Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

106K characters. Original on sec.gov · Markdown

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ADOBE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value)


	May 29, 2026		November 28, 2025
	(Unaudited)		*()**
ASSETS
Current assets:
Cash and cash equivalents	$	4,919	$	5,431
Short-term investments	707		1,164
Trade receivables, net of allowances for doubtful accounts of $14 and $13, respectively	1,993		2,344
Prepaid expenses and other current assets	1,449		1,224
Total current assets	9,068		10,163
Property and equipment, net	1,870		1,873
Operating lease right-of-use assets, net	299		312
Goodwill	14,041		12,857
Other intangibles, net	1,012		495
Deferred income taxes	1,998		2,186
Other assets	1,645		1,610
Total assets	$	29,933	$	29,496

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	499	$	417
Accrued expenses and other current liabilities	2,455		2,648
Debt	1,843		—
Deferred revenue	7,152		6,905
Income taxes payable	38		153
Operating lease liabilities	91		77
Total current liabilities	12,078		10,200
Long-term liabilities:
Debt	4,802		6,210
Deferred revenue	98		125
Income taxes payable	536		469
Operating lease liabilities	329		361
Other liabilities	572		508
Total liabilities	18,415		17,873
Stockholders’ equity:
Preferred stock, $0.0001 par value; 2 shares authorized; none issued	—		—
Common stock, $0.0001 par value; 900 shares authorized; 601 shares issued; 399 and 413 shares outstanding, respectively	—		—
Additional paid-in capital	16,416		15,361
Retained earnings	48,767		45,354
Accumulated other comprehensive income (loss)	(247)		(245)
Treasury stock, at cost (202 and 188 shares, respectively)	(53,418)		(48,847)
Total stockholders’ equity	11,518		11,623
Total liabilities and stockholders’ equity	$	29,933	$	29,496

(*) The condensed consolidated balance sheet as of November 28, 2025 has been derived from the audited consolidated financial statements at that date but does 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.

ADOBE INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	May 29, 2026		May 30, 2025		May 29, 2026		May 30, 2025
Revenue:
Subscription	$	6,416	$	5,641	$	12,614	$	11,124
Product	89		88		179		183
Services and other	113		144		223		280
Total revenue	6,618		5,873		13,016		11,587
Cost of revenue:
Subscription	586		505		1,126		995
Product	5		6		11		12
Services and other	124		127		242		253
Total cost of revenue	715		638		1,379		1,260
Gross profit	5,903		5,235		11,637		10,327
Operating expenses:
Research and development	1,198		1,082		2,308		2,108
Sales and marketing	1,884		1,626		3,592		3,121
General and administrative	546		377		1,009		744

Amortization of intangibles	37		41		72		82
Total operating expenses	3,665		3,126		6,981		6,055
Operating income	2,238		2,109		4,656		4,272
Non-operating income (expense):
Interest expense	(65)		(68)		(128)		(130)
Investment gains (losses), net	18		2		23		8
Other income (expense), net	47		58		109		133
Total non-operating income (expense), net	—		(8)		4		11
Income before income taxes	2,238		2,101		4,660		4,283
Provision for income taxes	526		410		1,059		781
Net income	$	1,712	$	1,691	$	3,601	$	3,502
Basic net income per share	$	4.26	$	3.95	$	8.86	$	8.10
Shares used to compute basic net income per share	402		428		406		432
Diluted net income per share	$	4.25	$	3.94	$	8.86	$	8.08
Shares used to compute diluted net income per share	402		429		407		433

See accompanying notes to condensed consolidated financial statements.

ADOBE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended				Six Months Ended
	May 29, 2026		May 30, 2025		May 29, 2026		May 30, 2025

	Increase/(Decrease)				Increase/(Decrease)
Net income	$	1,712	$	1,691	$	3,601	$	3,502
Other comprehensive income (loss), net of taxes:
Available-for-sale securities:
Unrealized gains / losses on available-for-sale securities	—		—		—		1


Derivatives designated as hedging instruments:
Unrealized gains / losses on derivative instruments	54		(281)		(42)		(187)
Reclassification adjustment for realized gains / losses on derivative instruments	23		(2)		46		(22)
Net increase (decrease) from derivatives designated as hedging instruments	77		(283)		4		(209)
Foreign currency translation adjustments	(29)		108		(6)		76
Other comprehensive income (loss), net of taxes	48		(175)		(2)		(132)
Total comprehensive income, net of taxes	$	1,760	$	1,516	$	3,599	$	3,370

See accompanying notes to condensed consolidated financial statements.

ADOBE INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

(Unaudited)


	Three Months Ended May 29, 2026
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock
	Shares	Amount						Shares			Amount		Total
Balances at February 27, 2026	601	$	—	$	15,870	$	47,170		$	(295)		(195)		$	(51,312)	$	11,433
Net income	—	—		—		1,712			—			—		—		1,712
Other comprehensive income (loss), net of taxes	—	—		—		—			48			—		—		48
Re-issuance of treasury stock under stock compensation plans	—	—		—		(115)			—			1		24		(91)
Repurchases of common stock	—	—		—		—			—			(8)		(2,130)		(2,130)
Replacement awards related to acquisition	—	—		12		—			—			—		—		12
Stock-based compensation	—	—		534		—			—			—		—		534

Balances at May 29, 2026	601	$	—	$	16,416	$	48,767		$	(247)		(202)		$	(53,418)	$	11,518


	Three Months Ended May 30, 2025
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock
	Shares	Amount						Shares			Amount		Total
Balances at February 28, 2025	601	$	—	$	13,894	$	40,186		$	(158)		(166)		$	(40,827)	$	13,095
Net income	—	—		—		1,691			—			—		—		1,691
Other comprehensive income (loss), net of taxes	—	—		—		—			(175)			—		—		(175)
Re-issuance of treasury stock under stock compensation plans	—	—		—		(133)			—			1		21		(112)
Repurchases of common stock	—	—		—		—			—			(9)		(3,531)		(3,531)

Stock-based compensation	—	—		481		—			—			—		—		481
Value of shares in deferred compensation plan	—	—		—		—			—			—		(1)		(1)
Balances at May 30, 2025	601	$	—	$	14,375	$	41,744		$	(333)		(174)		$	(44,338)	$	11,448

ADOBE INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

(Unaudited)


	Six Months Ended May 29, 2026
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock
	Shares	Amount						Shares			Amount		Total
Balances at November 28, 2025	601	$	—	$	15,361	$	45,354		$	(245)		(188)		$	(48,847)	$	11,623
Net income	—	—		—		3,601			—			—		—		3,601
Other comprehensive income (loss), net of taxes	—	—		—		—			(2)			—		—		(2)
Re-issuance of treasury stock under stock compensation plans	—	—		—		(188)			—			2		58		(130)
Repurchases of common stock	—	—		—		—			—			(16)		(4,630)		(4,630)
Replacement awards related to acquisition	—	—		12		—			—			—		—		12
Stock-based compensation	—	—		1,043		—			—			—		—		1,043
Value of shares in deferred compensation plan	—	—		—		—			—			—		1		1
Balances at May 29, 2026	601	$	—	$	16,416	$	48,767		$	(247)		(202)		$	(53,418)	$	11,518


	Six Months Ended May 30, 2025
	Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock
	Shares	Amount						Shares			Amount		Total
Balances at November 29, 2024	601	$	—	$	13,419	$	38,470		$	(201)		(160)		$	(37,583)	$	14,105
Net income	—	—		—		3,502			—			—		—		3,502
Other comprehensive income (loss), net of taxes	—	—		—		—			(132)			—		—		(132)
Re-issuance of treasury stock under stock compensation plans	—	—		—		(228)			—			2		53		(175)
Repurchases of common stock	—	—		—		—			—			(16)		(6,808)		(6,808)

Stock-based compensation	—	—		956		—			—			—		—		956

Balances at May 30, 2025	601	$	—	$	14,375	$	41,744		$	(333)		(174)		$	(44,338)	$	11,448

See accompanying notes to condensed consolidated financial statements.

ADOBE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended
	May 29, 2026		May 30, 2025
Cash flows from operating activities:
Net income	$	3,601	$	3,502
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	367		426
Stock-based compensation	1,043		956
Deferred income taxes	111		(288)
Impairment of goodwill	70		—
Other non-cash items	76		35
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
Trade receivables, net	368		334
Prepaid expenses and other assets	(377)		(221)
Trade payables	15		7
Accrued expenses and other liabilities	(215)		(92)
Income taxes payable	(53)		(61)
Deferred revenue	117		75
Net cash provided by operating activities	5,123		4,673
Cash flows from investing activities:
Purchases of short-term investments	(796)		(742)
Maturities of short-term investments	1,265		242
Proceeds from sales of short-term investments	5		3

Acquisitions, net of cash acquired	(1,560)		—
Purchases of property and equipment	(95)		(73)
Purchases of long-term investments, intangibles and other assets	(62)		(195)
Other investing activities, net	3		3
Net cash used for investing activities	(1,240)		(762)
Cash flows from financing activities:
Repurchases of common stock	(4,589)		(6,750)
Proceeds from re-issuance of treasury stock	84		96
Taxes paid related to net share settlement of equity awards	(214)		(271)
Proceeds from issuance of debt	493		1,997
Repayment of debt	—		(1,500)

Other financing activities, net	(173)		(201)
Net cash used for financing activities	(4,399)		(6,629)
Effect of foreign currency exchange rates on cash and cash equivalents	4		36
Net change in cash and cash equivalents	(512)		(2,682)
Cash and cash equivalents at beginning of period	5,431		7,613
Cash and cash equivalents at end of period	$	4,919	$	4,931
Supplemental disclosures:
Cash paid for income taxes, net of refunds	$	1,089	$	1,182
Cash paid for interest	$	122	$	115

See accompanying notes to condensed consolidated financial statements.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

We have prepared the accompanying 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 annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the 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 consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended November 28, 2025 on file with the SEC (our “Annual Report”).

Use of Estimates

In preparing the condensed consolidated financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, we must make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ materially from these estimates.

Significant Accounting Policies

There have been no material changes to our significant accounting policies as compared to the significant accounting policies described in our Annual Report.

Recent Accounting Pronouncements Not Yet Effective

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes, which prescribes standardized categories and disaggregation of information in the reconciliation of provision for income taxes, requires disclosure of disaggregated income taxes paid, and modifies other income tax-related disclosure requirements. The updated standard is effective for our annual report for fiscal 2026. We are currently evaluating the impact that the updated standard will have on our annual financial statement disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which requires additional disclosure of certain costs and expenses within the notes to the financial statements. The updated standard is effective for our annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our financial statement disclosures.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software, which modernizes the accounting for internal-use software and clarifies capitalization criteria. The updated standard is effective for us beginning with our interim and annual reporting periods of fiscal 2029. Early adoption is permitted. We are currently evaluating the impact that the updated standard will have on our Consolidated Financial Statements.

There have been no other recent accounting pronouncements or changes in accounting pronouncements that are of significance or potential significance to us.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 2. REVENUE

Our revenue is derived from the sale of cloud-enabled software subscriptions, cloud-hosted offerings, term-based, royalty, and perpetual software licenses, associated software maintenance and support plans, consulting services, training and technical support.

Disaggregation of Revenue

Revenue by geographic area for the three and six months ended May 29, 2026 and May 30, 2025 were as follows:


	Three Months				Six Months
(in millions)	2026		2025		2026		2025
Americas	$	3,872	$	3,500	$	7,627	$	6,905
EMEA	1,809		1,541		3,548		3,043
APAC	937		832		1,841		1,639
Total	$	6,618	$	5,873	$	13,016	$	11,587

Subscription revenue for the three and six months ended May 29, 2026 and May 30, 2025 were as follows:


	Three Months				Six Months
(in millions)	2026		2025		2026		2025
Creative & Marketing Professionals customer group	$	4,537	$	4,019	$	8,926	$	7,941
Business Professionals & Consumers customer group	1,853		1,595		3,635		3,129
Total customer group subscription revenue	$	6,390	$	5,614	$	12,561	$	11,070
Other subscription revenue	26		27		53		54
Total subscription revenue	$	6,416	$	5,641	$	12,614	$	11,124

Contract Balances

A 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 balance sheets are unbilled receivable balances which have not yet been invoiced, and are mainly related to subscription revenue that has been delivered prior to invoicing. As of May 29, 2026, the balance of trade receivables, net of allowance for doubtful accounts, was $1.99 billion, inclusive of unbilled receivables of $89 million. As of November 28, 2025, the balance of trade receivables, net of allowance for doubtful accounts, was $2.34 billion, inclusive of unbilled receivables of $74 million.

We maintain an allowance for doubtful accounts which reflects our best estimate of potentially uncollectible trade receivables and is based on both specific and general reserves. We maintain general reserves on a collective basis by considering factors such as historical experience, credit-worthiness, the age of the trade receivable balances, current economic conditions and a reasonable and supportable forecast of future economic conditions. The allowance for doubtful accounts was $14 million and $13 million as of May 29, 2026 and November 28, 2025, respectively.

A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. We regularly review contract asset balances for impairment, considering factors such as historical experience, credit-worthiness, age of the balance, current economic conditions and a reasonable and supportable forecast of future economic conditions. Contract asset impairments were not material for the six months ended May 29, 2026. Contract assets were $178 million and $241 million as of May 29, 2026 and November 28, 2025, respectively.

Deferred revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services, including non-cancellable and non-refundable committed funds and refundable customer deposits. Deferred revenue is recognized as revenue when transfer of control to customers has occurred. As of May 29, 2026, the balance of deferred revenue was $7.25 billion, which includes $99 million of refundable customer deposits. Arrangements with some of

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

As of November 28, 2025, the balance of deferred revenue was $7.03 billion. During the three and six months ended May 29, 2026, approximately $2.09 billion and $5.30 billion of revenue, respectively, was recognized that was included in the balance of deferred revenue as of November 28, 2025.

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 May 29, 2026, remaining performance obligations were approximately $22.27 billion. Non-cancellable and non-refundable funds related to some of our enterprise customer agreements referred to above comprised approximately 3% of the total remaining performance obligations. Approximately 67% of the remaining performance obligations, excluding the aforementioned enterprise customer agreements, are expected to be recognized over the next 12 months with the remainder recognized thereafter.

Incremental costs of obtaining a contract with a customer are capitalized if we expect the benefit of those costs to be longer than one year and primarily relate to sales commissions paid to our sales force personnel. Capitalized contract acquisition costs are included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion on the condensed consolidated balance sheets. Capitalized contract acquisition costs were $782 million and $721 million as of May 29, 2026 and November 28, 2025, 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 and other current liabilities on the condensed consolidated balance sheets. Refund liabilities were $122 million and $137 million as of May 29, 2026 and November 28, 2025, respectively.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 3. ACQUISITIONS

Semrush

On April 28, 2026, we completed the acquisition of Semrush Holdings, Inc. (“Semrush”), a publicly held brand visibility platform company, for $1.87 billion, primarily in cash consideration. The acquisition enhances our ability to serve marketers at every scale, with solutions for search engine optimization, generative engine optimization and agentic search optimization. Following the closing, we began integrating Semrush into our operations and have included the financial results of Semrush in our condensed consolidated financial statements beginning on the acquisition date.

Purchase Price Allocation

The table below represents the preliminary purchase price allocation to the acquired net tangible and intangible assets of Semrush based on their estimated fair values as of the acquisition date and the associated estimated useful lives at that date. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date.


(dollars in millions)	Amount		Weighted Average Useful Life (years)
Purchased technology	$	415	7
Customer contracts and relationships	107		11
Trademarks	60		7
Total identifiable intangible assets	582
Cash and cash equivalents	262		N/A
Other net liabilities assumed(1)	(221)		N/A
Goodwill(2)	1,251		N/A
Total purchase price	$	1,874

(1)Primarily comprised of deferred revenue and deferred tax liabilities.

(2)Non-deductible for income tax purposes.

The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. The resulting goodwill is primarily attributable to the assembled workforce and expected synergies from combining Semrush’s platform with Adobe’s existing offerings.

Financial results and pro forma financial information have not been presented for the Semrush acquisition as the impact to our condensed consolidated financial statements was not material.

NOTE 4. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash 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 value, 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 (loss), net of taxes, in our condensed consolidated balance sheets. Unrealized credit-related 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 realized in our condensed consolidated statements of income.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Cash, cash equivalents and short-term investments consisted of the following as of May 29, 2026:


(in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	766	$	—	$	—	$	766
Cash equivalents:
Corporate debt securities	806		—		—		806
Money market funds	3,252		—		—		3,252

Time deposits	95		—		—		95


Total cash equivalents	4,153		—		—		4,153
Total cash and cash equivalents	4,919		—		—		4,919
Short-term fixed income securities:

Corporate debt securities	606		—		—		606



U.S. Treasury securities	101		—		—		101
Total short-term investments(1)	707		—		—		707
Total cash, cash equivalents and short-term investments	$	5,626	$	—	$	—	$	5,626

(1)As of May 29, 2026, all short-term fixed income debt securities classified as short-term investments had stated effective maturities within one year.

Cash, cash equivalents and short-term investments consisted of the following as of November 28, 2025:


(in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	711	$	—	$	—	$	711
Cash equivalents:
Corporate debt securities	928		—		—		928
Money market funds	3,607		—		—		3,607

Time deposits	85		—		—		85
U.S. Treasury securities	100		—		—		100
Total cash equivalents	4,720		—		—		4,720
Total cash and cash equivalents	5,431		—		—		5,431
Short-term fixed income securities:


Corporate debt securities	914		—		—		914



U.S. Treasury securities	250		—		—		250


Total short-term investments	1,164		—		—		1,164
Total cash, cash equivalents and short-term investments	$	6,595	$	—	$	—	$	6,595

See Note 5 for further information regarding the fair value of our financial instruments.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We review our debt securities classified as short-term investments on a regular basis for impairment. For debt securities in unrealized loss positions, we determine whether any portion of the decline in fair value below the 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 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 factors in determining whether or not a credit loss exists. During the six months ended May 29, 2026 and May 30, 2025, we did not recognize an allowance for credit-related losses on any of our investments.

NOTE 5. FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The fair value of our financial assets and liabilities at May 29, 2026 was determined using the following inputs:


(in millions)	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate debt securities	$	806	$	—	$	806	$	—

Money market funds	3,252		3,252		—		—

Time deposits	95		95		—		—


Short-term investments:

Corporate debt securities	606		—		606		—





U.S. Treasury securities	101		—		101		—
Prepaid expenses and other current assets:
Foreign currency derivatives	69		—		69		—


Other assets:
Deferred compensation plan assets	385		385		—		—
Foreign currency derivatives	11		—		11		—
Interest rate swap derivatives	35		—		35		—
Total assets	$	5,360	$	3,732	$	1,628	$	—


Liabilities:
Accrued expenses and other current liabilities:

Foreign currency derivatives	$	89	$	—	$	89	$	—
Interest rate swap derivatives	10		—		10		—
Other liabilities:
Foreign currency derivatives	9		—		9		—
Interest rate swap derivatives	2		—		2		—
Total liabilities	$	110	$	—	$	110	$	—

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The fair value of our financial assets and liabilities at November 28, 2025 was determined using the following inputs:


(in millions)	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate debt securities	$	928	$	—	$	928	$	—
Money market funds	3,607		3,607		—		—

Time deposits	85		85		—		—
U.S. Treasury securities	100		—		100		—
Short-term investments:

Corporate debt securities	914		—		914		—




U.S. Treasury securities	250		—		250		—
Prepaid expenses and other current assets:
Foreign currency derivatives	62		—		62		—
Interest rate swap derivatives	2		—		2		—
Other assets:
Deferred compensation plan assets	342		342		—		—
Foreign currency derivatives	22		—		22		—
Interest rate swap derivatives	92		—		92		—
Total assets	$	6,404	$	4,034	$	2,370	$	—


Liabilities:
Accrued expenses and other current liabilities:

Foreign currency derivatives	$	94	$	—	$	94	$	—
Interest rate swap derivatives	8		—		8		—
Other liabilities:
Foreign currency derivatives	6		—		6		—
Total liabilities	$	108	$	—	$	108	$	—

See Note 4 for further information regarding the fair value of our financial instruments.

Our fixed income available-for-sale debt securities consist of high quality, investment grade securities from diverse issuers. We value these securities based on pricing from independent pricing vendors who use matrix pricing valuation techniques including market approach methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Inputs include quoted prices in active markets for identical assets or inputs other than quoted prices that are observable either directly or indirectly in determining fair value, including benchmark yields, issuer spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. We therefore categorize all of our fixed income available-for-sale securities as Level 2. We perform routine procedures such as comparing prices obtained from multiple independent sources to ensure that appropriate fair values are recorded.

The fair values of our money market funds, time deposits and deferred compensation plan assets, which consist of money market and other mutual funds, are based on quoted prices in active markets at the measurement date.

Our over-the-counter foreign currency and interest rate swap derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Our other current financial assets and current financial liabilities have fair values that approximate their carrying values.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The fair value of our senior notes was $6.08 billion as of May 29, 2026, excluding the associated interest rate swaps, based on observable market prices in less active markets and categorized as Level 2. See Note 14 for further details regarding our debt.

NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS

We may use derivatives to partially offset our business exposure to foreign currency and interest rate risk on expected future cash flows and certain existing assets and liabilities. We do not use any of our derivative instruments for trading purposes.

We enter into master netting arrangements to mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. We also enter into collateral security agreements with certain of our counterparties to exchange cash collateral when the net fair value of certain derivative instruments fluctuates from contractually established thresholds. Collateral posted is included in prepaid expenses and other current assets and collateral received is included in accrued expenses and other current liabilities on our condensed consolidated balance sheets.

Cash Flow Hedges

In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange forward contracts and option contracts to hedge a portion of our forecasted foreign currency denominated revenue and expenses. These foreign exchange contracts, carried at fair value, have maturities of up to 24 months. As of May 29, 2026 and November 28, 2025, gross notional amounts of outstanding cash flow hedges were $6.16 billion and $5.97 billion, respectively, hedging exposures denominated in Euros, Japanese Yen, British Pounds, Australian Dollars, Canadian Dollars and Indian Rupees.

As of May 29, 2026, we had net derivative losses on our foreign currency cash flow hedges expected to be recognized within the next 36 months, of which $26 million of net losses are expected to be recognized into revenue within the next 12 months.

Fair Value Hedges

We have entered into interest rate swaps related to certain of our senior notes. The interest rate swaps effectively convert the fixed interest rates on the notes to floating interest rates based on the Secured Overnight Financing Rate Overnight Index Swap Rate (“SOFR OIS”). Under the terms of the swaps, we pay quarterly interest at the daily compounded SOFR OIS plus a fixed number of basis points on the $2.70 billion notional amount through the respective par call dates for the notes. In exchange, we receive the fixed rate interest on the notes from the swap counterparties on a semi-annual basis. See Note 14 for further details regarding our debt.

The interest rate swaps are designated as fair value hedges. We record changes in fair value on the swaps associated with the hedged risk in interest expense in our condensed consolidated statements of income with a corresponding offset to the value of the senior notes being hedged.

Non-Designated Hedges

Our 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. As of May 29, 2026, gross notional amounts of outstanding contracts were $545 million, primarily hedging exposures denominated in Japanese Yen, Euros, Indian Rupees and Australian Dollars. As of November 28, 2025, gross notional amounts of outstanding contracts were $563 million, primarily hedging exposures denominated in Euros, Indian Rupees, Australian Dollars and British Pounds.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fair value asset derivatives 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 and other current liabilities for the current portion and other liabilities for the long-term portion on our condensed consolidated balance sheets. The fair value of derivative instruments as of May 29, 2026 and November 28, 2025 were as follows:


(in millions)	2026				2025
	Fair Value Asset Derivatives		Fair Value Liability Derivatives		Fair Value Asset Derivatives		Fair Value Liability Derivatives
Derivatives designated as hedging instruments:

Foreign exchange contracts	$	79	$	96	$	82	$	99

Interest rate swaps	35		12		94		8
Derivatives not designated as hedging instruments:
Foreign exchange contracts	1		2		2		1
Total derivatives	$	115	$	110	$	178	$	108

Unrealized gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three and six months ended May 29, 2026 were primarily associated with our foreign exchange contracts, for which we recognized $54 million net gains and $42 million of net losses, respectively. Unrealized gains and losses on derivative instruments, net of tax, for the three and six months ended May 30, 2025 were primarily associated with our foreign exchange contracts, for which we recognized $281 million and $187 million of net losses, respectively.

For the three and six months ended May 29, 2026 and May 30, 2025, the effects of derivative instruments on our condensed consolidated statements of income were immaterial.

NOTE 7. GOODWILL AND OTHER INTANGIBLES

Goodwill as of May 29, 2026 and November 28, 2025 was $14.04 billion and $12.86 billion, respectively. The increase was due to our acquisition of Semrush in the second quarter of fiscal 2026, partially offset by a goodwill impairment charge of $70 million associated with our Publishing & Advertising reporting unit, which was recorded in general and administrative expenses.

Other intangible assets subject to amortization as of May 29, 2026 and November 28, 2025 were as follows:


(in millions)	2026						2025
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Customer contracts and relationships	$	1,117	$	(711)	$	406	$	1,208	$	(857)	$	351
Purchased technology	490		(60)		430		881		(853)		28
Trademarks	402		(291)		111		372		(301)		71


Other	81		(16)		65		60		(15)		45
Other intangibles, net	$	2,090	$	(1,078)	$	1,012	$	2,521	$	(2,026)	$	495

During the six months ended May 29, 2026, other intangibles, net, increased primarily due to identifiable intangible assets acquired through Semrush, partially offset by amortization expense. Amortization expense related to other intangibles was $50 million and $91 million for the three and six months ended May 29, 2026, respectively. Comparatively, amortization expense related to other intangibles was $83 million and $167 million for the three and six months ended May 30, 2025, respectively. Of these amounts, $12 million and $17 million were included in cost of revenue for the three and six months ended May 29, 2026, respectively, and $42 million and $85 million were included in cost of revenue for the three and six months ended May 30, 2025, respectively.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

As of May 29, 2026, the estimated aggregate amortization expense in future periods was as follows:


(in millions)
Fiscal Year	Other Intangibles
Remainder of 2026	$	131
2027	208
2028	151
2029	146
2030	143
Thereafter	233
Total expected amortization expense	$	1,012

NOTE 8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities as of May 29, 2026 and November 28, 2025 consisted of the following:


(in millions)	2026		2025
Accrued compensation costs	$	1,223	$	1,345
Accrued corporate marketing	222		197
Sales and use taxes payable	147		150
Refund liabilities	122		137
Fair value of derivative liabilities	99		102
Excise taxes payable	41		105




Derivative collateral liabilities	33		101
Other	568		511
Accrued expenses and other current liabilities	$	2,455	$	2,648

Other primarily includes general business accruals, accrued hosting fees and interest payable.

NOTE 9. STOCK-BASED COMPENSATION

Restricted Stock Units

Restricted stock unit activity for the six months ended May 29, 2026 was as follows:


	Number of Shares (in millions)	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in millions)
Beginning outstanding balance	7.9	$	436.52
Awarded	7.0	$	293.34
Released	(2.0)	$	421.11
Forfeited	(0.5)	$	406.22
Increase due to acquisition	0.4	$	215.23
Ending outstanding balance	12.8	$	355.44	$	3,312

Expected to vest	11.7	$	356.94	$	3,019

The total fair value of restricted stock units vested during the six months ended May 29, 2026 was $541 million.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Performance Shares

In the first quarter of fiscal 2026, the Executive Compensation Committee of our Board of Directors (the “ECC”) approved the 2026 Performance Share Program, the terms of which are similar to the 2025 Performance Share Program that is still outstanding. For information regarding our outstanding Performance Share Programs, including the terms, see “Note 12. Stock-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended November 28, 2025.

As of May 29, 2026, performance shares awarded under our 2026, 2025 and 2024 Performance Share Programs remained outstanding and unvested.

Performance share activity for the six months ended May 29, 2026 was as follows:


	Number of Shares (in millions)	Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in millions)
Beginning outstanding balance	0.6	$	501.16
Awarded	0.3	$	339.26
Released	(0.2)	$	472.18
Forfeited	(0.1)	$	477.37
Ending outstanding balance	0.6	$	430.11	$	155

Expected to vest	0.5	$	434.55	$	140

Under our Performance Share Programs, participants generally have the ability to receive up to 200% of the target number of shares originally granted. Shares released during the six months ended May 29, 2026 resulted from overall payout at 83% of target for the 2023 Performance Share Program, as certified by the ECC in the first quarter of fiscal 2026.

The total fair value of performance shares vested during the six months ended May 29, 2026 was $62 million.

Employee Stock Purchase Plan Shares

Employees purchased 0.3 million shares at an average price of $297.49 and 0.3 million shares at an average price of $305.04 for the six months ended May 29, 2026 and May 30, 2025, respectively. The intrinsic value of shares purchased during the six months ended May 29, 2026 and May 30, 2025 was $15 million and $44 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.

Compensation Costs

As of May 29, 2026, there was $4.21 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 2.55 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 six months ended May 29, 2026 and May 30, 2025 were as follows:


	Three Months				Six Months
(in millions)	2026		2025		2026		2025
Cost of revenue	$	35	$	31	$	66	$	61
Research and development	277		247		548		494
Sales and marketing	150		141		292		278
General and administrative	74		62		139		123
Total	$	536	$	481	$	1,045	$	956

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 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)	November 28, 2025		Increase / Decrease		Reclassification Adjustments			May 29, 2026




Net unrealized gains / losses on derivative instruments designated as hedging instruments	$	(45)	$	(42)	$	46	(1)	$	(41)
Cumulative foreign currency translation adjustments	(200)		(6)		—			(206)
Total accumulated other comprehensive income (loss), net of taxes	$	(245)	$	(48)	$	46		$	(247)

(1) Reclassification adjustments for gains / losses on foreign currency hedges are classified in revenue or operating expenses, depending on the nature of the underlying transaction, and reclassification adjustments for gains / losses on Treasury lock hedges are classified in interest expense.

Taxes related to each component of other comprehensive income (loss) for the three and six months ended May 29, 2026 and May 30, 2025 were immaterial.

NOTE 11. STOCK REPURCHASE PROGRAM

To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we may repurchase our shares in the open market or enter into structured repurchase agreements with third parties. In March 2024, our Board of Directors granted authority to repurchase up to $25 billion in our common stock through March 14, 2028. In April 2026, our Board of Directors granted additional authority to repurchase up to $25 billion in our common stock through April 30, 2030. As of May 29, 2026, a total of $26.78 billion remained under our stock repurchase authorities.

Share repurchase activity for the six months ended May 29, 2026 and May 30, 2025 was as follows:


(in millions)	Number of Shares Delivered	Amount Paid
Six months ended May 29, 2026


Open market repurchases	16.6	$	4,588

Six months ended May 30, 2025
Accelerated share repurchase agreements	14.5	$	6,250

Open market repurchases	1.1	500
Total	15.6	$	6,750

Prepayments for stock repurchases are classified as treasury stock, a component of stockholders’ equity on our condensed consolidated 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.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 12. NET INCOME PER SHARE

Basic net income per share is computed using the weighted average number of common shares outstanding for the period, excluding unvested stock-based awards and purchase rights. Diluted net income per share is based upon the weighted average common shares outstanding for the period plus dilutive potential common shares, including unvested restricted stock units, stock purchase rights and performance share awards using the treasury stock method. Performance share awards are included based on the number of shares that would be issued as if the end of the reporting period was the end of the performance period and the result was dilutive.

The following table sets forth the computation of basic and diluted net income per share for the three and six months ended May 29, 2026 and May 30, 2025:


	Three Months				Six Months
(in millions, except per share data)	2026		2025		2026		2025
Net income	$	1,712	$	1,691	$	3,601	$	3,502

Shares used to compute basic net income per share	402.4		428.2		406.3		432.2
Dilutive potential common shares from stock plans and programs	0.1		0.7		0.3		1.0


Shares used to compute diluted net income per share	402.5		428.9		406.6		433.2

Basic net income per share	$	4.26	$	3.95	$	8.86	$	8.10
Diluted net income per share	$	4.25	$	3.94	$	8.86	$	8.08

Anti-dilutive potential common shares	12.1		6.4		9.2		4.5

NOTE 13. COMMITMENTS AND CONTINGENCIES

Indemnifications

In the ordinary course of business, we provide indemnifications of varying scope to our customers and channel partners against claims of intellectual property 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 maximum 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 request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and 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 Proceedings

We are subject to legal proceedings, claims, including claims relating to intellectual property, consumer protection, 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 indeterminate 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 accrue for such claims in our financial statements. This determination is then reviewed and discussed with the Audit Committee of the Board of Directors.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. As of May 29, 2026, we accrued provisions for legal liabilities that were probable and estimable, which were not material to our financial statements. Unless otherwise specifically disclosed in this note, we have determined that no disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, results of operations or cash flows could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations.

Since June 2022, we had been cooperating with the Federal Trade Commission (the “FTC”) staff in response to a Civil Investigative Demand seeking information regarding our disclosure and subscription cancellation practices relative to the Restore Online Shoppers’ Confidence Act (“ROSCA”). In November 2023, the FTC staff asserted that they had the authority to enter into consent negotiations to determine if a settlement regarding their investigation of these issues could be reached. On March 20, 2024, we were informed that the FTC had voted to authorize a filing of the case. The FTC then referred the case to the Department of Justice (the “DOJ”), and on June 17, 2024, the DOJ filed a civil complaint in the United States District Court for the Northern District of California (the “Court”), 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 cancellation mechanism regarding our disclosure and subscription cancellation practices in violation of ROSCA and the FTC Act. The DOJ sought injunctive relief, civil penalties, equitable monetary relief and other relief. On October 7, 2024, we filed a motion to dismiss the DOJ’s civil complaint, and that motion was fully briefed as of December 23, 2024. On May 2, 2025, the Court denied our motion to dismiss the complaint, and discovery then ensued. On March 12, 2026, we reached an agreement to settle the action, and on March 13, 2026, we filed a stipulation of dismissal with the Court.

On October 20, 2023, a securities class action captioned Pembroke Pines Firefighters & Police Officers Pension Fund et al v. Adobe, Inc. et al, renamed as In Re Adobe Inc. Securities Litigation, 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 current and former officers as defendants. The Securities Action purports to be brought on behalf of purchasers of the Company’s 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 during the Class Period related to competition from Figma and the adequacy of Adobe’s existing offerings to counter harms Adobe may have faced due to Figma’s growing market position were materially false and misleading. The Securities Action seeks unspecified compensatory damages, attorneys’ fees and costs, and extraordinary equitable and/or injunctive relief. We filed a motion to dismiss the Securities Action, which was granted in full on March 27, 2025. Plaintiff sought leave to amend the complaint in response to the court’s order, which the court denied on November 7, 2025. Plaintiff is appealing the court’s orders.

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 shareholder derivative action captioned Gervat v. Narayen et al, Case No. 1:24-cv-00006, was filed in the U.S. District Court for the District of Delaware (the “Gervat Action”), purportedly on behalf of Adobe. On January 24, 2024, the court consolidated the Shah and Gervat Actions (together, the “Consolidated Derivative Action”). On January 18, 2024, a shareholder derivative action captioned Sbriglio v. Narayen et al., Case No. 24-cv-429458, was filed in California Superior Court (the “Sbriglio Action”), purportedly on behalf of Adobe. On January 29, 2024, a shareholder derivative action captioned Roy v. Narayen et al., Case No. 1:24-cv-00633, was filed in the U.S. District Court for the Southern District of New York, (the “Roy Action”), purportedly on behalf of Adobe. On May 28, 2025, a shareholder derivative action captioned Daniel v. Narayen et al., Case No. 25-cv-46762 was filed in California Superior Court (the “Daniel Action,” and together with the Consolidated Derivative Action, the Roy Action, and the Sbriglio Action, the “Derivative Actions”), purportedly on behalf of Adobe. On July 11, 2025, the Sbriglio and Daniel Actions were consolidated, and plaintiffs filed an amended complaint on March 16, 2026. The Derivative Actions are based largely on the same alleged facts and circumstances as the Securities Action, and name certain of our current and former officers and members of our Board of Directors as defendants and Adobe as a nominal defendant. The

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Derivative Actions together allege claims for breach of fiduciary duty and/or aiding and abetting breach of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control, and violations of Section 10(b) (and Rule 10b-5 promulgated thereunder), Section 20(a), and/or Section 21D of the Securities Exchange Act of 1934, as amended, and seek recovery of unspecified damages, restitution, and attorney’s fees and costs, as well as disgorgement of profits and certain payments and benefits, in the case of the Gervat and Daniel Actions, and improvements to Adobe’s corporate governance and internal procedures, in the case of the Shah and Daniel Actions, on behalf of Adobe. The Derivative Actions are presently stayed.

We dispute the allegations of wrongdoing in the Securities Action and the Derivative Actions and intend to vigorously defend ourselves in these matters. In view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible financial loss or range of financial loss, if any, that we may incur to resolve or settle the Securities Action and the Derivative Actions.

In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements.

NOTE 14. DEBT

Senior Notes

The carrying value of our senior notes as of May 29, 2026 and November 28, 2025 were as follows:


(dollars in millions)	Issuance Date	Due Date	Effective Interest Rate	2026		2025
2.15% 2027 Notes	February 2020	February 2027	2.26%	$	850	$	850
4.85% 2027 Notes	April 2024	April 2027	5.03%	500		500
4.75% 2028 Notes	January 2025	January 2028	4.93%	800		800
4.80% 2029 Notes	April 2024	April 2029	4.93%	750		750
4.95% 2030 Notes	January 2025	January 2030	5.09%	700		700
2.30% 2030 Notes	February 2020	February 2030	2.69%	1,300		1,300
4.95% 2034 Notes	April 2024	April 2034	5.03%	750		750
5.30% 2035 Notes	January 2025	January 2035	5.40%	500		500


Total senior notes outstanding, at par				$	6,150	$	6,150
Less: Current portion of senior notes, at par				(1,350)		—
Fair value of interest rate swaps				23		86
Unamortized discount and debt issuance costs				(21)		(26)
Carrying value of long-term senior notes				$	4,802	$	6,210

Current portion of senior notes, at par				$	1,350	$	—
Unamortized discount and debt issuance costs				(1)		—

Carrying value of current senior notes				$	1,349	$	—

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Our senior notes rank equally with our other unsecured and unsubordinated indebtedness, and do not contain financial covenants. We may redeem the notes at any time, subject to a make-whole premium.

We have entered into interest rate swaps related to certain of our senior notes. The interest rate swaps effectively convert the fixed interest rates on the notes to floating interest rates based on the SOFR OIS. The fair value of the interest rate swaps is included in the carrying value of our debt in the condensed consolidated balance sheets. See Note 6 for further details regarding our interest rate swap derivatives.

Discounts and issuance costs on our senior notes are amortized to interest expense over the terms of the respective notes using the effective interest method. Interest on the notes issued in February 2020 is payable semi-annually, in arrears, on February 1 and August 1. Interest on the notes issued in April 2024 is payable semi-annually, in arrears, on April 4 and October 4. Interest on the notes issued in January 2025 is payable semi-annually, in arrears, on January 17 and July 17.

For the senior notes issued in February 2020, upon the occurrence of certain change of control triggering events, we may be required to repurchase the notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. In addition, these notes include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances.

Revolving Credit Agreement

In 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. 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 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. As of May 29, 2026, there were no outstanding borrowings under this Revolving Credit Agreement.

Commercial Paper Program

In September 2023, we established 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 used for general corporate purposes, which may include working capital, capital expenditures, acquisitions, stock repurchases, refinancing indebtedness or any other general corporate purposes.

As of May 29, 2026, we had $500 million of commercial paper outstanding, with a carrying value of $494 million and a weighted average interest rate of 3.76%. As of November 28, 2025, there were no outstanding borrowings under the commercial paper program.

ADOBE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 15. SEGMENT INFORMATION

We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.

In the first quarter of fiscal 2026, we combined our former segments—Digital Media, Digital Experience and Publishing and Advertising—into a single operating and reportable segment due to changes in how management evaluates results and allocates resources, reflecting the Company’s shift to unified selling motions and integrated product innovation. Prior period information in the table below has been recast to reflect this change. Our Chief Executive Officer, the Company’s chief operating decision maker, reviews consolidated results, including net income, to assess segment performance and allocate resources. This information is primarily reviewed by comparing actual results to prior period results and to quarterly and annual forecasts. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets.

Information about our single reportable segment revenue, net income and significant segment expenses for the three and six months ended May 29, 2026 and May 30, 2025 were as follows:


	Three Months Ended				Six Months Ended
(dollars in millions)	2026		2025		2026		2025
Revenue	$	6,618	$	5,873	$	13,016	$	11,587
Less:
Cost of revenue(1)	669		565		1,299		1,115
Research and development expenses(1)	911		834		1,745		1,616
Sales and marketing expenses(1)	1,729		1,485		3,295		2,845
General and administrative expenses(1)	364		315		697		622
Stock-based and deferred compensation expense	556		482		1,070		951
Impairment of goodwill	70		—		70		—
Amortization of purchased intangibles	46		83		85		166
Loss contingency	30		—		92		—
Acquisition-related expenses	5		—		7		—

Non-operating (income) expense, net(2)	—		8		(4)		(11)
Income before income taxes	2,238		2,101		4,660		4,283
Provision for income taxes	526		410		1,059		781
Net income	$	1,712	$	1,691	$	3,601	$	3,502

(1)Excludes stock-based and deferred compensation expenses, impairment of goodwill, amortization of purchased intangibles, and certain loss contingencies and acquisition-related expenses, which are presented separately within this table.

(2)Includes interest income of $56 million for both the three months ended May 29, 2026 and the three months ended May 30, 2025, and $119 million and $136 million for the six months ended May 29, 2026 and May 30, 2025, respectively.

Further components of the Company’s measures of segment profitability and segment assets are included throughout the Company’s financial statements.

Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS