Adobe(ADBE) - 2025 Q1 - Quarterly Report

Financial Performance - Digital Media ARR reached $17.63 billion as of February 28, 2025, reflecting a 12.6$15.66 billion a year earlier[148]. - Digital Media segment revenue grew to $4.23 billion in the first quarter of fiscal 2025, an increase of$411 million or 11% year-over-year[148]. - Digital Experience revenue was $1.41 billion in the first quarter of fiscal 2025, up$125 million or 10% compared to the previous year[150]. - Net income for the three months ended February 28, 2025, was $1.81 billion, an increase of$1.19 billion or 192% year-over-year[167]. - Total revenue for the three months ended February 28, 2025, was $5.71 billion, a 10$5.18 billion in the prior year[164]. - Total revenue for the three months ended February 28, 2025, was $5,714 million, a 10$5,182 million in the same period of 2024[170]. - Digital Media revenue increased by $411 million (11$4,227 million, while Digital Experience revenue rose by $125 million (10$1,414 million[170]. - Total subscription revenue grew by 12% to $5,483 million, driven by strong performance in Creative Cloud and Adobe Experience Platform[171]. Operating Expenses - Operating expenses decreased by$756 million or 21% to $2.93 billion during the three months ended February 28, 2025, primarily due to a$1 billion Figma termination fee incurred in the prior year[167]. - Operating expenses decreased by 21% to $2,929 million, primarily due to the absence of a$1 billion acquisition termination fee incurred in the prior year[182]. - Research and development expenses rose by 9% to $1,026 million, reflecting increased compensation and hosting costs[182]. - Total cost of revenue increased by 5$622 million, with subscription costs rising by 8% to $490 million[176]. Cash Flow and Liquidity - Cash flows from operations increased by$1.31 billion or 111% to $2.48 billion during the three months ended February 28, 2025[167]. - Net cash provided by operating activities for the three months ended February 28, 2025, was$2.48 billion, significantly higher than $1.17 billion for the same period in the previous year[211]. - Net cash used for investing activities was$484 million for the three months ended February 28, 2025, primarily due to purchases of short-term investments[212]. - Net cash used for financing activities amounted to $2.84 billion for the three months ended February 28, 2025, mainly due to stock repurchases and debt repayments[213]. - As of February 28, 2025, cash and cash equivalents totaled$6.76 billion, down from $7.61 billion on November 29, 2024[210]. - The company anticipates sufficient cash flows from operations and available credit to meet working capital and capital expenditure requirements for the next twelve months[215]. Debt and Financing - The company has a$1.5 billion senior unsecured revolving credit agreement, with no outstanding borrowings as of February 28, 2025[219]. - The company issued $800 million of senior notes due January 17, 2028, and has a total of$6.15 billion in senior notes outstanding as of February 28, 2025[221]. - The stock repurchase program has an authority to repurchase up to $25 billion in common stock through March 14, 2028, with$3.25 billion repurchased in the latest quarter[223][224]. - Interest expense increased by 130% to $62 million due to new senior notes issued in 2024[190]. Performance Obligations and Revenue Sources - Remaining performance obligations rose to$19.69 billion as of February 28, 2025, a 12% increase from $17.58 billion a year earlier[167]. - Subscription revenue for the three months ended February 28, 2025, was$5.48 billion, representing a 12% increase from $4.92 billion in the same period last year[164]. - Digital Experience subscription revenue grew to$1.30 billion in the first quarter of fiscal 2025, up from $1.16 billion, marking an 11$3,405 million (60% of total revenue), up 9% from $3,110 million; EMEA revenue increased by 14$1,502 million (26% of total revenue)[174]. Tax and Currency Impact - The effective tax rate decreased to 17% from 36% in the prior year, primarily due to the impact of the Figma acquisition termination fee[195]. - The company reported a net decrease in revenue of approximately $74 million due to foreign currency fluctuations, despite net hedging gains of$26 million[175]. Interest Rate Management - Interest rate swaps related to senior notes convert fixed rates to floating rates, with no significant impact expected from a hypothetical 50 basis point change in market interest rates[228]. - The company executed agreements increasing minimum purchase obligations by approximately $1.3 billion through December 2029[222].