right-of-use assets 56 54 Deferred income taxes(341)(276)Unrealized losses(gains)on investments,net(24)(7)Other non-cash items 9 Changes in operating assets and liabilities,net of acquired assets and assumed liabiliti

39、es:Trade receivables,net 414 217 Prepaid expenses and other assets(799)(787)Trade payables 2 (47)Accrued expenses and other liabilities(162)(153)Income taxes payable 116 749 Deferred revenue(44)69 Net cash provided by operating activities 5,135 5,705 Cash flows from investing activities:Maturities o

40、f short-term investments 379 754 Proceeds from sales of short-term investments 9 215 Purchases of property and equipment(135)(313)Purchases of long-term investments,intangibles and other assets(125)(34)Proceeds from sale of long-term investments and other assets 2 1 Net cash provided by investing ac

41、tivities 130 623 Cash flows from financing activities:Repurchases of common stock(7,000)(3,400)Proceeds from re-issuance of treasury stock 361 314 Taxes paid related to net share settlement of equity awards(525)(387)Proceeds from issuance of debt 1,997 Repayment of debt (500)Other financing activiti

42、es,net(56)8 Net cash used for financing activities(5,223)(3,965)Effect of foreign currency exchange rates on cash and cash equivalents 10 2 Net change in cash and cash equivalents 52 2,365 Cash and cash equivalents at beginning of period 7,141 4,236 Cash and cash equivalents at end of period$7,193$6

43、,601 Supplemental disclosures:Cash paid for income taxes,net of refunds$1,389$590 Cash paid for interest$94$103 See accompanying notes to condensed consolidated financial statements.Table of Contents8NOTE 1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESWe have prepared the acco

44、mpanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S.Securities and Exchange Commission(the“SEC”).Pursuant to these rules and regulations,we have condensed or omitted certain information and footnote disclosures we normally include in our an

45、nual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States(“GAAP”).In managements opinion,we have made all adjustments(consisting only of normal,recurring adjustments,except as otherwise indicated)necessary to fairly present our f

46、inancial position,results of operations and cash flows.Our interim period operating results do not necessarily indicate the results 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 c

47、onsolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 1,2023 on file with the SEC(our“Annual Report”).Use of EstimatesIn preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP and pur

48、suant to the rules and regulations of the SEC,we must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.Actual results may differ materially from these estimates.Significant Accounting PoliciesThere have been no ma

49、terial changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.Recent Accounting Pronouncements Not Yet EffectiveIn November 2023,the Financial Accounting Standards Board(the“FASB”)issued Accounting Standards Update(“ASU”)No.20

50、23-07,Segment Reporting,which expands annual and interim disclosure requirements for reportable segments,primarily through enhanced disclosures about significant segment expenses.The updated standard is effective for our annual periods beginning in fiscal 2025 and interim periods beginning in the fi

51、rst quarter of fiscal 2026.Early adoption is permitted.We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.In December 2023,the FASB issued ASU No.2023-09,Income Taxes,which prescribes standardized categories and disaggregation of informa

52、tion in the reconciliation of provision for income taxes,requires disclosure of disaggregated income taxes paid,and modifies other income tax-related disclosure requirements.The updated standard is effective for us beginning with our fiscal year 2026 annual reporting period.Early adoption is permitt

53、ed.We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.With the exception of the new standards discussed above,there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended

54、August 30,2024,as compared to the recent accounting pronouncements described in our Annual Report,that are of significance or potential significance to us.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)9NOTE 2.REVENUESegment InformationOur segment results f

55、or the three months ended August 30,2024 and September 1,2023 were as follows:(dollars in millions)Digital MediaDigital ExperiencePublishing and AdvertisingTotalThree months ended August 30,2024Revenue$3,995$1,354$59$5,408 Cost of revenue 137 395 22 554 Gross profit$3,858$959$37$4,854 Gross profit a

56、s a percentage of revenue 97%71%63%90%Three months ended September 1,2023Revenue$3,594$1,229$67$4,890 Cost of revenue 161 397 22 580 Gross profit$3,433$832$45$4,310 Gross profit as a percentage of revenue 96%68%67%88%Our segment results for the nine months ended August 30,2024 and September 1,2023 w

57、ere as follows:(dollars in millions)Digital MediaDigital ExperiencePublishing and AdvertisingTotalNine months ended August 30,2024Revenue$11,719$3,970$210$15,899 Cost of revenue 489 1,187 66 1,742 Gross profit$11,230$2,783$144$14,157 Gross profit as a percentage of revenue 96%70%69%89%Nine months en

58、ded September 1,2023Revenue$10,500$3,627$234$14,361 Cost of revenue 455 1,200 65 1,720 Gross profit$10,045$2,427$169$12,641 Gross profit as a percentage of revenue 96%67%72%88%Revenue by geographic area for the three and nine months ended August 30,2024 and September 1,2023 were as follows:Three Mon

59、thsNine Months(in millions)2024202320242023Americas$3,241$2,943$9,539$8,601 EMEA 1,405 1,229 4,085 3,615 APAC 762 718 2,275 2,145 Total$5,408$4,890$15,899$14,361 Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)10Revenue by major offerings in our D

60、igital Media reportable segment for the three and nine months ended August 30,2024 and September 1,2023 were as follows:Three MonthsNine Months(in millions)2024202320242023Creative Cloud$3,188$2,909$9,380$8,522 Document Cloud 807 685 2,339 1,978 Total Digital Media revenue$3,995$3,594$11,719$10,500

61、Subscription revenue by segment for the three and nine months ended August 30,2024 and September 1,2023 were as follows:Three MonthsNine Months(in millions)2024202320242023Digital Media$3,921$3,506$11,474$10,225 Digital Experience 1,231 1,096 3,599 3,208 Publishing and Advertising 28 29 83 88 Total

62、subscription revenue$5,180$4,631$15,156$13,521 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 of consideration is due.Included in trade receivables on the condensed consolidated

63、 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 August 30,2024,the balance of trade receivables,net of allowances for doubtful accounts,was$1.80 billion,inclusive o

64、f unbilled receivables of$83 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 allowance for doubtful accounts which reflects our best estimate of potentially uncollec

65、tible 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 receivable balances,current economic conditions and a reasonable and supportable f

66、orecast of future economic conditions.The allowance for doubtful accounts was$17 million and$16 million as of August 30,2024 and December 1,2023,respectively.A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred.Contract assets are inclu

67、ded 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,considering factors such as historical experience,credit-worthiness,age of the b

68、alance,current economic conditions and a reasonable and supportable forecast of future economic conditions.Contract asset impairments were not material for the nine months ended August 30,2024.Contract assets were$214 million and$141 million as of August 30,2024 and December 1,2023,respectively.Defe

69、rred 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 revenue is recognized as revenue when transfer of control to customers

70、has occurred.As of August 30,2024,the balance of deferred revenue was$5.91 billion,which includes$44 million of refundable customer deposits.Arrangements with some of our enterprise customers with non-cancellable and non-refundable committed funds provide options to either renew monthly on-premise t

71、erm-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.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEME

72、NTS(Continued)(Unaudited)11As of December 1,2023,the balance of deferred revenue was$5.95 billion.During the three and nine months ended August 30,2024,approximately$1.07 billion and$5.43 billion of revenue,respectively,was recognized that was included in the balance of deferred revenue as of Decemb

73、er 1,2023.Transaction 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 periods.As of August 30,2024,remaining performance obligations w

74、ere approximately$18.14 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 69%of the remaining performance obligations,excluding the aforementi

75、oned 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 costs to be longer than one year and primarily relate to sale

76、s 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 consolidated balance sheets.Capitalized contract acquisition costs were

77、$717 million and$656 million as of August 30,2024 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 liabilities are included in accrued expenses on the condensed

78、 consolidated balance sheets.Refund liabilities were$107 million and$111 million as of August 30,2024 and December 1,2023,respectively.NOTE 3.ACQUISITIONSFigmaOn September 15,2022,we entered into a definitive merger agreement under which we intended to acquire Figma,Inc.(“Figma”)for approximately$20

79、 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 termination fee of$1 billion.The termination fee was r

80、ecorded in operating expenses in our condensed consolidated statements of income during the nine months ended August 30,2024,and was not tax-deductible for financial statement purposes.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)12NOTE 4.CASH,

81、CASH EQUIVALENTS AND SHORT-TERM INVESTMENTSCash equivalents 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 val

82、ue,based on quoted market prices or other readily available 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-re

83、lated losses are recorded to other income(expense),net 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

84、 realized in our condensed consolidated statements of income.Cash,cash equivalents and short-term investments consisted of the following as of August 30,2024:(in millions)AmortizedCostUnrealizedGainsUnrealizedLossesEstimatedFair ValueCurrent assets:Cash$571$571 Cash equivalents:Money market funds 6,

85、622 6,622 Total cash and cash equivalents 7,193 7,193 Short-term fixed income securities:Asset-backed securities 6 6 Corporate debt securities 146 (1)145 U.S.agency securities 13 13 U.S.Treasury securities 159 (1)158 Total short-term investments 324 (2)322 Total cash,cash equivalents and short-term

86、investments$7,517$(2)$7,515 Cash,cash equivalents and short-term investments consisted of the following as of December 1,2023:(in millions)AmortizedCostUnrealizedGainsUnrealizedLossesEstimatedFair ValueCurrent assets:Cash$618$618 Cash equivalents:Money market funds 6,498 6,498 Time deposits 25 25 To

87、tal 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 securities 13 (1)12 U.S.Treasury securities 247 (7)240 Total short-term investments 713 (12)701 Total cash,cas

88、h 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 CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)13The following table summarizes the estimated fair

89、value of short-term fixed income debt securities classified as short-term investments based on stated effective maturities as of August 30,2024:(in millions)EstimatedFair ValueDue within one year$308 Due between one and two years 14 Total$322 We review our debt securities classified as short-term in

90、vestments 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 amortized cost basis is due to credit-related factors if we neither intend to sell nor anticipate that it is more likely than not that

91、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,any noted failure of the issuer to make scheduled payments,changes to the rating of the security and other relevant credit-related fa

92、ctors in determining whether or not a credit loss exists.During the nine months ended August 30,2024 and September 1,2023,we did not recognize an allowance for credit-related losses on any of our investments.NOTE 5.FAIR VALUE MEASUREMENTSAssets and Liabilities Measured and Recorded at Fair Value on

93、a Recurring BasisThe fair value of our financial assets and liabilities at August 30,2024 was determined using the following inputs:(in millions)Fair Value Measurements at Reporting Date Using Quoted Pricesin ActiveMarkets forIdentical AssetsSignificantOtherObservableInputsSignificantUnobservableInp

94、uts Total(Level 1)(Level 2)(Level 3)Assets:Cash equivalents:Money market funds$6,622$6,622$Short-term investments:Asset-backed securities 6 6 Corporate debt securities 145 145 U.S.agency securities 13 13 U.S.Treasury securities 158 158 Prepaid expenses and other current assets:Foreign currency deriv

95、atives 9 9 Other assets:Deferred compensation plan assets 266 266 Foreign currency derivatives 1 1 Total assets$7,220$6,888$332$Liabilities:Accrued expenses:Foreign currency derivatives$42$42$Other liabilities:Foreign currency derivatives 9 9 Total liabilities$51$51$Table of ContentsADOBE INC.NOTES

96、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 ActiveMarkets forIdentical AssetsSign

97、ificantOtherObservableInputsSignificantUnobservableInputs 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 securities 12 12 U.S.Treasury securit

98、ies 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 information regarding the fair value of ou

99、r 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 vendors who use matrix pricing valuatio

100、n 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 inputs other than quoted prices t

101、hat 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 Level 2.We perform routine procedure

102、s 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 funds,are based on quoted prices in a

103、ctive 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 financial assets and current financial

104、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$5.53 billion as of August 30,2024,based on observable market prices in less active markets and categorized as Level 2.See No

105、te 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 currency and interest rate risk on ex

106、pected 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 transactions with the same counterpar

107、ty.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 instruments fluctuates from co

108、ntractually 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 currency denominated revenue a

109、nd expenses.These foreign exchange contracts,carried at fair value,have maturities of up to 24 months.As of August 30,2024,we had net derivative losses on our foreign currency cash flow hedges expected to be recognized within the next 36 months,of which$52 million of net losses are expected to be re

110、cognized 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.Fair value asset derivative

111、s are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion,and fair value liability derivatives are included in accrued expenses for the current portion and other liabilities for the long-term portion on our condensed consolidated b

112、alance sheets.The fair value of derivative instruments as of August 30,2024 and December 1,2023 were as follows:(in millions)20242023 Fair Value AssetDerivativesFair ValueLiabilityDerivativesFair Value AssetDerivativesFair ValueLiabilityDerivativesDerivatives designated as hedging instruments:Foreig

113、n exchange option contracts$5$42$Foreign exchange forward contracts 3 49 1 Derivatives not designated as hedging instruments:Foreign exchange forward contracts 2 2 9 4 Total derivatives$10$51$52$4 Gains and losses on derivative instruments,net of tax,recognized in our condensed consolidated statemen

114、ts of comprehensive income for the three and nine months ended August 30,2024 were primarily associated with our foreign exchange forward contracts,for which we recognized$40 million of net losses in both periods.Gains and losses on derivative instruments,net of tax,for the three and nine months end

115、ed September 1,2023 were immaterial.For the three and nine months ended August 30,2024 and September 1,2023,the effects of derivative instruments on our condensed consolidated statements of income were immaterial.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continu

116、ed)(Unaudited)16NOTE 7.GOODWILL AND OTHER INTANGIBLESGoodwill as of August 30,2024 and December 1,2023 was$12.81 billion and$12.81 billion,respectively.During the second quarter of fiscal 2024,we completed our annual goodwill impairment test associated with our reporting units and determined there w

117、as no impairment of goodwill.Other intangible assets subject to amortization as of August 30,2024 and December 1,2023 were as follows:(in millions)20242023 Gross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNetCustomer contracts and relationships$1,205$(713)

118、$492$1,204$(619)$585 Purchased technology 877 (664)213 984 (647)337 Trademarks 376 (250)126 376 (217)159 Other 36 (9)27 22 (15)7 Other intangibles,net$2,494$(1,636)$858$2,586$(1,498)$1,088 Amortization expense related to other intangibles was$84 million and$252 million for the three and nine months

119、ended August 30,2024,respectively.Comparatively,amortization expense related to other intangibles was$92 million and$284 million for the three and nine months ended September 1,2023,respectively.Of these amounts,$41 million and$125 million were included in cost of revenue for the three and nine mont

120、hs ended August 30,2024,respectively,and$50 million and$158 million were included in cost of revenue for the three and nine months ended September 1,2023,respectively.As of August 30,2024,the estimated aggregate amortization expense in future periods was as follows:(in millions)Fiscal YearOther Inta

121、ngibles(1)Remainder of 2024$83 2025 303 2026 151 2027 109 2028 66 Thereafter 126 Total expected amortization expense$838 _(1)Excludes capitalized in-process research and development which is considered indefinite lived until the completion or abandonment of the associated research and development ef

122、forts.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)17NOTE 8.ACCRUED EXPENSESAccrued expenses as of August 30,2024 and December 1,2023 consisted of the following:(in millions)20242023Accrued compensation and benefits$504$535 Accrued bonuses 447

123、547 Accrued corporate marketing 149 132 Sales and use taxes 111 122 Refund liabilities 107 111 Other 530 495 Accrued expenses$1,848$1,942 Other primarily includes general business accruals,accrued hosting fees,royalties payable and accrued interest expense.NOTE 9.STOCK-BASED COMPENSATIONRestricted S

124、tock UnitsRestricted stock unit activity for the nine months ended August 30,2024 was as follows:Number ofShares(in millions)Weighted AverageGrant Date Fair ValueAggregateFair Value(1)(in millions)Beginning outstanding balance 7.8$418.63 Awarded 2.9$586.20 Released(2.6)$441.45 Forfeited(0.4)$449.34

125、Ending outstanding balance 7.7$472.50$4,436 Expected to vest 7.1$471.45$4,100 _(1)The aggregate fair value is calculated using the closing stock price as of August 30,2024 of$574.41.The total fair value of restricted stock units vested during the nine months ended August 30,2024 was$1.42 billion.Per

126、formance 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,the terms of which are similar to the 2023 Performance Share Program that is still outstanding.For information regarding our outstan

127、ding 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 of August 30,2024,the performance shares awarded under our 2024,2023 and 2022 Performance Share Programs remained outstanding and un

128、vested.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)18Performance share activity for the nine months ended August 30,2024 was as follows:Number ofShares(in millions)Weighted AverageGrant Date Fair ValueAggregateFair Value(1)(in millions)Beginni

129、ng outstanding balance 0.5$465.71 Awarded 0.2$645.40 Released(0.1)$455.65 Forfeited(0.1)$487.20 Ending outstanding balance 0.5$536.74$301 Expected to vest 0.5$534.50$277 _(1)The aggregate fair value is calculated using the closing stock price as of August 30,2024 of$574.41.Under our Performance Shar

130、e Programs,participants generally have the ability to receive up to 200%of the target number of shares originally granted.Shares released during the nine months ended August 30,2024 resulted from 83%achievement of target for the 2021 Performance Share Program,as certified by the ECC in the first qua

131、rter of fiscal 2024.The total fair value of performance shares vested during the nine months ended August 30,2024 was$63 million.Employee Stock Purchase Plan SharesEmployees purchased 1.2 million shares at an average price of$298.53 and 1.1 million shares at an average price of$286.31 for the nine m

132、onths ended August 30,2024 and September 1,2023,respectively.The intrinsic value of shares purchased during the nine months ended August 30,2024 and September 1,2023 was$324 million and$185 million,respectively.The intrinsic value is calculated as the difference between the market value on the date

133、of purchase and the purchase price of the shares.Compensation CostsAs of August 30,2024,there was$3.28 billion of unrecognized compensation cost,adjusted for estimated forfeitures,related to unvested stock-based awards and purchase rights which will be recognized over a weighted average period of 2.

134、32 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 the three and nine months ended August 30,2024 and September 1,2023 were as follows:Three Mo

135、nthsNine Months(in millions)2024202320242023Cost of revenue$30$30$90$88 Research and development 241 224 704 657 Sales and marketing 140 130 403 375 General and administrative 63 58 195 171 Total$474$442$1,392$1,291 Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Cont

136、inued)(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/DecreaseReclassification AdjustmentsAugust 30,2024Net unrealized gains/losses on

137、 available-for-sale securities$(12)$10$(1)$(2)Net unrealized gains/losses on derivative instruments designated as hedging instruments(26)(59)9(2)(76)Cumulative foreign currency translation adjustments(247)16 (231)Total accumulated other comprehensive income(loss),net of taxes$(285)$(33)$9$(309)_(1)R

138、eclassification 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 operating expenses,depending on the nature of the underlying transaction,

139、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 nine months ended August 30,2024 and September 1,2023 were immaterial.NOTE 11.STOCK REPURCHASE PROGRAMTo f

140、acilitate 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.In December 2020,our Board of Directors granted authority t

141、o repurchase up to$15 billion in our common stock,which became fully utilized during the nine months ended August 30,2024.In March 2024,our Board of Directors granted additional authority to repurchase up to$25 billion in our common stock through March 14,2028.During the nine months ended August 30,

142、2024 and September 1,2023,we entered into accelerated share repurchase agreements(“ASRs”)with large financial institutions whereupon we provided them with prepayments totaling$7 billion and$1.4 billion,respectively.Under the terms of our ASRs,the financial institutions agree to deliver a portion of

143、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 the ASR,less an agreed upon discount.During the n

144、ine months ended September 1,2023,we also entered into structured stock repurchase agreements with a large financial institution whereupon we provided them with prepayments totaling$2 billion.Under the terms of our structured stock repurchase agreements,the financial institutions agree to deliver sh

145、ares 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,less an agreed upon discount.Table of Co

146、ntentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)20Share repurchase activity for the nine months ended August 30,2024 and September 1,2023 was as follows:Number of Shares Delivered(in millions)Average Price Paid Per ShareNine months ended August 30,2024Struct

147、ured 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 5.2$475.94 ASR entered into in June 2024 3.6$(1)Total shares delivered 12.9 Nine months ended September 1,2023Structured stock repurchase agreements ente

148、red into in fiscal 2022 and the nine months ended September 1,2023 5.7$396.43 ASR entered into in December 2022 4.0$348.46 Total shares delivered 9.7 _(1)During the nine months ended August 30,2024,we received the initial delivery of shares under the ASR entered into in June 2024,which remained outs

149、tanding as of August 30,2024.Subsequent to August 30,2024,the outstanding ASR was settled which resulted in total repurchases of 4.6 million shares at an average price of$546.30.Prepayments for stock repurchases are classified as treasury stock,a component of stockholders equity on our condensed con

150、solidated balance sheets,at the payment 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 August 30,2024,a portion of the$2.5 billion prepayment under the ASR entered into in June 2024 was evaluated

151、as an unsettled forward contract indexed to our own stock,classified within stockholders equity.Subsequent to August 30,2024,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

152、received an initial delivery of 3.6 million shares,which represents approximately 75%of our prepayment.Upon completion of this$2.5 billion ASR,$17.65 billion remains under our March 2024 stock repurchase authority.NOTE 12.NET INCOME PER SHAREThe following table sets forth the computation of basic an

153、d diluted net income per share for the three and nine months ended August 30,2024 and September 1,2023:Three MonthsNine Months(in millions,except per share data)2024202320242023Net income$1,684$1,403$3,877$3,945 Shares used to compute basic net income per share 445.3 456.4 449.1 457.7 Dilutive poten

154、tial common shares from stock plans and programs 2.3 3.1 2.7 1.5 Shares used to compute diluted net income per share 447.6 459.5 451.8 459.2 Basic net income per share$3.78$3.07$8.63$8.62 Diluted net income per share$3.76$3.05$8.58$8.59 Anti-dilutive potential common shares 2.0 0.5 1.8 3.5 Table of

155、ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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

156、 infringement made by third parties arising from the 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 m

157、aximum potential impact of these indemnification provisions 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 reque

158、st in such capacity.The indemnification period covers 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 i

159、nsurance coverage that reduces our exposure and enables 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,includi

160、ng claims relating to intellectual property,commercial,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 i

161、ndeterminate amounts of damages.We consider all claims 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

162、 accrue for such claims in our financial statements.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 estima

163、ted.These provisions are reviewed at least quarterly 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 August 30,2024,accrued provisions for legal proceedings were immaterial.Unless o

164、therwise 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 reasonably possible

165、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.It is possible,nev

166、ertheless,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“FTC”)staff in re

167、sponse 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 negotiations to determ

168、ine 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 civil complaint in t

169、he 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 provide a simple cancel

170、lation 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 monetary costs or

171、 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 business or have a ma

172、terially 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 result of this litigation.Table of ContentsADOBE INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unau

173、dited)22On 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 certain of our curre

174、nt 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 made by Adobe durin

175、g 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 fees and costs,an

176、d 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 3,2024,a second sha

177、reholder 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“Consolidated Deriva

178、tive 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.Narayen et al.,No.1

179、: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 the same alleged fa

180、cts 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 abetting breach of fidu

181、ciary 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,and attorneys fees

182、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 Securities Action

183、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 financial loss,if any,

184、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 be subject to clai

185、ms,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 or resolved past

186、 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 licensing certain of ou

187、r 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 contractual provisions

188、 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 August 30,2024 and December 1,2023 were as follows:(dollars in millions)Issuance Da

189、teDue 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 20294.93%750 2.30%

190、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(22)(16)Carrying value of long-term debt$4,128$3,634 Current portion of deb

191、t,at par$1,500$Unamortized discount and debt issuance costs(1)Carrying value of current debt$1,499$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 using the effec

192、tive 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 discount and issua

193、nce 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 notes due April 4

194、,2029 and$750 million of senior notes due April 4,2034.Our total proceeds were 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 the notes us

195、ing 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 August 30,2024,the carrying value of

196、 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 and unsu

197、bordinated 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 repurchase the not

198、es,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 of Conte

199、ntsADOBE 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 our prev

200、ious 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 Revolving Credit

201、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 Overnigh

202、t 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,adjusted daily

203、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.We are pe

204、rmitted 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 time duri

205、ng 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 regarding the i

206、ncurrence 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 occurren

207、ce 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 August 30,2024,there were no outstanding borrowings under this Revolving Credit Agreement.Commercial Paper ProgramIn September 2023,we establis

208、hed 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 purposes

209、,which may include working capital,capital expenditures,acquisitions,stock repurchases,refinancing indebtedness or any other general corporate purposes.As of August 30,2024,there were no outstanding borrowings under the commercial paper program.Term Loan Credit AgreementIn January 2023,we entered in

210、to 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 nine months ended A

211、ugust 30,2024,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 Cont

212、entsADOBE 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 t

213、hereto.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 acqu

214、isition 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,

215、as 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 statem

216、ents.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 Commiss

217、ion(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 revisio

218、ns 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

219、 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 d

220、igital 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 beli

221、eve 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 third quarter of fiscal 2024,we

222、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

223、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

224、g,creating and publishing rich content and immersive 3D experiences.Creative Cloud offers Adobe Acrobat Pro,our comprehensive PDF solution,integral to creative workflows and used by creators worldwide as part of our Creative Cloud All Apps subscription and on a standalone basis.In addition,Adobe Exp

225、ress is our 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 easily with content-first,task-based solutions.Creative Cloud also includes Adobe Firefly,a group of

226、 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 Photoshop and Adobe Express.Creative Cloud delivers value with deep,cross-product integration,frequent p

227、roduct 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 community-based features with our Adobe Stock and Behance services,app creation capabilities,tools

228、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 Creative Cloud will drive sustained long-term revenue growth through a continued expansion of our custo

229、mer 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 features and technologies to existing customers with our latest releases such as generative AI capabili

230、ties.We have also built out a marketplace for Creative Cloud subscribers to enable the delivery and purchase of stock content in our Table of Contents26Adobe Stock service.Overall,our strategy with Creative Cloud is designed to enable us to increase our revenue with existing users,continue to attrac

231、t 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,consideration and purchase of subscriptions to our Creative Cloud offerings.These strategies include increasing the value Cre

232、ative 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 experience and ultimately subscribe to Creative Cloud.Because of the shift towards Creative Cloud subscriptions and Ent

233、erprise 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 Cloud offerings built around our Adobe Acrobat family of products,with a set of integrated mobile apps and cloud-based

234、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 way people manage critical documents at home,in the office and across devices,includes subscriptions to Adobe Acrobat

235、 Pro and Standard,Adobe Acrobat Sign and Adobe Scan.Certain Adobe Acrobat products are also offered as perpetual licenses.In April 2024,we introduced Acrobat AI Assistant,a generative AI-powered product designed to deliver insights and enhance productivity through interactive document experiences,wh

236、ich is available as an add-on subscription to our Adobe Acrobat Pro and Standard and Adobe Acrobat Reader products.As part of our Creative Cloud and Document Cloud strategies,we utilize a data-driven operating model(“DDOM”)and our Adobe Experience Cloud solutions to raise awareness of our products,d

237、rive new customer acquisition,engagement and retention,and optimize customer journeys,which continue to contribute strong product-led growth in the business.Annualized Recurring Revenue(“ARR”)is currently the key performance metric our management uses to assess the health and trajectory of our overa

238、ll Digital Media segment.ARR should be viewed independently of revenue,deferred revenue and remaining performance obligations as ARR is a performance metric 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.O

239、ur 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 for measurement purposes.We calculate ARR as follows:Creative ARRAnnual Value of Creative Cloud Subscriptions and Services+Annual Creative ETLA Contra

240、ct Value Document Cloud ARRAnnual Value of Document Cloud Subscriptions and Services+Annual Document Cloud ETLA Contract ValueDigital Media ARRCreative ARR+Document Cloud ARRCreative ARR exiting the third quarter of fiscal 2024 was$13.45 billion,up from$12.49 billion at the end of fiscal 2023.Docume

241、nt Cloud ARR exiting the third quarter of fiscal 2024 was$3.31 billion,up from$2.84 billion at the end of fiscal 2023.Total Digital Media ARR grew to$16.76 billion at the end of the third quarter of fiscal 2024,up from$15.33 billion at the end of fiscal 2023.Our success in driving growth in ARR has

242、positively affected our revenue growth.Creative revenue in the third quarter of fiscal 2024 was$3.19 billion,up from$2.91 billion in the third quarter of fiscal 2023,representing 10%year-over-year growth.Document Cloud revenue in the third quarter of fiscal 2024 was$807 million,up from$685 million i

243、n the third quarter of fiscal 2023,representing 18%year-over-year growth.Total Digital Media segment revenue grew to$4.00 billion in the third quarter of fiscal 2024,up from$3.59 billion in the third quarter of fiscal 2023,representing 11%year-over-year growth driven by strong net new user growth.Ta

244、ble of Contents27Digital ExperienceWe are a market leader in the fast-growing category addressed by our Digital Experience segment.The Adobe Experience Cloud apps and services are designed to manage customer journeys,enable personalized experiences at scale and deliver intelligence for businesses of

245、 any size in any industry.Our differentiation and competitive advantage are strengthened by our ability to use the Adobe Experience Platform to integrate our comprehensive set of solutions and our ability to embed AI into our product portfolio,such as with our new Adobe Experience Platform AI Assist

246、ant,a generative AI-powered conversational interface designed to help customers automate workflows and generate new audiences and journeys.Adobe Experience Cloud delivers solutions for our customers across the following strategic growth pillars:Data insights and audiences.Our products,including Adob

247、e Analytics,Customer Journey Analytics,Adobe Product Analytics,Adobe Mix Modeler,and our Real-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,delive

248、r,monetize,and optimize content delivery through Adobe Experience Manager;build multi-channel 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

249、 and scale with our enterprise work management app,Adobe Workfront.Customer journeys.Our products 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 Jour

250、ney Optimizer.In addition to chief marketing officers,chief revenue officers and digital marketers,users of our Digital Experience solutions include advertisers,campaign managers,publishers,data analysts,content managers,social marketers,marketing executives and information management and technology

251、 executives.These customers often are involved in workflows that integrate other Adobe products,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

252、customers to more efficiently and effectively make,manage,measure and monetize their content 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,includi

253、ng marketing agencies,systems integrators and independent software vendors that help license 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 i

254、nvestments and our experience-led growth strategy.Digital Experience revenue was$1.35 billion in the third quarter of fiscal 2024,up from$1.23 billion in the third quarter of fiscal 2023,representing 10%year-over-year growth.Driving this growth was the increase in subscription revenue,which grew to$

255、1.23 billion in the third quarter of fiscal 2024 from$1.10 billion in the third quarter of fiscal 2023,representing 12%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,i

256、ncluding the effects of increased global inflationary pressures and interest rates,fluctuations 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 d

257、irect and indirect impacts of these circumstances on our business and financial results.While 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 over

258、all financial position,particularly in the long term,remain uncertain.See Risk Factors for 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

259、 in accordance with generally accepted accounting principles in the United States(“GAAP”)and 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

260、assets and liabilities.We base our assumptions,judgments and estimates on historical experience 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 ass

261、umptions,judgments and estimates on a regular basis.We also discuss our critical accounting 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 g

262、reatest potential impact on our condensed consolidated financial statements.These areas are 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,o

263、ur assumptions,judgments and estimates relative to our critical accounting policies have not differed materially from actual results.There have been no significant changes in our critical accounting policies and estimates during the nine months ended August 30,2024,as compared to the critical accoun

264、ting policies and estimates disclosed in Managements Discussion and Analysis of Financial Condition 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 stat

265、ements for information regarding recent accounting pronouncements that are of significance or potential significance to us.RESULTS OF OPERATIONSFinancial Performance SummaryTotal Digital Media ARR of approximately$16.76 billion as of August 30,2024 increased by$1.42 billion,or 9%,from$15.33 billion

266、as of December 1,2023.Creative revenue during the three months ended August 30,2024 of$3.19 billion increased by$279 million,or 10%,compared to the year-ago period.Document Cloud revenue during the three months ended August 30,2024 of$807 million increased by$122 million,or 18%,compared to the year-

267、ago period.Digital Experience revenue of$1.35 billion during the three months ended August 30,2024 increased by$125 million,or 10%,compared to the year-ago period.Cost of revenue of$554 million during the three months ended August 30,2024 decreased by$26 million,or 4%,compared to the year-ago period

268、.Operating expenses of$2.86 billion during the three months ended August 30,2024 increased by$249 million,or 10%,compared to the year-ago period.Net income of$1.68 billion during the three months ended August 30,2024 increased by$281 million,or 20%,compared to the year-ago period.Cash flows from ope

269、rations of$5.14 billion during the nine months ended August 30,2024 decreased by$570 million,or 10%,compared to the year-ago period and were adversely impacted by the payment of the$1 billion Figma termination fee during the first quarter of fiscal 2024.Remaining performance obligations of$18.14 bil

270、lion as of August 30,2024 increased by$924 million,or 5%,from$17.22 billion as of December 1,2023.Table of Contents29Revenue for the Three and Nine Months Ended August 30,2024 and September 1,2023(dollars in millions)Three MonthsNine Months 20242023%Change20242023%ChangeSubscription$5,180$4,631 12%$

271、15,156$13,521 12%Percentage of total revenue 96%95%95%94%Product 82 96 (15)%305 346 (12)%Percentage of total revenue 1%2%2%2%Services and other 146 163 (10)%438 494 (11)%Percentage of total revenue 3%3%3%4%Total revenue$5,408$4,890 11%$15,899$14,361 11%SubscriptionOur subscription revenue is compris

272、ed primarily of fees we charge for our subscription and hosted service offerings,and related support,including Creative Cloud and certain of our Adobe Experience Cloud and Document Cloud services.We primarily recognize subscription revenue ratably over the term of agreements with our customers,begin

273、ning with commencement of service.Subscription revenue related to certain offerings,where fees are based on a number of transactions and invoicing is aligned to the pattern of performance,customer benefit and consumption,are recognized on a usage basis.We have the following reportable segments:Digit

274、al Media,Digital Experience,and Publishing and Advertising.Subscription revenue by reportable segment for the three and nine months ended August 30,2024 and September 1,2023 is as follows:(dollars in millions)Three MonthsNine Months20242023%Change20242023%ChangeDigital Media$3,921$3,506 12%$11,474$1

275、0,225 12%Digital Experience 1,231 1,096 12%3,599 3,208 12%Publishing and Advertising 28 29 (3)%83 88 (6)%Total subscription revenue$5,180$4,631 12%$15,156$13,521 12%ProductOur product revenue is comprised primarily of fees related to licenses for on-premise software purchased on a perpetual basis,fo

276、r 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 in time the software is available to the customer,provided all other revenue recognition criteria are met.Services and OtherOur ser

277、vices 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 point in time and our advertising offerings.We typically sell our consulting contracts on a time-and-materials or fixed-fee basis.The

278、se 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 are recognized as the services are performed.Our maintenance and support offerings,which entitle customers,partners and developers t

279、o receive desktop product upgrades and enhancements or technical support,depending on the offering,are generally recognized ratably over the term of the arrangement.Transaction-based advertising revenue is recognized on a usage basis as we satisfy the performance obligations to our customers.Table o

280、f Contents30Segment Information(dollars in millions)Three MonthsNine Months 20242023%Change20242023%ChangeDigital Media$3,995$3,594 11%$11,719$10,500 12%Percentage of total revenue 74%74%74%73%Digital Experience 1,354 1,229 10%3,970 3,627 9%Percentage of total revenue 25%25%25%25%Publishing and Adve

281、rtising 59 67 (12)%210 234 (10)%Percentage of total revenue 1%1%1%2%Total revenue$5,408$4,890 11%$15,899$14,361 11%Digital MediaRevenue by major offerings in our Digital Media reportable segment for the three and nine months ended August 30,2024 and September 1,2023 were as follows:(dollars in milli

282、ons)Three MonthsNine Months20242023%Change20242023%ChangeCreative Cloud$3,188$2,909 10%$9,380$8,522 10%Document Cloud 807 685 18%2,339 1,978 18%Total Digital Media revenue$3,995$3,594 11%$11,719$10,500 12%Revenue from Digital Media increased$401 million and$1.22 billion during the three and nine mon

283、ths ended August 30,2024 as compared to the three and nine months ended September 1,2023 driven by increases in revenue associated with our Creative and Document Cloud subscription offerings due to continued demand amid an increasingly digital environment,strong engagement across customer segments a

284、nd migrating our customers to higher valued subscription offerings with increased revenue per subscription.Digital ExperienceRevenue from Digital Experience increased$125 million and$343 million during the three and nine months ended August 30,2024 as compared to the three and nine months ended Sept

285、ember 1,2023 driven by subscription revenue growth across our offerings.Geographical Information(dollars in millions)Three MonthsNine Months 20242023%Change20242023%ChangeAmericas$3,241$2,943 10%$9,539$8,601 11%Percentage of total revenue 60%60%60%60%EMEA 1,405 1,229 14%4,085 3,615 13%Percentage of

286、total revenue 26%25%26%25%APAC 762 718 6%2,275 2,145 6%Percentage of total revenue 14%15%14%15%Total revenue$5,408$4,890 11%$15,899$14,361 11%Overall revenue during the three and nine months ended August 30,2024 increased in all geographic regions as compared to the three and nine months ended Septe

287、mber 1,2023.Within each geographic region,the fluctuations in revenue by reportable segment were attributable to the factors noted in the segment information above.Table of Contents31Included in the overall change in revenue for the three and nine months ended August 30,2024 as compared to the three

288、 and nine months ended September 1,2023 were impacts associated with foreign currency and our foreign currency hedging program.During the three and nine months ended August 30,2024,the U.S.Dollar primarily strengthened against APAC foreign currencies and weakened against EMEA foreign currencies as c

289、ompared to the year-ago periods,which resulted in a net decrease in revenue in U.S.Dollar equivalents of approximately$33 million and$49 million,respectively.For the three and nine months ended August 30,2024,we had net hedging losses from our cash flow hedging program of$2 million and$11 million,re

290、spectively.Cost of Revenue for the Three and Nine Months Ended August 30,2024 and September 1,2023(dollars in millions)Three MonthsNine Months 20242023%Change20242023%ChangeSubscription$413$447 (8)%$1,324$1,317 1%Percentage of total revenue 8%9%8%9%Product 6 7 (14)%19 23 (17)%Percentage of total rev

291、enue*Services and other 135 126 7%399 380 5%Percentage of total revenue 2%3%3%3%Total cost of revenue$554$580 (4)%$1,742$1,720 1%_(*)Percentage is less than 1%.SubscriptionCost of subscription revenue consists of third-party hosting services and data center costs,including expenses related to operat

292、ing 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 intangible assets.Cost of subscription revenue dec

293、reased during the three months ended August 30,2024 as compared to the three months ended September 1,2023 and increased during the nine months ended August 30,2024 as compared to the nine months ended September 1,2023 primarily due to the following:Components of%Change2024-2023QTDComponents of%Chan

294、ge2024-2023YTDLoss contingency reversal(10)%(3)%Amortization of intangibles(2)(2)Hosting services and data center costs 2 4 Base compensation and related benefits 2 1 Various individually insignificant items 1 Total change(8)%1%Cost of subscription revenue during the three and nine months ended Augu

295、st 30,2024 included the reversal of a loss contingency associated with an IP litigation matter.ProductCost 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 re

296、venue is primarily comprised of compensation and contracted costs incurred to provide consulting services,training and product support,and hosting services and data center costs.Cost of services and other revenue increased during the three and nine months ended August 30,2024 as compared to the thre

297、e and nine months ended September 1,2023 primarily due to increases in compensation costs and professional fees.Table of Contents32Operating Expenses for the Three and Nine Months Ended August 30,2024 and September 1,2023(dollars in millions)Three MonthsNine Months 20242023%Change20242023%ChangeRese

298、arch and development$1,022$881 16%$2,945$2,584 14%Percentage of total revenue 19%18%19%18%Sales and marketing 1,431 1,337 7%4,228 3,983 6%Percentage of total revenue 26%27%27%28%General and administrative 366 353 4%1,073 1,041 3%Percentage of total revenue 7%7%7%7%Acquisition termination fee%1,000 *

299、Percentage of total revenue*6%*Amortization of intangibles 43 42 2%127 126 1%Percentage of total revenue 1%1%1%1%Total operating expenses$2,862$2,613 10%$9,373$7,734 21%_(*)Percentage is less than 1%.(*)Percentage is not meaningful.Research and Development Research and development expenses consist p

300、rimarily of compensation and contracted costs associated with software development,third-party hosting services and data center costs,related facilities costs and expenses associated with computer equipment and software used in development activities.Research and development expenses increased durin

301、g the three and nine months ended August 30,2024 as compared to the three and nine months ended September 1,2023 due to the following:Components of%Change2024-2023QTDComponents of%Change2024-2023YTDBase compensation and related benefits 6%5%Incentive compensation,cash and stock-based 3 3 Hosting ser

302、vices and data center costs 5 4 Various individually insignificant items 2 2 Total change 16%14%Investments in research and development,including the recruiting and hiring of software developers,are critical to remain competitive in the marketplace and are directly related to continued timely develo

303、pment of new and enhanced offerings and solutions.We will continue to focus on long-term opportunities available in our end markets and make significant investments in the development of our subscription and service offerings,apps and tools.Sales and MarketingSales and marketing expenses consist pri

304、marily of compensation costs,amortization of contract acquisition costs,including sales commissions,travel expenses and related facilities costs for our sales,marketing,order management and global supply chain management personnel.Sales and marketing expenses also include the costs of programs aimed

305、 at increasing revenue,such as advertising,trade shows and events,public relations and other market development programs.Sales and marketing expenses increased during the three and nine months ended August 30,2024 as compared to the three and nine months ended September 1,2023 primarily due to incre

306、ases in compensation costs.General and AdministrativeGeneral and administrative expenses consist primarily of compensation and contracted costs,travel expenses and related facilities costs for our finance,facilities,human resources,legal,information services and executive personnel.General and admin

307、istrative expenses also include outside legal and accounting fees,provision for bad debts,expenses associated with Table of Contents33computer equipment and software used in the administration of the business,charitable contributions and various forms of insurance.General and administrative expenses

308、 increased during the three and nine months ended August 30,2024 as compared to the three and nine months ended September 1,2023 primarily due to the following:Components of%Change2024-2023QTDComponents of%Change2024-2023YTDBase compensation and related benefits 4%3%Incentive compensation,cash and s

309、tock-based 2 3 Charitable contributions 3 Professional and consulting fees(6)(5)Various individually insignificant items 1 2 Total change 4%3%Acquisition Termination FeeDuring the nine months ended August 30,2024,we incurred a$1 billion termination fee which resulted from termination of the Figma tr

310、ansaction.Non-Operating Income(Expense),Net for the Three and Nine Months Ended August 30,2024 and September 1,2023(dollars in millions)Three MonthsNine Months 20242023%Change20242023%ChangeInterest expense$(51)$(27)89%$(119)$(85)40%Percentage of total revenue(1)%(1)%(1)%(1)%Investment gains(losses)

311、,net 12 6*34 12*Percentage of total revenue*Other income(expense),net 89 67*241 157*Percentage of total revenue 2%1%2%1%Total non-operating income(expense),net$50$46*$156$84*_(*)Percentage is less than 1%.(*)Percentage is not meaningful.Interest ExpenseInterest expense represents interest associated

312、 with our debt instruments.Interest on our senior notes is payable semi-annually,in arrears.Interest expense increased during the three and nine months ended August 30,2024 as compared to the three and nine months ended September 1,2023 due to the senior notes issued in April 2024.See Note 14 for fu

313、rther details regarding our debt.Investment Gains(Losses),NetInvestment gains(losses),net consists principally of unrealized 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 cas

314、h,cash equivalents and short-term fixed income investments.Other income(expense),net also includes realized gains and losses on fixed income investments and foreign exchange gains and losses.Other income(expense),net increased during the three and nine months ended August 30,2024 as compared to the

315、three and nine months ended September 1,2023 primarily due to increases in interest income driven by higher average cash equivalent balances and average interest rates.Table of Contents34Provision for Income Taxes for the Three and Nine Months Ended August 30,2024 and September 1,2023(dollars in mil

316、lions)Three MonthsNine Months 20242023%Change20242023%ChangeProvision for income taxes$358$340 5%$1,063$1,046 2%Percentage of total revenue 7%7%7%7%Effective tax rate 18%20%22%21%Our effective tax rate decreased by approximately two percentage points and increased by approximately one percentage poi

317、nt for the three and nine months ended August 30,2024,respectively,as compared to the three and nine months ended September 1,2023.During the three and nine months ended August 30,2024,there was an increase in the net tax benefits from effects of non-U.S.operations and stock-based compensation which

318、 decreased our effective tax rates.The increase in our effective tax rate during the nine months ended August 30,2024 was primarily due to the Figma acquisition termination fee which was not deductible for financial statement purposes,partially offset by the previously noted items.Our effective tax

319、rate for the three months ended August 30,2024 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 tax rate for the nine months ended Aug

320、ust 30,2024 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,partially offset by the previously noted items.We recognize deferred tax assets to the extent that we believe these as

321、sets are more likely than not to be realized based on evaluation of all available positive and negative evidence.On the basis of this evaluation,we continue to maintain a valuation allowance to reduce our deferred tax assets to the amount realizable.The total valuation allowance was$723 million as o

322、f August 30,2024,primarily related to certain state credits and capital loss carryforwards.We are a U.S.-based multinational company subject to 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 generall

323、y allows an exemption from taxation for distributions from foreign subsidiaries.In the current global tax policy environment,the domestic and foreign governing bodies continue to consider,and in some cases introduce,changes in regulations applicable to corporate multinationals such as Adobe.As regul

324、ations are issued,we account for finalized regulations in the period of enactment.The provision from the U.S.Tax Act which requires us to capitalize and amortize research and development costs became effective in fiscal 2023.This requirement continues to have an adverse impact on our effective rates

325、 for income taxes paid,which is partially offset by a benefit to our effective tax rates from the increase in the foreign-derived intangible income deduction.Accounting for Uncertainty in Income TaxesThe gross liabilities for unrecognized tax benefits excluding interest and penalties were$703 millio

326、n and$436 million as of August 30,2024 and September 1,2023,respectively.If the total unrecognized tax benefits as of August 30,2024 and September 1,2023 were recognized,$539 million and$307 million would decrease the respective effective tax rates.As of August 30,2024 and September 1,2023,the combi

327、ned amounts of accrued interest and penalties included in long-term income taxes payable related to tax positions taken on our tax returns were not 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

328、audit settlement process.These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities.We believe that within the next 12 months,it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax exa

329、mination periods will expire,or both.Although the timing of resolution,settlement and closing of audits is not certain,it is reasonably possible that the underlying unrecognized tax benefits may decrease by up to$50 million over the next 12 months.Our future effective tax rates may be materially aff

330、ected by changes in the tax rates in jurisdictions where our income is earned,changes in jurisdictions in which our profits are determined to be earned and taxed,changes in the valuation of our deferred tax assets and liabilities,changes in or interpretation of tax rules and regulations in the juris

331、dictions in which we do business,or unexpected changes in business and market conditions that could reduce certain tax benefits.Table of Contents35In addition,tax laws in the United States as well as other countries and jurisdictions in which we conduct business are subject to change as new laws are

332、 passed and/or new interpretations are made available.These countries,governmental bodies,such as the European Commission of the European Union,and intergovernmental economic organizations,such as the Organization for Economic Cooperation and Development,have made or could make unprecedented asserti

333、ons 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 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 s