ADOBE INC.

Adobe operates in the rapidly evolving markets for digital creativity, document productivity, and customer experience management, where the company builds platforms and tools that unleash creativity, productivity and personalized customer experiences. The markets are characterized by rapid technological innovation, new industry standards, evolving distribution and sales models, limited barriers to entry, short product lifecycles, customer price sensitivity, global economic conditions and the frequent entry of new solutions or competitors. Adobe's solutions are the foundation of digital experiences, starting with the first creative spark, to the creation and development of all content and media, to the personalized delivery across every channel. The massive opportunity and evolving role of creativity across roles and industries have driven Adobe's growth over the past four decades and are expected to continue to drive growth going forward as the company evolves its solutions and routes to market to anticipate the growing needs of customers.

Adobe participates in a highly competitive and rapidly evolving environment where competitors include companies of various sizes and both public and private companies, including large, global companies and smaller companies with more specialized focuses, new entrants, and AI or cloud-native companies. The company competes with software companies, AI companies, hardware manufacturers, operating system developers, and social media companies across its business. Key competitive factors include proven performance, security, scalability, flexibility, and reliability of the platform; breadth of functionality and strategic integrations with third parties; cost-effective benefits; enterprise-level service and training; and ability to integrate across business workflows. Adobe continues to build on its strong foundation of research and development, transformative innovation, category and brand leadership and world-class financial discipline, positioning itself as a trusted partner to companies of all sizes who look to its integrated ecosystems and connected workflows across creativity, productivity, and marketing.

Adobe generates revenue primarily through subscription-based offerings, with subscription revenue comprising 96% ¹ of total revenue in fiscal 2025. The company's core business model centers on cloud-based subscriptions to its creative, document, and experience solutions, serving customer audiences including business professionals, consumers, creators, creative professionals and marketing professionals. Adobe's strategy is to empower these customer audiences to be more creative, productive and successful through a connected ecosystem of tools, agents and workflows, with an AI strategy that infuses AI across apps, embeds purpose-built agents, provides choice of models and harnesses unique data assets. The company drives growth through customer-specific product innovation and go-to-market motions focused on two customer groups: Business Professionals & Consumers and Creative & Marketing Professionals, scaling digital and enterprise routes to market and an extensive partner ecosystem to expand addressable market.

Adobe's Digital Media segment provides products and services that enable individuals, teams, businesses, and enterprises to create, publish and promote content and accelerate productivity. This segment includes Creative Cloud flagship applications such as Adobe Photoshop, Adobe Illustrator, Adobe Lightroom, Adobe Premiere Pro and Adobe After Effects, as well as Adobe Acrobat, Adobe Express, Adobe Firefly and many more products available across surfaces and platforms. Digital Media segment revenue grew to $17.649 billion ² in fiscal 2025, up from $15.864 billion ³ in fiscal 2024, representing 11% ⁴ year-over-year growth. Digital Media ARR grew to $19.20 billion ⁵ at the end of fiscal 2025, representing 11.5% ⁶ year-over-year growth. Subscription revenue for the Digital Media segment was $17.389 billion ⁷ in fiscal 2025, up 12% ⁸ from $15.547 billion ⁹ in fiscal 2024, driven by strength in Creative Cloud Pro and other flagship apps as well as Acrobat across all routes to market and geographies.

Adobe's Digital Experience segment provides marketing professionals with an integrated platform and set of products, services and solutions that enable businesses to create, manage, execute, measure, monetize and optimize customer experiences. This segment includes Adobe Experience Platform and native applications such as Real-Time Customer Data Platform, Customer Journey Analytics, Adobe Experience Manager Sites, Adobe Commerce, Adobe Journey Optimizer, Adobe Marketo Engage and solutions within Adobe GenStudio. Digital Experience revenue was $5.864 billion ¹⁰ in fiscal 2025, up from $5.366 billion ¹¹ in fiscal 2024, representing 9% ¹² year-over-year growth. Subscription revenue for the Digital Experience segment grew to $5.409 billion ¹³ in fiscal 2025, up 11% ¹⁴ from $4.864 billion ¹⁵ in fiscal 2024, driven by strength in GenStudio solutions, and Adobe Experience Platform and related apps. The Publishing and Advertising segment, containing legacy products and services, generated $256 million ¹⁶ in revenue in fiscal 2025, a decrease of 7% ¹⁷ from $275 million ¹⁸ in fiscal 2024.

During fiscal 2025, Adobe released Acrobat Studio in August 2025, which brings together Adobe Acrobat, Adobe Express and AI agents to further unite productivity and creativity. In January 2025, the company issued $800 million ¹⁹ of senior notes due January 17, 2028, $700 million ²⁰ of senior notes due January 17, 2030 and $500 million ²¹ of senior notes due January 17, 2035. During fiscal 2025, Adobe entered into stock repurchase arrangements with large financial institutions and made payments totaling $11.28 billion ²² to repurchase shares. In September 2025, the company entered into a stock repurchase arrangement to execute up to $2.5 billion ²³ in open market repurchases. On November 18, 2025, Adobe entered into a definitive agreement to acquire Semrush Holdings, Inc. for approximately $1.9 billion ²⁴ of cash consideration. The company also repaid its 1.90% 2025 Notes and 3.25% 2025 Notes during the period.

Total revenue for fiscal 2025 was $23.769 billion ²⁵, an increase of 11% ²⁶ compared to $21.505 billion ²⁷ in fiscal 2024. Net income was $7.130 billion ²⁸ in fiscal 2025, an increase of 28% ²⁹ compared to $5.560 billion ³⁰ in fiscal 2024. Diluted net income per share was $16.70 ³¹ in fiscal 2025, compared to $12.36 ³² in fiscal 2024. Cash flows from operations were $10.031 billion ³³ in fiscal 2025, an increase of 25% ³⁴ compared to $8.056 billion ³⁵ in fiscal 2024, which were adversely impacted by payment of the $1 billion ³⁶ Figma termination fee. Total Adobe ARR grew to $25.20 billion ³⁷ exiting fiscal 2025, representing 11.5% ³⁸ year-over-year growth. Remaining performance obligations were $22.52 billion ³⁹ as of November 28, 2025, an increase of 13% ⁴⁰ from $19.96 billion ⁴¹ as of November 29, 2024.

The filing states that forward-looking statements involve risks, uncertainties and assumptions based on information available as of the date of the report, and Adobe assumes no obligation to update these forward-looking statements.

A major growth vector is the AI opportunity, which management describes as a generational opportunity to serve an increasingly large and diverse customer universe. Adobe's AI strategy infuses AI across its apps, embeds purpose-built agents, provides choice of models and harnesses unique data assets to deliver comprehensive solutions. The company is building agents on the Adobe Experience Platform to redefine customer connection by automating decision-making, optimizing workflows and enabling real-time orchestration of content, data and journeys. Adobe offers Firefly foundation models for generation and editing across categories, partners with an extensive ecosystem of third-party models, and offers the ability for individuals and enterprises to train Firefly generative AI models tailored to their specific requirements. The company's AI-powered solutions, including Acrobat AI Assistant, Adobe Firefly, and Adobe GenStudio, are designed to expand the user base and drive customer acquisition, engagement and retention.

Another growth vector is the expansion of customer groups through tailored go-to-market strategies. For Business Professionals & Consumers, Adobe is democratizing productivity and creativity with AI-driven applications, evolving Acrobat from a leading document productivity app to an integrated destination with Acrobat Studio. The company's Acrobat solutions, from freemium Acrobat Reader to Acrobat AI Assistant to Acrobat Studio, facilitate frictionless onboarding and scaled reach in serving the billions of potential users in this customer group. For Creative & Marketing Professionals, Adobe offers an end-to-end, ideation-to-creation platform powered by commercially safe Firefly models and an expansive partner model ecosystem, and unifies creative production and marketing execution with comprehensive content supply chain solutions centered around Adobe Experience Platform and Adobe GenStudio. The company continues to scale its digital and enterprise routes to market as well as its extensive partner ecosystem to expand its addressable market.

Management's discussion of margin and cost outlook is embedded in the financial results discussion. Total cost of revenue was $2.551 billion ⁴² in fiscal 2025, an increase of 8% ⁴³ compared to $2.358 billion ⁴⁴ in fiscal 2024. Operating expenses were $12.512 billion ⁴⁵ in fiscal 2025, remaining relatively flat compared to $12.406 billion ⁴⁶ in fiscal 2024, which included a $1 billion ⁴⁷ acquisition termination fee. Research and development expenses increased 9% ⁴⁸ to $4.294 billion ⁴⁹ in fiscal 2025, and sales and marketing expenses increased 13% ⁵⁰ to $6.488 billion ⁵¹. The company notes that developing, testing and deploying AI systems and third-party AI models may continue to increase the cost of solutions, including due to the nature of computing costs involved, which could adversely impact margins as the company continues to make significant investments in AI development.

Adobe's operational outlook focuses on continued investment in research and development to advance the value and impact of solutions and integrate generative and agentic technologies. The company employs 31,360 ⁵² people as of November 28, 2025, with 50% ⁵³ in the United States and 50% ⁵⁴ in international locations. During fiscal 2025, total attrition rate was 9.9% ⁵⁵. The company operates under a hybrid work model and continues to pilot, test and iterate its approach to support new ways of working. Adobe's properties include corporate headquarters in San Jose, California occupying approximately 1.7 million ⁵⁶ square feet of office space, and large offices in Bangalore, India and Noida, India of approximately 0.7 million ⁵⁷ and 0.7 million ⁵⁸ square feet, respectively.

Capital allocation priorities are evident from the filing. Research and development expenses were $4.294 billion ⁵⁹ in fiscal 2025. Capital expenditures for property and equipment were $179 million ⁶⁰ in fiscal 2025. Under the March 2024 stock repurchase authority, the Board granted authority to repurchase up to $25 billion ⁶¹ in common stock through March 14, 2028. As of November 28, 2025, $5.90 billion ⁶² remains under this authority. The company does not anticipate paying any cash dividends in the foreseeable future. In fiscal 2025, Adobe made payments totaling $11.281 billion ⁶³ to repurchase shares. The company also has a $1.5 billion ⁶⁴ senior unsecured revolving credit agreement that was undrawn as of November 28, 2025, and a $3 billion ⁶⁵ commercial paper program with no amounts outstanding.

Management identified several headwinds and constraints. Macroeconomic conditions including 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, pose risks. The company notes that adverse changes in global economic conditions have resulted and may result in customers' insolvency, inability to obtain credit, or delay in paying obligations. Foreign currency exposure is significant, with the U.S. Dollar strengthening against APAC currencies and weakening against EMEA currencies during fiscal 2025, resulting in a net decrease in revenue of approximately $18 million ⁶⁶ offset by net hedging gains of $22 million ⁶⁷. The company also faces risks from the rapidly evolving AI regulatory environment, including the EU AI Act which has obligations going into effect and being implemented in phases through 2030.

Structural headwinds include intense competition in rapidly evolving markets, with expectations that competition will continue to intensify. The company faces increasing competition from companies offering generative and agentic AI solutions, including prompt-based and multi-modal creation and editing, document productivity and understanding, ad distribution and creation, and purpose-built AI agents. Other companies may prevent, limit or interfere with Adobe's ability to use third-party models in its solutions. The company also faces risks related to the development and use of AI, including potential reputational harm, liability, and adverse business results if AI development, deployment, content labeling or governance is ineffective or inadequate. Additionally, the company's enterprise solutions have extended and complex sales cycles, which may increase costs and make sales cycles unpredictable, particularly as the company increasingly offers end-to-end solutions that include generative and agentic AI capabilities.

Adobe faces material risks from the rapid evolution of AI, as competitors may develop AI solutions more rapidly or successfully, and the company may not innovate effectively to keep pace with the rapid evolution of AI across its solutions, which could cause business and financial results to suffer materially. The company faces increasing competition from companies offering generative and agentic AI solutions, and other companies may prevent, limit or interfere with Adobe's ability to use third-party models in its solutions. Social, ethical and operational issues relating to AI use may result in reputational harm, liability and adverse business results, and jurisdictions are developing new regulations such as the EU AI Act, with non-compliant companies subject to administrative fines. Security incidents pose a significant risk, as the company's solutions collect, store, manage and process third-party data, and have been subject to cyberattacks, ransomware, and other cybersecurity incidents that have resulted in unauthorized access or disclosure of data. The company's investment portfolio of $6.595 billion ⁶⁸ in cash, cash equivalents and short-term investments is subject to credit, liquidity, market, and interest rate risks. As of November 28, 2025, the company had $6.15 billion ⁶⁹ in senior unsecured notes outstanding, and this debt may adversely affect financial condition by requiring dedication of cash flows to service debt and increasing vulnerability to adverse business conditions. The company's goodwill of $12.857 billion ⁷⁰ could become impaired if stock price, market capitalization or future cash flow estimates decline, requiring a significant charge to earnings.

Management's message emphasizes Adobe's mission to empower everyone to create, building innovative platforms and tools that unleash creativity, productivity and personalized customer experiences. The tone is forward-looking and confident, highlighting the massive opportunity and evolving role of creativity across roles and industries that have driven Adobe's growth over the past four decades and are expected to continue to drive growth. Management emphasizes the AI era as a generational opportunity, with Adobe harnessing the power of AI across solutions by bringing together commercially safe first-party and leading partner AI models, deploying conversational and agentic capabilities, ensuring ubiquity on all surfaces, delivering trusted and secure solutions, and expanding global presence. The strategic priorities for the period ahead center on three key areas: first, driving customer-focused innovation through product development and go-to-market motions focused on Business Professionals & Consumers and Creative & Marketing Professionals customer groups; second, executing an AI strategy that infuses AI across apps, embeds purpose-built agents, provides choice of models and harnesses unique data assets; and third, scaling differentiated digital and enterprise routes to market and automated workflows to expand brand value and global reach. Management notes that effective in the first quarter of fiscal 2026, the company will combine its prior segments into a single operating and reportable segment due to changes in how management intends to evaluate results, allocate resources and execute strategic opportunities.