Company achieves first $5 billion revenue quarter with exiting RPO of over $17 billion

Adobe (Nasdaq:ADBE) today reported financial results for its fourth quarter and fiscal year 2023 ended Dec. 1, 2023.

“Adobe drove record revenue of $19.41 billion in FY23 and 17 percent year-over-year EPS growth, with strong momentum across Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu Narayen, chair and CEO, Adobe. “Adobe’s strategy, category leadership, ground-breaking innovation, exceptional talent and global customer base position us well for 2024 and beyond.”

“Adobe’s remarkable performance in FY23 drove world-class margins and operating cash flows of $7.30 billion,” said Dan Durn, executive vice president and CFO, Adobe. “Adobe’s strategy, scale, speed of execution and profitability position the company for years of sustained success.”

Fourth Quarter Fiscal Year 2023 Financial Highlights

• Adobe achieved revenue of $5.05 billion in its fourth quarter of fiscal year 2023, which represents 12 percent year-over-year growth or 13 percent in constant currency. Diluted earnings per share was $3.23 on a GAAP basis and $4.27 on a non-GAAP basis.
• GAAP operating income in the fourth quarter was $1.74 billion and non-GAAP operating income was $2.34 billion. GAAP net income was $1.48 billion and non-GAAP net income was $1.96 billion.
• Cash flows from operations were $1.60 billion.
• Remaining Performance Obligations (“RPO”) exiting the quarter were $17.22 billion.
• Adobe repurchased approximately 1.8 million shares during the quarter.

Fourth Quarter Fiscal Year 2023 Business Segment Highlights

• Digital Media segment revenue was $3.72 billion, which represents 13 percent year-over-year growth or 14 percent in constant currency. Creative revenue grew to $3.00 billion, representing 12 percent year-over-year growth or 14 percent in constant currency. Document Cloud revenue was $721 million, representing 16 percent year-over-year growth or 17 percent in constant currency.
• Net new Digital Media Annualized Recurring Revenue (“ARR”) was $569 million, exiting the quarter with Digital Media ARR of $15.17 billion. Creative ARR grew to $12.37 billion and Document Cloud ARR grew to $2.81 billion.
• Digital Experience segment revenue was $1.27 billion, representing 10 percent year-over-year growth or 11 percent in constant currency. Digital Experience subscription revenue was $1.12 billion, representing 12 percent year-over-year growth as reported and in constant currency.

Fiscal Year 2023 Financial Highlights

• Adobe achieved record revenue of $19.41 billion in fiscal year 2023, which represents 10 percent year-over-year growth or 13 percent in constant currency. Diluted earnings per share was $11.82 on a GAAP basis and $16.07 on a non-GAAP basis.
• GAAP operating income was $6.65 billion and non-GAAP operating income was $8.92 billion. GAAP net income was $5.43 billion and non-GAAP net income was $7.38 billion.
• Adobe generated $7.30 billion in operating cash flows during the year.
• Adobe repurchased approximately 11.5 million shares during the year.

Fiscal Year 2023 Business Segment Highlights

• Digital Media segment revenue was $14.22 billion, which represents 11 percent year-over-year growth or 14 percent in constant currency. Net new Digital Media ARR was $1.91 billion during the fiscal year.
• Creative revenue grew to $11.52 billion, representing 10 percent year-over-year growth or 14 percent in constant currency.
• Document Cloud revenue was $2.70 billion, representing 13 percent year-over-year growth or 15 percent in constant currency.
• Digital Experience segment revenue was $4.89 billion, representing 11 percent year-over-year growth or 12 percent in constant currency. Digital Experience subscription revenue was $4.33 billion, representing 12 percent year-over-year growth or 13 percent in constant currency.

Financial Targets

Adobe is providing fiscal year 2024 targets, as well as first quarter targets which factor in current expectations for the macroeconomic and foreign exchange environments. As is customary, these targets do not reflect the planned acquisition of Figma.

Changes to foreign exchange rates have resulted in a $160 million upward revaluation to Adobe’s total Digital Media ARR balance entering fiscal 2024. As a reminder, ARR is forecasted annually at currency rates determined in December, and currency rates are held constant through that fiscal year for measurement purposes; end-of-year actual ARR balances are revalued in December at new rates for the next fiscal year.

The following table summarizes Adobe’s fiscal year 2024 targets:

The following table summarizes Adobe’s first quarter fiscal year 2024 targets:

Adobe to Host Conference Call

Adobe will webcast its fourth quarter and fiscal year 2023 earnings conference call today at 2:00 p.m. Pacific Time from its investor relations website: www.adobe.com/ADBE. Earnings documents, including Adobe management’s prepared conference call remarks with slides and an investor datasheet are posted to Adobe’s investor relations website in advance of the conference call for reference.

Forward-Looking Statements, Non-GAAP and Other Disclosures

In addition to historical information, this press release contains “forward-looking statements” within the meaning of applicable securities laws, including statements related to our business, strategy, artificial intelligence (“AI”) and innovation momentum; our market opportunity and future growth; market and AI trends; current macroeconomic conditions; fluctuations in foreign currency exchange rates; strategic investments; customer success; revenue; operating margin; operating efficiencies and annualized recurring revenue; tax rate on a GAAP and non-GAAP basis; earnings per share on a GAAP and non-GAAP basis; share count; and industry positioning. Each of the forward-looking statements we make in this press release involves risks, uncertainties and assumptions based on information available to us as of the date of this press release. Such risks and uncertainties, many of which relate to matters beyond our control, could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to: failure to innovate effectively and meet customer needs; issues relating to development and use of AI; failure to realize the anticipated benefits of investments or acquisitions; failure to compete effectively; damage to our reputation or brands; service interruptions or failures in information technology systems by us or third parties; security incidents; failure to effectively develop, manage and maintain critical third-party business relationships; risks associated with being a multinational corporation and adverse macroeconomic conditions; failure to recruit and retain key personnel; complex sales cycles; changes in, and compliance with, global laws and regulations, including those related to information security and privacy; failure to protect our intellectual property; litigation, regulatory inquiries and intellectual property infringement claims; changes in tax regulations; complex government procurement processes; risks related to fluctuations in or the timing of revenue recognition from our subscription offerings; fluctuations in foreign currency exchange rates; impairment charges; our existing and future debt obligations; catastrophic events; and fluctuations in our stock price. Further information on these and other factors are discussed in the section titled “Risk Factors” in Adobe’s most recently filed Annual Report on Form 10-K and Adobe's most recently filed Quarterly Reports on Form 10-Q. The risks described in this press release and in Adobe’s filings with the U.S. Securities and Exchange Commission should be carefully reviewed.

Undue reliance should not be placed on the financial information set forth in this press release, which reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in Adobe’s Annual Report on Form 10-K for our fiscal year ended Dec. 1, 2023, which Adobe expects to file in Jan. 2024. Adobe assumes no obligation to, and does not currently intend to, update these forward-looking statements.

A reconciliation between GAAP and non-GAAP earnings results and financial targets and a statement regarding use of non-GAAP financial information are provided at the end of this press release and on Adobe’s investor relations website.

About Adobe

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

©2023 Adobe. All rights reserved. Adobe, Creative Cloud, Document Cloud and the Adobe logo are either registered trademarks or trademarks of Adobe (or one of its subsidiaries) in the United States and/or other countries. All other trademarks are the property of their respective owners.

Use of Non-GAAP Financial Information

Adobe continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. Adobe's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe's operating results. Adobe believes these non-GAAP financial measures are useful because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making. This allows institutional investors, the analyst community and others to better understand and evaluate our operating results and future prospects in the same manner as management.

Adobe's management believes it is useful for itself and investors to review, as applicable, both GAAP information as well as non-GAAP measures, which may exclude items such as stock-based and deferred compensation expenses, amortization of intangibles, investment gains and losses, income tax adjustments, and the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Adobe uses these non-GAAP measures in order to assess the performance of Adobe's business and for planning and forecasting in subsequent periods. Whenever such a non-GAAP measure is used, Adobe provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

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