# EDGAR Filing Document

**Accession Number:** 0000796343
**File Stem:** 0000796343-23-000055
**Filing Date:** 2023-3
**Character Count:** 601505
**Document Hash:** c9dcb9a46ae298c5b870c2a4e0061514
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000796343-23-000055.hdr.sgml**: 20230329

**ACCESSION NUMBER**: 0000796343-23-000055

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 80

**CONFORMED PERIOD OF REPORT**: 20230303

**FILED AS OF DATE**: 20230329

**DATE AS OF CHANGE**: 20230329

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** ADOBE INC.
- **CENTRAL INDEX KEY:** 0000796343
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **IRS NUMBER:** 770019522
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1202

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-15175
- **FILM NUMBER:** 23776168

**BUSINESS ADDRESS:**
- **STREET 1:** 345 PARK AVE
- **CITY:** SAN JOSE
- **STATE:** CA
- **ZIP:** 95110-2704
- **BUSINESS PHONE:** 4085366000

**MAIL ADDRESS:**
- **STREET 1:** 345 PARK AVENUE
- **CITY:** SAN JOSE
- **STATE:** CA
- **ZIP:** 95110-2704

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** ADOBE SYSTEMS INC
- **DATE OF NAME CHANGE:** 19940208

?xml version="1.0" ? adbe-20230303

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

________________________________

**FORM 10-Q** 

**(Mark One)**

☒ **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended March 3, 2023** 

**or**

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> to<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>**

**Commission File Number: 0-15175** 

**ADOBE INC.**

(Exact name of registrant as specified in its charter)

________________________________

---

| | |
|:---|:---|
| **Delaware** | **77-0019522** |
| (State or other jurisdiction of<br>incorporation or organization) | (I.R.S. Employer<br>Identification No.) |

---

**345 Park Avenue, San Jose, California 95110-2704** 

(Address of principal executive offices and zip code)

**(408) 536-6000** 

(Registrant's telephone number, including area code)

**Securities registered pursuant to Section 12(b) of the Act:**

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol** | **Name of each exchange on which registered** |
| Common Stock, $0.0001 par value per share | ADBE | NASDAQ |

---

________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes **☐** No ☒

As of March 24, 2023, 458.7 million shares of the registrant's common stock, $0.0001 par value per share, were issued and outstanding.

------

**ADOBE INC.**

**FORM 10-Q**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| | | **Page No.** |
| **PART I—FINANCIAL INFORMATION** | **PART I—FINANCIAL INFORMATION** | |
| Item 1. | <br><u>[Condensed Consolidated Financial Statements:](#i9ecc3edfc89346608b532b3f4b71fa31_13)</u> | <u>[3](#i9ecc3edfc89346608b532b3f4b71fa31_13)</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><u>[Condensed Consolidated Balance Sheets](#i9ecc3edfc89346608b532b3f4b71fa31_16)[](#i9ecc3edfc89346608b532b3f4b71fa31_16)[March](#i9ecc3edfc89346608b532b3f4b71fa31_16)[3](#i9ecc3edfc89346608b532b3f4b71fa31_16)[,](#i9ecc3edfc89346608b532b3f4b71fa31_16)[2](#i9ecc3edfc89346608b532b3f4b71fa31_16)[0](#i9ecc3edfc89346608b532b3f4b71fa31_16)[2](#i9ecc3edfc89346608b532b3f4b71fa31_16)[3](#i9ecc3edfc89346608b532b3f4b71fa31_16)[and December](#i9ecc3edfc89346608b532b3f4b71fa31_16)[2](#i9ecc3edfc89346608b532b3f4b71fa31_16)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_16)[2](#i9ecc3edfc89346608b532b3f4b71fa31_16)</u> | <u>[3](#i9ecc3edfc89346608b532b3f4b71fa31_16)</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><u>[Condensed Consolidated Statements of Income](#i9ecc3edfc89346608b532b3f4b71fa31_19)[](#i9ecc3edfc89346608b532b3f4b71fa31_19)[Three](#i9ecc3edfc89346608b532b3f4b71fa31_19)[Months Ended](#i9ecc3edfc89346608b532b3f4b71fa31_19)[March](#i9ecc3edfc89346608b532b3f4b71fa31_19)[3](#i9ecc3edfc89346608b532b3f4b71fa31_19)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_19)[3](#i9ecc3edfc89346608b532b3f4b71fa31_19)[and](#i9ecc3edfc89346608b532b3f4b71fa31_19)[Ma](#i9ecc3edfc89346608b532b3f4b71fa31_19)[rch](#i9ecc3edfc89346608b532b3f4b71fa31_19)[4](#i9ecc3edfc89346608b532b3f4b71fa31_19)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_19)[2](#i9ecc3edfc89346608b532b3f4b71fa31_19)</u> | <u>[4](#i9ecc3edfc89346608b532b3f4b71fa31_19)</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><u>[Condensed Consolidated Statements of Comprehensive Income](#i9ecc3edfc89346608b532b3f4b71fa31_22)[](#i9ecc3edfc89346608b532b3f4b71fa31_22)[Three](#i9ecc3edfc89346608b532b3f4b71fa31_22)[Months Ended](#i9ecc3edfc89346608b532b3f4b71fa31_22)[M](#i9ecc3edfc89346608b532b3f4b71fa31_22)[arch](#i9ecc3edfc89346608b532b3f4b71fa31_22)[3](#i9ecc3edfc89346608b532b3f4b71fa31_22)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_22)[3](#i9ecc3edfc89346608b532b3f4b71fa31_22)[and](#i9ecc3edfc89346608b532b3f4b71fa31_22)[March](#i9ecc3edfc89346608b532b3f4b71fa31_22)[4](#i9ecc3edfc89346608b532b3f4b71fa31_22)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_22)[2](#i9ecc3edfc89346608b532b3f4b71fa31_22)</u> | <u>[5](#i9ecc3edfc89346608b532b3f4b71fa31_22)</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><u>[Condensed Consolidated Statements of Stockholders' Equity](#i9ecc3edfc89346608b532b3f4b71fa31_25)[](#i9ecc3edfc89346608b532b3f4b71fa31_25)[Three](#i9ecc3edfc89346608b532b3f4b71fa31_25)[Months Ended](#i9ecc3edfc89346608b532b3f4b71fa31_25)[March](#i9ecc3edfc89346608b532b3f4b71fa31_25)[3](#i9ecc3edfc89346608b532b3f4b71fa31_25)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_25)[3](#i9ecc3edfc89346608b532b3f4b71fa31_25)[and](#i9ecc3edfc89346608b532b3f4b71fa31_25)[March](#i9ecc3edfc89346608b532b3f4b71fa31_25)[4](#i9ecc3edfc89346608b532b3f4b71fa31_25)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_25)[2](#i9ecc3edfc89346608b532b3f4b71fa31_25)</u> | <u>[6](#i9ecc3edfc89346608b532b3f4b71fa31_25)</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><u>[Condensed Consolidated Statements of Cash Flows](#i9ecc3edfc89346608b532b3f4b71fa31_28)[](#i9ecc3edfc89346608b532b3f4b71fa31_28)[Three](#i9ecc3edfc89346608b532b3f4b71fa31_28)[Months Ended](#i9ecc3edfc89346608b532b3f4b71fa31_28)[March](#i9ecc3edfc89346608b532b3f4b71fa31_28)[3](#i9ecc3edfc89346608b532b3f4b71fa31_28)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_28)[3](#i9ecc3edfc89346608b532b3f4b71fa31_28)[and](#i9ecc3edfc89346608b532b3f4b71fa31_28)[March](#i9ecc3edfc89346608b532b3f4b71fa31_28)[4](#i9ecc3edfc89346608b532b3f4b71fa31_28)[, 202](#i9ecc3edfc89346608b532b3f4b71fa31_28)[2](#i9ecc3edfc89346608b532b3f4b71fa31_28)</u> | <u>[7](#i9ecc3edfc89346608b532b3f4b71fa31_28)</u> |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br><u>[Notes to Condensed Consolidated Financial Statements](#i9ecc3edfc89346608b532b3f4b71fa31_31)</u> | <u>[8](#i9ecc3edfc89346608b532b3f4b71fa31_31)</u> |
| Item 2. | <br><u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#i9ecc3edfc89346608b532b3f4b71fa31_91)</u> | <u>[23](#i9ecc3edfc89346608b532b3f4b71fa31_91)</u> |
| Item 3. | <br><u>[Quantitative and Qualitative Disclosures about Market Risk](#i9ecc3edfc89346608b532b3f4b71fa31_124)</u> | <u>[36](#i9ecc3edfc89346608b532b3f4b71fa31_124)</u> |
| Item 4. | <br><u>[Controls and Procedures](#i9ecc3edfc89346608b532b3f4b71fa31_127)</u> | <u>[36](#i9ecc3edfc89346608b532b3f4b71fa31_127)</u> |
| **PART II—OTHER INFORMATION** | **PART II—OTHER INFORMATION** |  |
| Item 1. | <br><u>[Legal Proceedings](#i9ecc3edfc89346608b532b3f4b71fa31_133)</u> | <u>[37](#i9ecc3edfc89346608b532b3f4b71fa31_133)</u> |
| Item 1A. | <br><u>[Risk Factors](#i9ecc3edfc89346608b532b3f4b71fa31_136)</u> | <u>[37](#i9ecc3edfc89346608b532b3f4b71fa31_136)</u> |
| Item 2. | <br><u>[Unregistered Sales of Equity Securities and Use of Proceeds](#i9ecc3edfc89346608b532b3f4b71fa31_139)</u> | <u>[51](#i9ecc3edfc89346608b532b3f4b71fa31_139)</u> |
| Item 4. | <br><u>[Mine Safety Disclosures](#i9ecc3edfc89346608b532b3f4b71fa31_142)</u> | <u>[51](#i9ecc3edfc89346608b532b3f4b71fa31_142)</u> |
| Item 5. | <br><u>[Other Information](#i9ecc3edfc89346608b532b3f4b71fa31_145)</u> | <u>[51](#i9ecc3edfc89346608b532b3f4b71fa31_145)</u> |
| Item 6. | <br><u>[Exhibits](#i9ecc3edfc89346608b532b3f4b71fa31_148)</u> | <u>[52](#i9ecc3edfc89346608b532b3f4b71fa31_148)</u> |
| <br><u>[Signature](#i9ecc3edfc89346608b532b3f4b71fa31_154)</u> | <br><u>[Signature](#i9ecc3edfc89346608b532b3f4b71fa31_154)</u> | <u>[54](#i9ecc3edfc89346608b532b3f4b71fa31_154)</u> |
| <br><u>[Summary of Trademarks](#i9ecc3edfc89346608b532b3f4b71fa31_157)</u> | <br><u>[Summary of Trademarks](#i9ecc3edfc89346608b532b3f4b71fa31_157)</u> | <u>[55](#i9ecc3edfc89346608b532b3f4b71fa31_157)</u> |

---

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**PART I—FINANCIAL INFORMATION**

**ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**ADOBE INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(In millions, except par value)**

---

| | | |
|:---|:---|:---|
| | **March 3,<br>2023**<br>**(Unaudited)** | **December 2,<br>2022**<br>**(\*)** |
| **ASSETS** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $4072 | $4236 |
| &nbsp;&nbsp;&nbsp;Short-term investments | 1581 | 1860 |
| &nbsp;&nbsp;Trade receivables, net of allowances for doubtful accounts of $17 and $23, respectively | 1801 | 2065 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 888 | 835 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 8342 | 8996 |
| Property and equipment, net | 1967 | 1908 |
| Operating lease right-of-use assets, net | 402 | 407 |
| Goodwill | 12792 | 12787 |
| Other intangibles, net | 1354 | 1449 |
| Deferred income taxes | 826 | 777 |
| Other assets | 984 | 841 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $26667 | $27165 |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Trade payables | $308 | $379 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 1469 | 1790 |
| &nbsp;&nbsp;&nbsp;Debt |  | 500 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 5357 | 5297 |
| &nbsp;&nbsp;&nbsp;Income taxes payable | 222 | 75 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 81 | 87 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 7437 | 8128 |
| Long-term liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Debt | 3630 | 3629 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 120 | 117 |
| &nbsp;&nbsp;&nbsp;Income taxes payable | 536 | 530 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 415 | 417 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 323 | 293 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 12461 | 13114 |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;Preferred stock, $0.0001 par value; 2 shares authorized; none issued |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Common stock, $0.0001 par value; 900 shares authorized; 601 shares issued; <br>459 and 462 shares outstanding, respectively |  |  |
| &nbsp;&nbsp;&nbsp;Additional paid-in-capital | 10284 | 9868 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 29435 | 28319 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income (loss) | (307) | (293) |
| &nbsp;&nbsp;Treasury stock, at cost (142 and 139 shares, respectively) | (25206) | (23843) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 14206 | 14051 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $26667 | $27165 |

---

<sup>_________________________________________</sup>

(\*)&nbsp;&nbsp;&nbsp;&nbsp;The condensed consolidated balance sheet as of December 2, 2022 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.](#i9ecc3edfc89346608b532b3f4b71fa31_31)*

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME**

**(In millions, except per share data)**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| | **March 3,<br>2023** | **March 4,<br>2022** |
| Revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Subscription | $4373 | $3958 |
| &nbsp;&nbsp;&nbsp;Product | 120 | 145 |
| &nbsp;&nbsp;&nbsp;Services and other | 162 | 159 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue | 4655 | 4262 |
| <br>Cost of revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Subscription | 434 | 393 |
| &nbsp;&nbsp;&nbsp;Product | 8 | 10 |
| &nbsp;&nbsp;&nbsp;Services and other | 126 | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenue | 568 | 512 |
| Gross profit | 4087 | 3750 |
| <br>Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Research and development | 827 | 701 |
| &nbsp;&nbsp;&nbsp;Sales and marketing | 1301 | 1158 |
| &nbsp;&nbsp;&nbsp;General and administrative | 331 | 269 |
| &nbsp;&nbsp;&nbsp;Amortization of intangibles | 42 | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 2501 | 2170 |
| Operating income | 1586 | 1580 |
| <br>Non-operating income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | (32) | (28) |
| &nbsp;&nbsp;&nbsp;Investment gains (losses), net | 1 | (9) |
| &nbsp;&nbsp;&nbsp;Other income (expense), net | 43 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-operating income (expense), net | 12 | (37) |
| Income before income taxes | 1598 | 1543 |
| Provision for income taxes | 351 | 277 |
| Net income | $1247 | $1266 |
| Basic net income per share | $2.72 | $2.68 |
| Shares used to compute basic net income per share | 459 | 473 |
| Diluted net income per share | $2.71 | $2.66 |
| Shares used to compute diluted net income per share | 460 | 475 |

---

*[See accompanying notes to condensed consolidated financial statements.](#i9ecc3edfc89346608b532b3f4b71fa31_31)*

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME**

**(In millions)**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| | **March 3,<br>2023** | **March 4,<br>2022** |
| | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Net income | $1247 | $1266 |
| Other comprehensive income (loss), net of taxes: |  |  |
| &nbsp;&nbsp;&nbsp;Available-for-sale securities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized gains / losses on available-for-sale securities | 7 | (14) |
| &nbsp;&nbsp;&nbsp;Derivatives designated as hedging instruments: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized gains / losses on derivative instruments | (9) | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification adjustment for realized gains / losses on derivative instruments | (16) | (15) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease) from derivatives designated as hedging instruments | (25) | 8 |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustments | 4 | (34) |
| Other comprehensive income (loss), net of taxes | (14) | (40) |
| Total comprehensive income, net of taxes | $1233 | $1226 |

---

*[See accompanying notes to condensed consolidated financial statements.](#i9ecc3edfc89346608b532b3f4b71fa31_31)*

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY** 

**(In millions)**

**(Unaudited)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** | **Three Months Ended March 3, 2023** |
| | **Common Stock** | **Common Stock** | **Additional<br>Paid-In<br>Capital** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income (Loss)** | **Treasury Stock** | **Treasury Stock** | |
| | **Shares** | **Amount** | **Additional<br>Paid-In<br>Capital** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income (Loss)** | **Shares** | **Amount** |<br>**Total** |
| Balances at December 2, 2022 | 601 | $— | $9868 | $28319 | $(293) | (139) | $(23843) | $14051 |
| Net income |  |  |  | 1247 |  |  |  | 1247 |
| &nbsp;&nbsp;&nbsp;Other comprehensive income (loss), <br>net of taxes |  |  |  |  | (14) |  |  | (14) |
| Re-issuance of treasury stock under stock compensation plans |  |  |  | (131) |  | 2 | 36 | (95) |
| Repurchases of common stock |  |  |  |  |  | (5) | (1400) | (1400) |
| Stock-based compensation |  |  | 416 |  |  |  |  | 416 |
| Value of shares in deferred compensation plan |  |  |  |  |  |  | 1 | 1 |
| Balances at March 3, 2023 | 601 | $— | $10284 | $29435 | $(307) | (142) | $(25206) | $14206 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** | **Three Months Ended March 4, 2022** |
| | **Common Stock** | **Common Stock** | **Additional<br>Paid-In<br>Capital** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income (Loss)** | **Treasury Stock** | **Treasury Stock** | |
| | **Shares** | **Amount** | **Additional<br>Paid-In<br>Capital** | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Income (Loss)** | **Shares** | **Amount** |<br>**Total** |
| Balances at December 3, 2021 | 601 | $— | $8428 | $23905 | $(137) | (126) | $(17399) | $14797 |
| Net income |  |  |  | 1266 |  |  |  | 1266 |
| Other comprehensive income (loss), <br>net of taxes |  |  |  |  | (40) |  |  | (40) |
| Re-issuance of treasury stock under stock compensation plans |  |  |  | (210) |  | 1 | 35 | (175) |
| Repurchases of common stock |  |  |  |  |  | (4) | (2400) | (2400) |
| Stock-based compensation |  |  | 322 |  |  |  |  | 322 |
| Value of shares in deferred compensation plan |  |  |  |  |  |  | 5 | 5 |
| Balances at March 4, 2022 | 601 | $— | $8750 | $24961 | $(177) | (129) | $(19759) | $13775 |

---

*[See accompanying notes to condensed consolidated financial statements.](#i9ecc3edfc89346608b532b3f4b71fa31_31)*

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In millions)**

**(Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| | **March 3,<br>2023** | **March 4,<br>2022** |
| Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $1247 | $1266 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation, amortization and accretion | 212 | 213 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 416 | 322 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reduction of operating lease right-of-use assets | 21 | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (49) | 129 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized losses (gains) on investments, net | 3 | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other non-cash items | (5) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade receivables, net | 269 | 191 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other assets | (258) | (187) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade payables | (55) | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other liabilities | (323) | (389) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable | 152 | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 63 | 141 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 1693 | 1769 |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of short-term investments |  | (288) |
| &nbsp;&nbsp;&nbsp;Maturities of short-term investments | 254 | 208 |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of short-term investments | 33 | 54 |
| &nbsp;&nbsp;&nbsp;Acquisitions, net of cash acquired |  | (106) |
| &nbsp;&nbsp;&nbsp;Purchases of property and equipment | (101) | (100) |
| &nbsp;&nbsp;&nbsp;Purchases of long-term investments, intangibles and other assets | (30) | (28) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used for) investing activities | 156 | (260) |
| Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Repurchases of common stock | (1400) | (2400) |
| &nbsp;&nbsp;&nbsp;Proceeds from re-issuance of treasury stock | 69 | 91 |
| &nbsp;&nbsp;&nbsp;Taxes paid related to net share settlement of equity awards | (164) | (266) |
| &nbsp;&nbsp;&nbsp;Repayment of debt | (500) |  |
| &nbsp;&nbsp;&nbsp;Other financing activities, net | (19) | (29) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used for financing activities | (2014) | (2604) |
| Effect of foreign currency exchange rates on cash and cash equivalents | 1 | (10) |
| Net change in cash and cash equivalents | (164) | (1105) |
| Cash and cash equivalents at beginning of period | 4236 | 3844 |
| Cash and cash equivalents at end of period | $4072 | $2739 |
| Supplemental disclosures: |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for income taxes, net of refunds | $214 | $59 |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $55 | $50 |

---

*[See accompanying notes to condensed consolidated financial statements.](#i9ecc3edfc89346608b532b3f4b71fa31_31)*

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**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 accounting principles generally accepted in the United States of America ("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 December 2, 2022 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.

*Adopted Accounting Guidance and Accounting Pronouncements Not Yet Effective*

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the three months ended March 3, 2023 that are of significance or potential significance to us.

**NOTE 2. REVENUE**

*Segment Information*

Our segment results for the three months ended March 3, 2023 and March 4, 2022 were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(dollars in millions)* | **Digital <br>Media** | **Digital <br>Experience** | **Publishing and <br>Advertising** | **Total** |
| **Three months ended March 3, 2023** |  |  |  |  |
| Revenue | $3395 | $1176 | $84 | $4655 |
| Cost of revenue | 142 | 404 | 22 | 568 |
| Gross profit | $3253 | $772 | $62 | $4087 |
| Gross profit as a percentage of revenue | 96% | 66% | 74% | 88% |
| **Three months ended March 4, 2022** |  |  |  |  |
| Revenue | $3110 | $1057 | $95 | $4262 |
| Cost of revenue | 134 | 352 | 26 | 512 |
| Gross profit | $2976 | $705 | $69 | $3750 |
| Gross profit as a percentage of revenue | 96% | 67% | 73% | 88% |

---

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

Revenue by geographic area for the three months ended March 3, 2023 and March 4, 2022 were as follows:

---

| | | |
|:---|:---|:---|
| *(in millions)* | **2023** | **2022** |
| Americas | $2779 | $2446 |
| EMEA | 1173 | 1136 |
| APAC | 703 | 680 |
| &nbsp;&nbsp;&nbsp;Total | $4655 | $4262 |

---

Revenue by major offerings in our Digital Media reportable segment for the three months ended March 3, 2023 and March 4, 2022 were as follows:

---

| | | |
|:---|:---|:---|
| *(in millions)* | **2023** | **2022** |
| Creative Cloud | $2761 | $2548 |
| Document Cloud | 634 | 562 |
| &nbsp;&nbsp;&nbsp;Total Digital Media revenue | $3395 | $3110 |

---

Subscription revenue by segment for the three months ended March 3, 2023 and March 4, 2022 were as follows:

---

| | | |
|:---|:---|:---|
| *(in millions)* | **2023** | **2022** |
| Digital Media | $3301 | $2995 |
| Digital Experience | 1042 | 932 |
| Publishing and Advertising | 30 | 31 |
| &nbsp;&nbsp;&nbsp;Total subscription revenue | $4373 | $3958 |

---

*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 typically related to license revenue or services which are delivered prior to invoicing. As of March 3, 2023, the balance of trade receivables, net of allowances for doubtful accounts, was $1.80 billion, inclusive of unbilled receivables of $101 million. As of December 2, 2022, the balance of trade receivables, net of allowances for doubtful accounts, was $2.07 billion, inclusive of unbilled receivables of $93 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 $17 million and $23 million as of March 3, 2023 and December 2, 2022, 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 three months ended March 3, 2023. Contract assets were $82 million and $97 million as of March 3, 2023 and December 2, 2022, 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 March 3, 2023, the balance of deferred revenue was $5.48 billion, which includes $79 million of refundable customer deposits. Arrangements with some of our enterprise customers with non-cancellable and non-refundable committed funds provide options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Non-

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

cancellable and non-refundable committed funds related to these agreements comprised approximately 5% of the total deferred revenue.

As of December 2, 2022, the balance of deferred revenue was $5.41 billion. During the three months ended March 3, 2023, approximately $2.31 billion of revenue was recognized that was included in the balance of deferred revenue as of December 2, 2022.

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 March 3, 2023, remaining performance obligations were approximately $15.21 billion. Non-cancellable and non-refundable funds related to some of our enterprise customer agreements referred to in the paragraph above comprised approximately 5% of the total remaining performance obligations. Approximately 73% 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 $656 million and $629 million as of March 3, 2023 and December 2, 2022, respectively.

We record refund liabilities for amounts that may be subject to future refunds, which include sales returns reserves and customer rebates and credits. Refund liabilities are included in accrued expenses on the condensed consolidated balance sheets. Refund liabilities were $103 million and $106 million as of March 3, 2023 and December 2, 2022, respectively.

**NOTE 3. ACQUISITIONS**

*Figma*

On September 15, 2022, we entered into a definitive agreement under which we intend to acquire Figma, Inc. ("Figma") for approximately $20 billion, comprised of approximately half cash and half stock, subject to customary purchase price adjustments. Approximately 6 million additional restricted stock units will be granted to Figma's Chief Executive Officer and employees that will vest over four years subsequent to closing. The transaction is subject to regulatory approvals and customary closing conditions, and is expected to close in 2023. We will be required to pay Figma a reverse termination fee of $1 billion if the transaction fails to receive regulatory clearance, assuming all other closing conditions have been satisfied or waived, or if it fails to close within 18 months from September 15, 2022.

Figma is a privately held company that provides a web-first collaborative product design platform. Following the closing, we intend to integrate Figma into our Digital Media reportable segment for financial reporting purposes.

**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, 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.

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

Cash, cash equivalents and short-term investments consisted of the following as of March 3, 2023:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(in millions)* | **Amortized<br>Cost** | **Unrealized<br>Gains** | **Unrealized<br>Losses** | **Estimated<br>Fair Value** |
| Current assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $607 | $— | $— | $607 |
| &nbsp;&nbsp;&nbsp;Cash equivalents: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market funds | 3440 |  |  | 3440 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time deposits | 25 |  |  | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash equivalents | 3465 |  |  | 3465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash and cash equivalents | 4072 |  |  | 4072 |
| &nbsp;&nbsp;&nbsp;Short-term fixed income securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 65 |  | (1) | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 1073 |  | (17) | 1056 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 19 |  |  | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. agency securities | 36 |  | (1) | 35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury securities | 422 |  | (15) | 407 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total short-term investments | 1615 |  | (34) | 1581 |
| Total cash, cash equivalents and short-term investments | $5687 | $— | $(34) | $5653 |

---

Cash, cash equivalents and short-term investments consisted of the following as of December 2, 2022:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(in millions)* | **Amortized<br>Cost** | **Unrealized<br>Gains** | **Unrealized<br>Losses** | **Estimated<br>Fair Value** |
| Current assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $657 | $— | $— | $657 |
| &nbsp;&nbsp;&nbsp;Cash equivalents: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 39 |  |  | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market funds | 3479 |  |  | 3479 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time deposits | 61 |  |  | 61 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash equivalents | 3579 |  |  | 3579 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cash and cash equivalents | 4236 |  |  | 4236 |
| &nbsp;&nbsp;&nbsp;Short-term fixed income securities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 98 |  | (1) | 97 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 1290 |  | (24) | 1266 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign government securities | 5 |  |  | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 24 |  |  | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. agency securities | 34 |  |  | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury securities | 450 |  | (16) | 434 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total short-term investments | 1901 |  | (41) | 1860 |
| Total cash, cash equivalents and short-term investments | $6137 | $— | $(41) | $6096 |

---

*[See Note 5 for further information regarding the fair value of our financial instruments.](#i9ecc3edfc89346608b532b3f4b71fa31_49)*

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

The following table summarizes the estimated fair value of short-term fixed income debt securities classified as short-term investments based on stated effective maturities as of March 3, 2023:

---

| | |
|:---|:---|
| *(in millions)* | **Estimated<br>Fair Value** |
| Due within one year | $906 |
| Due between one and two years | 528 |
| Due between two and three years | 145 |
| Due after three years | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $1581 |

---

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 three months ended March 3, 2023 and March 4, 2022, 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 March 3, 2023 was determined using the following inputs:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(in millions)* | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** |
|  |  | **Quoted Prices<br>in Active<br>Markets for<br>Identical Assets** | **Significant<br>Other<br>Observable<br>Inputs** | **Significant<br>Unobservable<br>Inputs** |
|  | **Total** | **(Level 1)** | **(Level 2)** | **(Level 3)** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash equivalents: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market funds | $3440 | $3440 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time deposits | 25 | 25 |  |  |
| &nbsp;&nbsp;&nbsp;Short-term investments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 64 |  | 64 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 1056 |  | 1056 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 19 |  | 19 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. agency securities | 35 |  | 35 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury securities | 407 |  | 407 |  |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency derivatives | 46 |  | 46 |  |
| &nbsp;&nbsp;&nbsp;Other assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation plan assets | 186 | 186 |  |  |
| Total assets | $5278 | $3651 | $1627 | $— |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Accrued expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency derivatives | $7 | $| $7 | $|

---

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

The fair value of our financial assets and liabilities at December 2, 2022 was determined using the following inputs:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(in millions)* | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** | **Fair Value Measurements at Reporting Date Using** |
|  |  | **Quoted Prices<br>in Active<br>Markets for<br>Identical Assets** | **Significant<br>Other<br>Observable<br>Inputs** | **Significant<br>Unobservable<br>Inputs** |
|  | **Total** | **(Level 1)** | **(Level 2)** | **(Level 3)** |
| Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash equivalents: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | $39 | $— | $39 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money market funds | 3479 | 3479 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time deposits | 61 | 61 |  |  |
| &nbsp;&nbsp;&nbsp;Short-term investments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Asset-backed securities | 97 |  | 97 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate debt securities | 1266 |  | 1266 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign government securities | 5 |  | 5 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 24 |  | 24 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. agency securities | 34 |  | 34 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Treasury securities | 434 |  | 434 |  |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency derivatives | 51 |  | 51 |  |
| &nbsp;&nbsp;&nbsp;Other assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation plan assets | 160 | 160 |  |  |
| Total assets | $5650 | $3700 | $1950 | $— |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Accrued expenses: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign currency derivatives | $15 | $| $15 | $|

---

*[See Note 4 for further information regarding the fair value of our financial instruments.](#i9ecc3edfc89346608b532b3f4b71fa31_43)* 

Our fixed income available-for-sale debt securities consist of high quality, investment grade securities from diverse issuers with a weighted average credit rating of AA-. We value these securities based on pricing from independent pricing vendors who use matrix pricing 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 classify 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 derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date.

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

------

<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

*Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis*

The fair value of our senior notes was $3.33 billion as of March 3, 2023, based on observable market prices in less active markets and categorized as Level 2. *[See Note 14 for further details regarding our debt.](#i9ecc3edfc89346608b532b3f4b71fa31_82)*

**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.

*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 option contracts and forward 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 12 months.

In June 2019, we entered into Treasury lock agreements with large financial institutions which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $1 billion of our future debt issuance. These derivative instruments hedged the impact of changes in the benchmark interest rate to future interest payments and were settled upon debt issuance in the first quarter of fiscal 2020. We incurred a loss related to the settlement of the instruments which is amortized to interest expense over the term of our debt due February 1, 2030. *[See Note 14 for further details regarding our debt.](#i9ecc3edfc89346608b532b3f4b71fa31_82)*

As of March 3, 2023, we had net derivative gains on our foreign exchange option contracts expected to be recognized within the next 18 months, of which $15 million of gains are expected to be recognized into revenue within the next 12 months. In addition, we had net derivative losses on our foreign exchange forward contracts, of which $1 million of losses are expected to be recognized into operating expenses within the next 12 months, and net derivative losses on our Treasury lock agreements, of which $5 million is expected to be recognized into interest expense within the next 12 months.

*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.

Fair value asset derivatives are included in prepaid expenses and other current assets and fair value liability derivatives are included in accrued expenses on our condensed consolidated balance sheets. The fair value of derivative instruments as of March 3, 2023 and December 2, 2022 were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(in millions)* | **2023** | **2023** | **2022** | **2022** |
|  | **Fair Value <br>Asset<br>Derivatives** | **Fair Value<br>Liability<br>Derivatives** | **Fair Value <br>Asset<br>Derivatives** | **Fair Value<br>Liability<br>Derivatives** |
| Derivatives designated as hedging instruments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign exchange option contracts | $41 | $— | $36 | $— |
| &nbsp;&nbsp;&nbsp;Foreign exchange forward contracts |  | 1 |  | 7 |
| Derivatives not designated as hedging instruments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Foreign exchange forward contracts | 5 | 6 | 15 | 8 |
| Total derivatives | $46 | $7 | $51 | $15 |

---

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<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

Gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three months ended March 3, 2023 and March 4, 2022 were primarily associated with our foreign exchange option contracts. For the three months ended March 3, 2023 and March 4, 2022, we recognized $13 million of net losses and $23 million of net gains, respectively, in our condensed consolidated statements of comprehensive income from our foreign exchange option contracts.

The effects of derivative instruments on our condensed consolidated statements of income for the three months ended March 3, 2023 and March 4, 2022 were primarily associated with foreign exchange option contracts. For the three months ended March 3, 2023 and March 4, 2022, we reclassified $18 million and $16 million of net gains, respectively, from accumulated other comprehensive income into revenue resulting from our foreign exchange option contracts.

**NOTE 7. GOODWILL AND OTHER INTANGIBLES**

Goodwill as of March 3, 2023 and December 2, 2022 was $12.79 billion for both periods presented.

Other intangible assets subject to amortization as of March 3, 2023 and December 2, 2022 were as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| *(in millions)* | **2023** | **2023** | **2023** | **2022** | **2022** | **2022** |
|  | **Gross Carrying Amount** | **Accumulated Amortization** | **Net** | **Gross Carrying Amount** | **Accumulated Amortization** | **Net** |
| Customer contracts and relationships | $1203 | $(526) | $677 | $1204 | $(495) | $709 |
| Purchased technology | 1060 | (583) | 477 | 1060 | (530) | 530 |
| Trademarks | 376 | (183) | 193 | 375 | (172) | 203 |
| Other | 20 | (13) | 7 | 61 | (54) | 7 |
| &nbsp;&nbsp;Other intangibles, net | $2659 | $(1305) | $1354 | $2700 | $(1251) | $1449 |

---

Amortization expense related to other intangibles was $96 million and $101 million for the three months ended March 3, 2023 and March 4, 2022, respectively. Of these amounts, $54 million and $59 million were included in cost of revenue for the three months ended March 3, 2023 and March 4, 2022, respectively.

As of March 3, 2023, the estimated aggregate amortization expense in future periods was as follows:

&nbsp;&nbsp;&nbsp;&nbsp;

---

| | |
|:---|:---|
| *(in millions)* | |
| **<u>Fiscal Year</u>** | **Other Intangibles** <sup>(1)</sup> |
| Remainder of 2023 | $281 |
| 2024 | 331 |
| 2025 | 295 |
| 2026 | 142 |
| 2027 | 104 |
| Thereafter | 182 |
| &nbsp;&nbsp;&nbsp;Total expected amortization expense | $1335 |

---

<sup>_________________________________________</sup>

<sup>(1)</sup> Excludes capitalized in-process research and development which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.

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**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

**NOTE 8. ACCRUED EXPENSES**

Accrued expenses as of March 3, 2023 and December 2, 2022 consisted of the following:

---

| | | |
|:---|:---|:---|
| *(in millions)* | **2023** | **2022** |
| Accrued compensation and benefits | $525 | $485 |
| Accrued bonuses | 158 | 489 |
| Accrued corporate marketing | 134 | 154 |
| Taxes payable | 111 | 117 |
| Refund liabilities | 103 | 106 |
| Other | 438 | 439 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | $1469 | $1790 |

---

Other primarily includes general corporate accruals for local and regional expenses, derivative collateral liabilities, accrued hosting fees and royalties payable.

**NOTE 9. STOCK-BASED COMPENSATION**

*Restricted Stock Units*

Restricted stock unit activity for the three months ended March 3, 2023 was as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **Number of**<br>**Shares**<br>(in millions) | **Weighted Average<br>Grant Date <br>Fair Value** | **Aggregate**<br>**Fair Value**<sup>(1)</sup><br>(in millions) |
| Beginning outstanding balance | 7.4 | $449.94 |  |
| Awarded | 4.1 | $360.54 |  |
| Released | (1.2) | $445.73 |  |
| Forfeited | (0.1) | $461.85 |  |
| Ending outstanding balance | 10.2 | $413.87 | $3506 |
| Expected to vest | 9.0 | $414.72 | $3081 |

---

<sup>_________________________________________</sup>

<sup>(1)&nbsp;&nbsp;&nbsp;&nbsp;</sup>The aggregate fair value is calculated using the closing stock price as of March 3, 2023 of $344.04.

The total fair value of restricted stock units vested during the three months ended March 3, 2023 was $423 million.

*Performance Shares* 

In the first quarter of fiscal 2023, the Executive Compensation Committee of our Board of Directors (the "ECC") approved the 2023 Performance Share Program, the terms of which are similar to the 2022 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 December 2, 2022.

As of March 3, 2023, the shares awarded under our 2023, 2022 and 2021 Performance Share Programs remained outstanding and were yet to be earned. For information regarding our outstanding 2022 and 2021 Performance Share Programs, including the terms, see "Note 12. Stock-Based Compensation" of our Annual Report on Form 10-K for the fiscal year ended December 2, 2022.

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**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

Performance share activity for the three months ended March 3, 2023 was as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **Number of**<br>**Shares**<br>(in millions) | **Weighted Average<br>Grant Date <br>Fair Value** | **Aggregate**<br>**Fair Value**<sup>(1)</sup><br>(in millions) |
| Beginning outstanding balance | 0.4 | $495.23 |  |
| Awarded | 0.2 | $437.52 |  |
| Released | (0.1) | $498.74 |  |
| Forfeited |  | $497.45 |  |
| Ending outstanding balance | 0.5 | $466.29 | $169 |
| Expected to vest | 0.4 | $466.54 | $143 |

---

<sup>_________________________________________</sup>

<sup>(1)&nbsp;&nbsp;&nbsp;&nbsp;</sup>The aggregate fair value is calculated using the closing stock price as of March 3, 2023 of $344.04.

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 three months ended March 3, 2023 resulted from 63% achievement of target for the 2020 Performance Share Program, as certified by the ECC in the first quarter of fiscal 2023.

The total fair value of performance shares vested during the three months ended March 3, 2023 was $39 million.

*Employee Stock Purchase Plan Shares*

Employees purchased 0.2 million shares at an average price of $286.05 and 0.2 million shares at an average price of $393.30 for the three months ended March 3, 2023 and March 4, 2022, respectively. The intrinsic value of shares purchased during the three months ended March 3, 2023 and March 4, 2022 was $12 million and $40 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 March 3, 2023, there was $3.85 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards and purchase rights which will be recognized over a weighted average period of 2.68 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 months ended March 3, 2023 and March 4, 2022 were as follows:

---

| | | |
|:---|:---|:---|
| *(in millions)* | **2023** | **2022** |
| Cost of revenue | $29 | $21 |
| Research and development | 209 | 161 |
| Sales and marketing | 122 | 93 |
| General and administrative | 56 | 47 |
| &nbsp;&nbsp;&nbsp;Total | $416 | $322 |

---

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**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)* | **December 2,<br>2022** | **Increase / Decrease** | **Reclassification Adjustments** | | **March 3,<br>2023** |
| Net unrealized gains / losses on available-for-sale securities | $(41) | $7 | $— | <sup>(1)</sup> | $(34) |
| Net unrealized gains / losses on derivative instruments designated as hedging instruments | 17 | (9) | (16) | <sup>(2)</sup> | (8) |
| Cumulative foreign currency translation adjustments | (269) | 4 |  |  | (265) |
| Total accumulated other comprehensive income (loss), net of taxes | $(293) | $2 | $(16) |  | $(307) |

---

<sup>_________________________________________</sup>

<sup>(1)</sup> Reclassification adjustments for gains / losses on available-for-sale securities are classified in other income (expense), net.

<sup>(2)</sup> 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 months ended March 3, 2023 and March 4, 2022 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 December 2020, our Board of Directors granted authority to repurchase up to $15 billion in our common stock through the end of fiscal 2024.

During the three months ended March 3, 2023 and March 4, 2022, we entered into accelerated share repurchase agreements ("ASRs") with large financial institutions whereupon we provided them with prepayments of $1.4 billion and $2.4 billion, respectively. Under the terms of our ASRs, the financial institutions agree to deliver a portion of shares to us at contract inception and the remaining shares at settlement. The total number of shares delivered and average purchase price paid per share are determined upon settlement based on the Volume Weighted Average Price ("VWAP") over the term of the ASR, less an agreed upon discount. At settlement, the financial institution may be required to deliver additional shares of our common stock to us or, under certain circumstances, we may be required to make a cash payment or deliver shares of our common stock to the financial institution, with the method of settlement at our election.

We also enter into structured stock repurchase agreements in which financial institutions agree to deliver shares to us at monthly intervals during the respective contract terms, and the number of shares delivered each month are determined based on the total notional amount of the contracts, the number of trading days in the intervals and the VWAP during the intervals, less an agreed upon discount.

During the three months ended March 3, 2023, we repurchased a total of 5.0 million shares, including approximately 1.8 million shares at an average price of $330.52 through a structured repurchase agreement entered into during fiscal 2022, as well as 3.2 million shares from the initial delivery of the ASR entered into during the three months ended March 3, 2023. During the three months ended March 4, 2022, we repurchased a total of 3.8 million shares, including approximately 0.6 million shares at an average price of $635.15 through a structured repurchase agreement entered into during fiscal 2021, as well as 3.2 million shares from the initial delivery of the ASR entered into during the three months ended March 4, 2022.

For the three months ended March 3, 2023, the prepayments were 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 March 3, 2023 were excluded from the computation of net income per share. As of March 3, 2023, a portion of the $1.4 billion prepayment under our outstanding ASR was evaluated as an unsettled forward contract indexed to our own

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**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

stock, classified within stockholders' equity. Subsequent to March 3, 2023, the outstanding ASR was settled which resulted in total repurchases of 4.0 million shares at an average purchase price of $348.46.

Subsequent to March 3, 2023, as part of the December 2020 stock repurchase authority, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1 billion. Upon completion of the $1 billion stock repurchase agreement, $4.15 billion remains under our December 2020 authority.

**NOTE 12. NET INCOME PER SHARE**

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 3, 2023 and March 4, 2022:

---

| | | |
|:---|:---|:---|
| *(in millions, except per share data)* | **2023** | **2022** |
| Net income | $1247 | $1266 |
| Shares used to compute basic net income per share | 459.0 | 472.6 |
| Dilutive potential common shares from stock plans and programs | 0.5 | 2.8 |
| Shares used to compute diluted net income per share | 459.5 | 475.4 |
| Basic net income per share | $2.72 | $2.68 |
| Diluted net income per share | $2.71 | $2.66 |
| Anti-dilutive potential common shares | 6.2 | 0.9 |

---

**NOTE 13. COMMITMENTS AND CONTINGENCIES**

*Indemnifications*

In the ordinary course of business, we provide indemnifications of varying scope to 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*

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.

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<u>[**Table of Contents**](#i9ecc3edfc89346608b532b3f4b71fa31_7)</u>

**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

In addition to intellectual property disputes, we are subject to legal proceedings, claims, including claims relating to commercial, employment and other matters, and investigations, including government investigations. 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.

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. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor 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.

In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-claims; however, it is possible that our consolidated financial position, results of operations or cash flows could be negatively affected in any particular period by the resolution of one or more of these counter-claims.

**NOTE 14. DEBT**

The carrying value of our borrowings as of March 3, 2023 and December 2, 2022 were as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(dollars in millions)* | **Issuance Date** | **Due Date** | **Effective Interest Rate** | **2023** | **2022** |
| &nbsp;&nbsp;1.70% 2023 Notes | February 2020 | February 2023 | 1.92% | $— | $500 |
| &nbsp;&nbsp;1.90% 2025 Notes | February 2020 | February 2025 | 2.07% | 500 | 500 |
| &nbsp;&nbsp;3.25% 2025 Notes | January 2015 | February 2025 | 3.67% | 1000 | 1000 |
| &nbsp;&nbsp;2.15% 2027 Notes | February 2020 | February 2027 | 2.26% | 850 | 850 |
| &nbsp;&nbsp;2.30% 2030 Notes | February 2020 | February 2030 | 2.69% | 1300 | 1300 |
| Total debt outstanding, at par | Total debt outstanding, at par | Total debt outstanding, at par | Total debt outstanding, at par | $3650 | $4150 |
| Current portion of debt, at par | Current portion of debt, at par | Current portion of debt, at par | Current portion of debt, at par |  | (500) |
| Unamortized discount and debt issuance costs | Unamortized discount and debt issuance costs | Unamortized discount and debt issuance costs | Unamortized discount and debt issuance costs | (20) | (21) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carrying value of long-term debt | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carrying value of long-term debt | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carrying value of long-term debt | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carrying value of long-term debt | $3630 | $3629 |
| Carrying value of current debt, net of unamortized discount and debt issuance costs | Carrying value of current debt, net of unamortized discount and debt issuance costs | Carrying value of current debt, net of unamortized discount and debt issuance costs | Carrying value of current debt, net of unamortized discount and debt issuance costs | $— | $500 |

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**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

*Senior Notes* 

In January 2015, we issued $1 billion of senior notes due February 1, 2025. The related discount and issuance costs are amortized to interest expense over the term of the notes using the effective interest method. Interest is payable semi-annually, in arrears, on February 1 and August 1.

In February 2020, we issued $500 million of senior notes due February 1, 2023, $500 million of senior notes due February 1, 2025, $850 million of senior notes due February 1, 2027 and $1.30 billion of senior notes due February 1, 2030. Our total proceeds of approximately $3.14 billion, net of issuance discount, were used for general corporate purposes including repayment of debt instruments due in fiscal 2020. The related discount and issuance costs are amortized to interest expense over the respective terms of the notes using the effective interest method. Interest is payable semi-annually, in arrears, on February 1 and August 1.

During the first quarter of fiscal 2023, the $500 million of senior notes due February 1, 2023 became due and were repaid.

Our senior notes rank equally with our other unsecured and unsubordinated indebtedness. We may redeem the notes at any time, subject to a make-whole premium. In addition, 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. The notes do not contain financial covenants but include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances.

*Term Loan Credit Agreement*

In January 2023, we entered into a delayed draw term loan credit agreement (the "Term Loan Credit Agreement"), providing for a senior unsecured term loan (the "Term Loan") of up to $3.5 billion for the purpose of partially funding the purchase price for our acquisition of Figma and the related fees and expenses incurred in connection with the acquisition. The Term Loan is available for funding in a single drawing upon the closing of the Figma acquisition at any time prior to March 15, 2024. The Term Loan will mature two years following the initial funding date and requires no scheduled principal amortization payments prior to maturity. The Term Loan may be prepaid and terminated at our election at any time without premium or penalty. At our election, the Term Loan will bear interest at either (i) term Secured Overnight Financing Rate ("SOFR"), plus a margin, (ii) adjusted daily SOFR, plus a margin, or (iii) base rate, plus a margin. Base rate is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the agent's prime rate, or (c) term SOFR plus 1.00%. The margin for term SOFR and adjusted daily SOFR loans is based on our debt ratings, and ranges from 0.750% to 1.250%. The margin for base rate loans is based on our debt ratings, and ranges from 0.000% to 0.250%. In addition, commitment fees determined according to our debt ratings are payable quarterly in an amount ranging from 0.040% to 0.100% per annum until the funding of the Term Loan.

The Term Loan Credit Agreement contains customary representations, warranties, affirmative and negative covenants, events of default and indemnification provisions in favor of the lenders similar to those contained in the Revolving Credit Agreement. As of March 3, 2023, there were no outstanding borrowings under the Term Loan.

*Revolving Credit Agreement*

In June 2022, we entered into a credit agreement ("Revolving Credit Agreement"), providing for a five-year $1.5 billion senior unsecured revolving credit facility, which replaced our previous five-year $1 billion senior unsecured revolving credit agreement entered into in October 2018 (the "Prior Revolving Credit Agreement"). 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. At our election, loans under the Revolving Credit Agreement will bear interest at either (i) term SOFR, plus a margin, (ii) adjusted daily SOFR, plus a margin, (iii) alternative currency rate, plus a margin, or (iv) base rate, which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the agent's prime rate, or (c) term SOFR plus 1.00%. The margin for term SOFR, adjusted daily SOFR and alternative currency rate loans is based on our debt ratings, and ranges from 0.460% to 0.900%. In addition, facility fees determined according to our debt ratings are payable on the aggregate commitments, regardless of usage, quarterly in an amount ranging from 0.040% to 0.100% per annum. We are permitted to permanently reduce the aggregate commitment under

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**ADOBE INC.**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**(Unaudited)**

the Revolving Credit Agreement at any time. Subject to certain conditions stated in the Revolving Credit Agreement, Adobe and any of its subsidiaries designated as additional borrowers may borrow, prepay and re-borrow amounts at any time during the term of the Revolving Credit Agreement.

The Revolving Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including events of default and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger transactions, dispositions and other matters, all subject to certain exceptions.

The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless (a) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (b) the maturity date is further extended upon our request, subject to the agreement of the lenders.

As of March 3, 2023, there were no outstanding borrowings under this Revolving Credit Agreement.

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**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

*The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto.*

*In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding product plans, future growth, market opportunities, fluctuations in foreign currency exchange rates, strategic investments, industry positioning, customer acquisition and retention, the amount of annualized recurring revenue, revenue growth and anticipated impacts on our business of the ongoing COVID-19 pandemic and related public health measures. In addition, when used in this report, the words "will," "expects," "could," "would," "may," "anticipates," "intends," "plans," "believes," "seeks," "targets," "estimates," "looks for," "looks to," "continues" and similar expressions, as well as statements regarding our focus for the future, are generally intended to identify forward-looking statements. Each of the forward-looking statements we make in this report involves risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors" in Part II, Item 1A of this report. The risks described herein and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K for fiscal 2022, should be carefully reviewed. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document, except as required by law.*

**BUSINESS OVERVIEW**

Founded in 1982, Adobe is one of the largest and most diversified software companies in the world. We offer a line of products and services used by creative professionals, including photographers, video editors, graphic and experience designers and game developers; communicators, including content creators, students, marketers and knowledge workers; businesses of all sizes; and consumers for creating, managing, delivering, measuring, optimizing, engaging and transacting with compelling content and experiences across personal computers, smartphones, other electronic devices and digital media formats.

We market our products and services directly to enterprise customers through our sales force and local field offices. We license our products to end users through app stores and our own website at www.adobe.com. We offer many of our products via a Software-as-a-Service ("SaaS") model or a managed services model (both of which are referred to as hosted or cloud-based) as well as through term subscription and pay-per-use models. We also distribute certain products and services through a network of distributors, value-added resellers, systems integrators, independent software vendors, retailers, software developers and original equipment manufacturers ("OEMs"). In addition, we license our technology to hardware manufacturers, software developers and service providers for use in their products and solutions. Our products run on desktop and laptop computers, smartphones, tablets, other devices and the web, depending on the product. We have operations in the Americas; Europe, Middle East and Africa ("EMEA"); and Asia-Pacific ("APAC").

Adobe was originally incorporated in California in October 1983 and was reincorporated in Delaware in May 1997. Our executive offices and principal facilities are located at 345 Park Avenue, San Jose, California 95110-2704. Our telephone number is 408-536-6000 and our website is www.adobe.com. Investors can obtain copies of our SEC filings from our website free of charge, as well as from the SEC website at www.sec.gov. The information posted to our website is not incorporated into this Quarterly Report on Form 10-Q.

**OPERATIONS OVERVIEW**

For our first quarter of fiscal 2023, we experienced strong demand across our Digital Media and Digital Experience offerings, driven by the ongoing shift towards a digital-first world. As we execute on our long-term growth initiatives, we have continued to experience growth in software-based subscription revenue across our portfolio of offerings.

*Digital Media*

In our Digital Media segment, we are a market leader with Creative Cloud, our subscription-based offering which provides desktop tools, mobile apps and cloud-based services for designing, creating and publishing rich content and immersive 3D experiences. Creative Cloud includes Adobe Express, a web and mobile application designed to enable a broad spectrum of users, including novice content creators, communicators and creative professionals, to create, edit and customize content quickly and easily with content-first, task-based solutions. Creative Cloud delivers value with deep, cross-product integration, frequent product updates and feature enhancements, cloud-enabled services including storage and syncing of files across users' devices, machine learning and artificial intelligence, access to marketplace, social and community-based features with our

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Adobe Stock and Behance services, app creation capabilities, tools which assist with enterprise deployments and team collaboration, and affordable pricing for cost-sensitive customers.

We offer Creative Cloud for individuals, students, teams and enterprises. We expect Creative Cloud will drive sustained long-term revenue growth through a continued expansion of our customer base by attracting new users with new features and products like Adobe Express that make creative tools accessible to first-time creators and communicators, and delivering new features and technologies to existing customers with our latest releases such as share for review. We have also built out a marketplace for Creative Cloud subscribers to enable the delivery and purchase of stock content in our Adobe Stock service. Overall, our strategy with Creative Cloud is designed to enable us to increase our revenue with existing users, continue to attract new customers, and grow our recurring and predictable revenue stream that is recognized ratably.

We continue to implement strategies that are designed to accelerate awareness, consideration and purchase of subscriptions to our Creative Cloud offerings. These strategies include increasing the value Creative Cloud users receive, such as offering new desktop, web and mobile applications, as well as targeted promotions and offers that attract past customers and potential users to experience and ultimately subscribe to Creative Cloud. Because of the shift towards Creative Cloud subscriptions and Enterprise Term License Agreements ("ETLAs"), revenue from perpetual licensing of our Creative products has been immaterial to our business.

We are also a market leader with our Document Cloud offerings built around our Adobe Acrobat family of products, with a set of integrated mobile apps and cloud-based document services which enable users to create, review, approve, sign and track documents regardless of platform or application source type. Document Cloud, which enhances the way people manage critical documents at home, in the office and across devices, includes Adobe Acrobat, Adobe Acrobat Sign and Adobe Scan. Adobe Acrobat is offered both through subscription and perpetual licenses, and is also included in our Creative Cloud all apps subscription offering.

As part of our Creative Cloud and Document Cloud strategies, we utilize a data-driven operating model ("DDOM") and our Adobe Experience Cloud solutions to raise awareness of our products, drive new customer acquisition, engagement and retention, and optimize customer journeys, and it continues to contribute strong growth in the business.

Annualized Recurring Revenue ("ARR") is currently the key performance metric our management uses to assess the health and trajectory of our overall Digital Media segment. ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations as ARR is a performance metric and is not intended to be combined with any of these items. We adjust our reported ARR on an annual basis to reflect any exchange rate changes. Our reported ARR results in the current fiscal year are based on currency rates set at the beginning of the year and held constant throughout the year for measurement purposes. We calculate ARR as follows:

---

| | |
|:---|:---|
| Creative ARR | Annual Value of Creative Cloud Subscriptions and Services<br>+ <br>Annual Creative ETLA Contract Value |
| Document Cloud ARR | Annual Value of Document Cloud Subscriptions and Services <br>+<br>Annual Document Cloud ETLA Contract Value |
| Digital Media ARR | Creative ARR<br>+ <br>Document Cloud ARR |

---

Creative ARR exiting the first quarter of fiscal 2023 was $11.28 billion, up from $10.98 billion at the end of fiscal 2022. Document Cloud ARR exiting the first quarter of fiscal 2023 was $2.39 billion, up from $2.28 billion at the end of fiscal 2022. Total Digital Media ARR grew to $13.67 billion at the end of the first quarter of fiscal 2023, up from $13.26 billion at the end of fiscal 2022.

Our success in driving growth in ARR has positively affected our revenue growth. Creative revenue in the first quarter of fiscal 2023 was $2.76 billion, up from $2.55 billion in the first quarter of fiscal 2022, representing 8% year-over-year growth. Document Cloud revenue in the first quarter of fiscal 2023 was $634 million, up from $562 million in the first quarter of fiscal 2022, representing 13% year-over-year growth. Total Digital Media segment revenue grew to $3.40 billion in the first quarter of fiscal 2023, up from $3.11 billion in the first quarter of fiscal 2022, representing 9% year-over-year growth driven by strong net new user growth.

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*Digital Experience*

We are a market leader in the fast-growing category addressed by our Digital Experience segment. The Adobe Experience Cloud applications, services and platform are designed to manage customer journeys, enable personalized experiences at scale and deliver intelligence for businesses of any size in any industry. Our differentiation and competitive advantage are strengthened by our ability to use the Adobe Experience Platform to integrate our comprehensive set of solutions.

Adobe Experience Cloud delivers solutions for our customers across the following strategic growth pillars:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Data insights and activation*. Our solutions, including Adobe Analytics, Adobe Experience Platform, Customer Journey Analytics, Adobe Audience Manager and our Real-time Customer Data Platform, deliver robust customer profiles and AI-powered analytics across the customer journey to provide timely, relevant experiences across platforms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Content and commerce*. Our solutions help customers manage, deliver and optimize content delivery through Adobe Experience Manager, and enable shopping experiences that scale from mid-market to enterprise businesses with Adobe Commerce.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Customer journeys*. Our solutions help businesses manage, test, target, personalize and orchestrate campaigns and customer journeys across B2E use cases, including through Marketo Engage, Adobe Campaign, Adobe Target and Journey Optimizer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Marketing planning and workflow.* We offer Adobe Workfront, a work management platform directed toward marketers to orchestrate campaign workflows.

In addition to chief marketing officers, chief revenue officers and digital marketers, users of our Digital Experience solutions include advertisers, campaign managers, publishers, data analysts, content managers, social marketers, marketing executives and information management and technology executives. These customers often are involved in workflows that utilize other Adobe products, such as our Digital Media offerings. By combining the creativity of our Digital Media business with the science of our Digital Experience business, we help our customers to more efficiently and effectively make, manage, measure and monetize their content across every channel with an end-to-end workflow and feedback loop.

We utilize a direct sales force to market and license our Digital Experience solutions, as well as an extensive ecosystem of partners, including marketing agencies, systems integrators and independent software vendors that help license and deploy our solutions to their customers. We have made significant investments to broaden the scale and size of all of these routes to market, and our recent financial results reflect the success of these investments.

Digital Experience revenue was $1.18 billion in the first quarter of fiscal 2023, up from $1.06 billion in the first quarter of fiscal 2022, representing 11% year-over-year growth. Driving this increase was the increase in subscription revenue, which grew to $1.04 billion in the first quarter of fiscal 2023 from $932 million in the first quarter of fiscal 2022, representing 12% year-over-year growth.

*Macroeconomic Conditions*

As a corporation with an extensive global footprint, we are subject to risks and exposures from the evolving macroeconomic environment, including the effects of increased global inflationary pressures and interest rates, fluctuations in foreign currency exchange rates, potential economic slowdowns or recessions, the COVID-19 pandemic and geopolitical pressures, including the unknown impacts of current and future trade regulations and the Russia-Ukraine war. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results. For example, foreign currency exchange rate fluctuations have negatively impacted our revenue and earnings during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022, and may continue to negatively impact our financial results for the remainder of fiscal 2023.

While our revenue and earnings are relatively predictable as a result of our subscription-based business model, the broader implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, remain uncertain. *[See Risk Factors for further discussion of the possible impact of these macroeconomic issues on our business.](#i9ecc3edfc89346608b532b3f4b71fa31_136)*

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**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

In preparing our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.

We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, business combinations and income taxes have the greatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 3, 2023, as compared to the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 2, 2022.

**Recent Accounting Pronouncements**

*[See Note 1 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.](#i9ecc3edfc89346608b532b3f4b71fa31_34)*

**RESULTS OF OPERATIONS**

*Financial Performance Summary*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total Digital Media ARR of approximately $13.67 billion as of March 3, 2023 increased by $410 million, or 3%, from $13.26 billion as of December 2, 2022. The change in our Digital Media ARR is primarily due to new user adoption of our Creative Cloud and Document Cloud offerings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Creative revenue during the three months ended March 3, 2023 of $2.76 billion increased by $213 million, or 8%, compared to the year-ago period. Document Cloud revenue during the three months ended March 3, 2023 of $634 million increased by $72 million, or 13%, compared to the year-ago period. The increases were primarily due to subscription revenue growth associated with our Creative Cloud and Document Cloud offerings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Digital Experience revenue of $1.18 billion during the three months ended March 3, 2023 increased by $119 million, or 11%, compared to the year-ago period. The increase was primarily due to subscription revenue growth across our offerings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Remaining performance obligations of $15.21 billion as of March 3, 2023 remained relatively flat compared to December 2, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cost of revenue of $568 million during the three months ended March 3, 2023 increased by $56 million, or 11%, compared to the year-ago period primarily due to increases in base and incentive compensation and related benefits costs, as well as increases in hosting services and data center costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Operating expenses of $2.50 billion during the three months ended March 3, 2023 increased by $331 million, or 15%, compared to the year-ago period primarily due to increases in base and incentive compensation and related benefits costs, as well as professional fees including costs associated with our planned acquisition of Figma.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cash flows from operations of $1.69 billion during the three months ended March 3, 2023 decreased by $76 million, or 4%, compared to the year-ago period primarily due to higher cash payments for income taxes.

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**Revenue for the Three Months Ended March 3, 2023 and March 4, 2022**

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| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Subscription | $4373 | $3958 | 10% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 94% | 93% |  |
| Product | 120 | 145 | (17)% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 3% | 3% |  |
| Services and other | 162 | 159 | 2% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 3% | 4% |  |
| Total revenue | $4655 | $4262 | 9% |

---

*Subscription*

Our subscription revenue is comprised primarily of fees we charge for our subscription and hosted service offerings, and related support, including Creative Cloud and certain of our Adobe Experience Cloud and Document Cloud services. We primarily recognize subscription revenue ratably over the term of agreements with our customers, beginning with commencement of service. Subscription revenue related to certain offerings, where fees are based on a number of transactions and invoicing is aligned to the pattern of performance, customer benefit and consumption, are recognized on a usage basis.

We have the following reportable segments: Digital Media, Digital Experience, and Publishing and Advertising. Subscription revenue by reportable segment for the three months ended March 3, 2023 and March 4, 2022 is as follows:

---

| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Digital Media | $3301 | $2995 | 10% |
| Digital Experience | 1042 | 932 | 12% |
| Publishing and Advertising | 30 | 31 | (3)% |
| &nbsp;&nbsp;&nbsp;Total subscription revenue | $4373 | $3958 | 10% |

---

*Product*

Our product revenue is comprised primarily of fees related to licenses for on-premise software purchased on a perpetual basis, for a fixed period of time or based on usage for certain of our OEM and royalty agreements. We primarily recognize product revenue at the point in time the software is available to the customer, provided all other revenue recognition criteria are met.

*Services and Other*

Our services and other revenue is comprised primarily of fees related to consulting, training, maintenance and support for certain on-premise licenses that are recognized at a point in time and our advertising offerings. We typically sell our consulting contracts on a time-and-materials or fixed-fee basis. These revenues are recognized as the services are performed for time-and-materials contracts and on a relative performance basis for fixed-fee contracts. Training revenues are recognized as the services are performed. Our maintenance and support offerings, which entitle customers, partners and developers to receive desktop product upgrades and enhancements or technical support, depending on the offering, are generally recognized ratably over the term of the arrangement. Transaction-based advertising revenue is recognized on a usage basis as we satisfy the performance obligations to our customers.

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*Segment Information*

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| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Digital Media | $3395 | $3110 | 9% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 73% | 73% |  |
| Digital Experience | 1176 | 1057 | 11% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 25% | 25% |  |
| Publishing and Advertising | 84 | 95 | (12)% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 2% | 2% |  |
| Total revenue | $4655 | $4262 | 9% |

---

*Digital Media*

Revenue by major offerings in our Digital Media reportable segment for the three months ended March 3, 2023 and March 4, 2022 were as follows:

---

| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Creative Cloud | $2761 | $2548 | 8% |
| Document Cloud | 634 | 562 | 13% |
| &nbsp;&nbsp;&nbsp;Total Digital Media revenue | $3395 | $3110 | 9% |

---

Revenue from Digital Media increased $285 million during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 driven by increases in revenue associated with our Creative and Document Cloud subscription offerings due to continued demand amid an increasingly digital environment and strong customer acquisition and engagement, partially offset by the impact of foreign currency exchange rate fluctuations.

*Digital Experience*

Revenue from Digital Experience increased $119 million during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to net new additions across our subscription offerings and strong demand for services, partially offset by the impact of foreign currency exchange rate fluctuations.

*Geographical Information*

---

| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Americas | $2779 | $2446 | 14% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 60% | 57% |  |
| EMEA | 1173 | 1136 | 3% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 25% | 27% |  |
| APAC | 703 | 680 | 3% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 15% | 16% |  |
| Total revenue | $4655 | $4262 | 9% |

---

Overall revenue during the three months ended March 3, 2023 increased in all geographic regions as compared to the three months ended March 4, 2022 primarily due to increases in Digital Media and Digital Experience revenue. Within each geographic region, the fluctuations in revenue by reportable segment were attributable to the factors noted in the segment information above.

Included in the overall change in revenue for the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 were impacts associated with foreign currency which were mitigated in part by our foreign currency hedging program. During the three months ended March 3, 2023 as compared to the year-ago period, the U.S. Dollar strengthened against foreign currencies, including the Euro, Japanese Yen and British Pound, which decreased revenue in U.S. Dollar equivalents by $169 million. For the three months ended March 3, 2023, the foreign currency impacts to revenue were offset in part by net hedging gains from our cash flow hedging program of $21 million.

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**Cost of Revenue for the Three Months Ended March 3, 2023 and March 4, 2022**

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| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Subscription | $434 | $393 | 10% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 9% | 9% |  |
| Product | 8 | 10 | (20)% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | \* | \* |  |
| Services and other | 126 | 109 | 16% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 3% | 3% |  |
| Total cost of revenue | $568 | $512 | 11% |

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<sup>_________________________________________</sup>

<sup>(\*)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Percentage is less than 1%.

*Subscription*

Cost of subscription revenue consists of third-party hosting services and data center costs, including expenses related to operating our network infrastructure. Cost of subscription revenue also includes compensation costs associated with network operations, implementation, account management and technical support personnel, royalty fees, software costs and amortization of certain intangible assets.

Cost of subscription revenue increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

---

| | |
|:---|:---|
| | **Components of % Change** |
| Hosting services and data center costs | 7% |
| Incentive compensation, cash and stock-based | 2 |
| Base compensation and related benefits | 1 |
| &nbsp;&nbsp;&nbsp;Total change | 10% |

---

*Product*

Cost of product revenue is primarily comprised of third-party royalties, localization costs and the costs associated with the manufacturing of our products.

*Services and Other*

Cost of services and other revenue is primarily comprised of compensation and contracted costs incurred to provide consulting services, training and product support, and hosting services and data center costs.

Cost of services and other revenue increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to increases in compensation costs.

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**Operating Expenses for the Three Months Ended March 3, 2023 and March 4, 2022**

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| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Research and development | $827 | $701 | 18% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 18% | 16% |  |
| Sales and marketing | 1301 | 1158 | 12% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 28% | 27% |  |
| General and administrative | 331 | 269 | 23% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 7% | 6% |  |
| Amortization of intangibles | 42 | 42 | —% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 1% | 1% |  |
| Total operating expenses | $2501 | $2170 | 15% |

---

*Research and Development* 

Research and development expenses consist primarily of compensation and contracted costs associated with software development, third-party hosting services and data center costs, related facilities costs and expenses associated with computer equipment and software used in development activities.

Research and development expenses increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

---

| | |
|:---|:---|
| | **Components of % Change** |
| Incentive compensation, cash and stock-based | 9% |
| Base compensation and related benefits | 7 |
| Various individually insignificant items | 2 |
| &nbsp;&nbsp;&nbsp;Total change | 18% |

---

Investments in research and development, including the recruiting and hiring of software developers, are critical to remain competitive in the marketplace and are directly related to continued timely development of new and enhanced offerings and solutions. We will continue to focus on long-term opportunities available in our end markets and make significant investments in the development of our subscription and service offerings, applications and tools.

*Sales and Marketing*

Sales and marketing expenses consist primarily of compensation costs, amortization of contract acquisition costs, including sales commissions, travel expenses and related facilities costs for our sales, marketing, order management and global supply chain management personnel. Sales and marketing expenses also include the costs of programs aimed at increasing revenue, such as advertising, trade shows and events, public relations and other market development programs.

Sales and marketing expenses increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

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| | |
|:---|:---|
| | **Components of % Change** |
| Base compensation and related benefits | 4% |
| Incentive compensation, cash and stock-based | 4 |
| Professional and consulting fees | 2 |
| Various individually insignificant items | 2 |
| &nbsp;&nbsp;&nbsp;Total change | 12% |

---

*General and Administrative*

General and administrative expenses consist primarily of compensation and contracted costs, travel expenses and related facilities costs for our finance, facilities, human resources, legal, information services and executive personnel. General and administrative expenses also include outside legal and accounting fees, provision for bad debts, expenses associated with

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computer equipment and software used in the administration of the business, charitable contributions and various forms of insurance.

General and administrative expenses increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

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| | |
|:---|:---|
| | **Components of % Change** |
| Professional and consulting fees | 15% |
| Base compensation and related benefits | 7 |
| Incentive compensation, cash and stock-based | 3 |
| Events | 3 |
| Bad debt expense | (3) |
| Various individually insignificant items | (2) |
| &nbsp;&nbsp;&nbsp;Total change | 23% |

---

Professional and consulting fees increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to incurred transaction costs associated with our planned acquisition of Figma.

**Non-Operating Income (Expense), Net for the Three Months Ended March 3, 2023 and March 4, 2022**

---

| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Interest expense | $(32) | $(28) | 14% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | (1)% | (1)% |  |
| Investment gains (losses), net | 1 | (9) | \*\* |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | \* | \* |  |
| Other income (expense), net | 43 |  | \*\* |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 1% | \* |  |
| Total non-operating income (expense), net | $12 | $(37) | \*\* |

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<sup>_________________________________________</sup>

<sup>(\*)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Percentage is less than 1%.

<sup>(\*\*)&nbsp;&nbsp;&nbsp;&nbsp;</sup>Percentage is not meaningful.

*Interest Expense*

Interest expense represents interest associated with our debt instruments. Interest on our senior notes is payable semi-annually, in arrears, on February 1 and August 1.

*Investment Gains (Losses), Net*

Investment gains (losses), net consists principally of unrealized holding gains and losses associated with our deferred compensation plan assets, and gains and losses associated with our direct and indirect investments in privately held companies.

*Other Income (Expense), Net* 

Other income (expense), net consists primarily of interest earned on cash, cash equivalents and short-term fixed income investments. Other income (expense), net also includes realized gains and losses on fixed income investments and foreign exchange gains and losses.

Other income (expense), net increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to increases in interest income driven by higher average interest rates.

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**Provision for Income Taxes for the Three Months Ended March 3, 2023 and March 4, 2022**

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| | | | |
|:---|:---|:---|:---|
| *(dollars in millions)* | **Three Months** | **Three Months** |  |
|  | **2023** | **2022** | **% Change** |
| Provision for income taxes | $351 | $277 | 27% |
| &nbsp;&nbsp;&nbsp;Percentage of total revenue | 8% | 6% |  |
| &nbsp;&nbsp;&nbsp;Effective tax rate | 22% | 18% |  |

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Our effective tax rate increased by approximately four percentage points primarily due to a net tax expense related to stock-based compensation recorded during the three months ended March 3, 2023, as compared to a net tax benefit related to stock-based compensation recorded during the three months ended March 4, 2022.

Our effective tax rate for the three months ended March 3, 2023 was higher than the U.S. federal statutory tax rate of 21% primarily due to a net tax expense related to stock-based compensation and state taxes, partially offset by the U.S. federal research tax credit.

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized based on evaluation of all available positive and negative evidence. On the basis of this evaluation, we continue to maintain a valuation allowance to reduce our deferred tax assets to the amount realizable. The total valuation allowance was $418 million as of March 3, 2023, primarily related to certain state credits.

We are a United States-based multinational company subject to tax in multiple domestic and foreign tax jurisdictions. The current U.S. tax law subjects the earnings of certain foreign subsidiaries to U.S. tax and generally allows an exemption from taxation for distributions from foreign subsidiaries.

In the current global tax policy environment, the domestic and foreign governing bodies continue to consider, and in some cases introduce, changes in regulations applicable to corporate multinationals such as Adobe. As regulations are issued, we account for finalized regulations in the period of enactment.

Beginning in 2023, under the provisions introduced by the U.S. Tax Act, we are required to capitalize and amortize research and development costs. If the rule is not modified, there will continue to be an adverse impact on our effective rates for income taxes paid, which is partially offset by a benefit to our effective tax rates from the increase in the foreign-derived intangible income deduction, in fiscal 2023 and beyond.

*Accounting for Uncertainty in Income Taxes*

The gross liabilities for unrecognized tax benefits excluding interest and penalties were $330 million and $298 million as of March 3, 2023 and March 4, 2022, respectively. If the total unrecognized tax benefits as of March 3, 2023 and March 4, 2022 were recognized, $214 million and $203 million would decrease the respective effective tax rates.

As of March 3, 2023 and March 4, 2022, the combined amounts of accrued interest and penalties related to tax positions taken on our tax returns were approximately $19 million and $22 million, respectively. These amounts were included in long-term income taxes payable in their respective years.

The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Although the timing of resolution, settlement and closing of audits is not certain, it is reasonably possible that the underlying unrecognized tax benefits may decrease by up to $15 million over the next 12 months.

Our future effective tax rates may be materially affected by changes in the tax rates in jurisdictions where our income is earned, changes in jurisdictions in which our profits are determined to be earned and taxed, changes in the valuation of our deferred tax assets and liabilities, changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business, or unexpected changes in business and market conditions that could reduce certain tax benefits.

In addition, the United States and other countries and jurisdictions in which we conduct business, including those covered by governing bodies that enact tax laws applicable to us, such as the European Commission of the European Union, could make changes to relevant tax, accounting or other laws and interpretations thereof that have a material impact to us. These countries, governmental bodies and intergovernmental economic organizations such as the Organization for Economic Cooperation and Development, have or could make unprecedented assertions about how taxation is determined and, in some

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cases, have proposed or enacted new laws that are contrary to the way in which rules and regulations have historically been interpreted and applied. In the current global tax policy environment, any changes in laws, regulations and interpretations could adversely affect our effective tax rates, cause us to respond by making changes to our business structure, or result in other costs to us which could adversely affect our operations and financial results.

Moreover, we are subject to the examination of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. Our policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. We believe our tax estimates to be reasonable; however, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our financial position and results of operations.

**LIQUIDITY AND CAPITAL RESOURCES**

**Cash Flows**

This data should be read in conjunction with our condensed consolidated statements of cash flows.

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| | | |
|:---|:---|:---|
| | **As of** | **As of** |
| *(in millions)* | **March 3, 2023** | **December 2, 2022** |
| Cash and cash equivalents | $4072 | $4236 |
| Short-term investments | $1581 | $1860 |
| Working capital | $905 | $868 |
| Stockholders' equity | $14206 | $14051 |

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A summary of our cash flows is as follows:

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| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| *(in millions)* | **March 3, 2023** | **March 4, 2022** |
| Net cash provided by operating activities | $1693 | $1769 |
| Net cash provided by (used for) investing activities | 156 | (260) |
| Net cash used for financing activities | (2014) | (2604) |
| Effect of foreign currency exchange rates on cash and cash equivalents | 1 | (10) |
| Net change in cash and cash equivalents | $(164) | $(1105) |

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Our primary source of cash is receipts from revenue. Our primary uses of cash are our stock repurchase program as described below and general business expenses including payroll, income taxes, marketing and third-party hosting services. Other sources of cash include proceeds from maturing short-term investments. Other uses of cash include repayment of maturing senior notes, purchases of property and equipment and payments for taxes related to net share settlement of equity awards.

*Cash Flows from Operating Activities*

Net cash provided by operating activities of $1.69 billion for the three months ended March 3, 2023 was primarily comprised of net income adjusted for the net effect of non-cash items and changes in operating assets and liabilities. The primary working capital uses of cash were the payment of accrued bonuses, partially offset by increases in deferred revenue driven by Digital Media and Digital Experience offerings.

*Cash Flows from Investing Activities*

Net cash provided by investing activities of $156 million for the three months ended March 3, 2023 was primarily due to maturities of short-term investments during the quarter partially offset by ongoing capital expenditures.

*Cash Flows from Financing Activities*

Net cash used for financing activities of $2.01 billion for the three months ended March 3, 2023 was primarily due to payments for our common stock repurchases, the repayment of our 2023 Notes and taxes paid related to the net share settlement of equity awards. The above uses of cash were offset in part by proceeds from re-issuance of treasury stock mainly for our employee stock purchase plan. *See the section titled "Stock Repurchase Program" below.*

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**Liquidity and Capital Resources Considerations**

Our existing cash, cash equivalents and investment balances may fluctuate during fiscal 2023 due to changes in our planned cash outlay.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, risks detailed in the section titled "Risk Factors" in titled Part II, Item 1A of this report. Based on our current business plan and revenue prospects, we believe that our existing cash, cash equivalents and investment balances, our anticipated cash flows from operations and our available revolving credit facility will be sufficient to meet our working capital, operating resource expenditure and capital expenditure requirements for the next twelve months.

Our cash equivalent and short-term investment portfolio as of March 3, 2023 consisted of asset-backed securities, corporate debt securities, money market funds, municipal securities, time deposits, U.S. agency securities and U.S. Treasury securities. We use professional investment management firms to manage a large portion of our invested cash.

We expect to continue our investing activities, including short-term and long-term investments, purchases of computer systems for research and development, sales and marketing, product support and administrative staff, and facilities expansion. Furthermore, cash reserves may be used to repurchase stock under our stock repurchase program and to strategically acquire companies, products or technologies that are complementary to our business.

On September 15, 2022, we entered into a definitive agreement under which we intend to acquire Figma, Inc. ("Figma") for approximately $20 billion, comprised of approximately half cash and half stock, subject to customary purchase price adjustments. Approximately 6 million additional restricted stock units will be granted to Figma's Chief Executive Officer and employees that will vest over four years subsequent to closing. The transaction is subject to regulatory approvals and customary closing conditions, and is expected to close in 2023. We will be required to pay Figma a reverse termination fee of $1 billion if the transaction fails to receive regulatory clearance, assuming all other closing conditions have been satisfied or waived, or if it fails to close within 18 months from September 15, 2022. We expect to finance the cash portion of the consideration using cash on hand and debt instruments. While the transaction is pending, at a minimum we expect to maintain share repurchases sufficient to offset the dilution of equity issuances to our employees.

*Term Loan Credit Agreement*

In January 2023, we entered into a delayed draw credit agreement, providing for a senior unsecured term loan (the "Term Loan") of up to $3.5 billion for the purpose of partially funding the purchase price and related fees for our acquisition of Figma. The Term Loan is available for funding in a single drawing upon the closing of the Figma acquisition at any time prior to March 15, 2024 and will mature two years following the initial funding date. As of March 3, 2023, there were no outstanding borrowings under the Term Loan.

*Revolving Credit Agreement*

We have a $1.5 billion senior unsecured revolving credit agreement (the "Revolving Credit Agreement") with a syndicate of lenders, providing for loans to us and certain of our subsidiaries through June 30, 2027. Subject to the agreement of lenders, we may obtain up to an additional $500 million in commitments, for a maximum aggregate commitment of $2 billion. As of March 3, 2023, there were no outstanding borrowings under the Revolving Credit Agreement and the entire $1.5 billion credit line remains available for borrowing. Under the terms of our Revolving Credit Agreement, we are not prohibited from paying cash dividends unless payment would trigger an event of default or if one currently exists. We do not anticipate paying any cash dividends in the foreseeable future.

*Senior Notes*

We have $3.65 billion senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. As of March 3, 2023, the carrying value of our senior notes was $3.63 billion and our maximum commitment for interest payments was $366 million for the remaining duration of our outstanding senior notes. Interest is payable semi-annually, in arrears, on February 1 and August 1. Our senior notes do not contain any financial covenants. *[See Note 14 of our notes to condensed consolidated financial statements for further details regarding our debt.](#i9ecc3edfc89346608b532b3f4b71fa31_82)*

*Contractual Obligations*

Our principal commitments as of March 3, 2023 consisted of purchase obligations resulting from agreements to purchase goods and services in the ordinary course of business and obligations under operating lease arrangements. There have been no material changes in those obligations during the three months ended March 3, 2023.

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*Other*

Beginning in 2023, under the provisions introduced by the U.S. Tax Act, we are required to capitalize and amortize research and development costs. If the rule is not modified, there will continue to be an adverse impact on our effective rates for income taxes paid, which is partially offset by a benefit from the increase in the foreign-derived intangible income deduction, in fiscal 2023 and beyond.

The Inflation Reduction Act enacted in 2022 introduced new provisions including a corporate book minimum tax effective for us beginning in fiscal 2024 and an excise tax on net stock repurchases made after December 31, 2022. We continue to monitor developments and evaluate impacts, if any, of these provisions on our results of operations and cash flows.

**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 December 2020, our Board of Directors granted authority to repurchase up to $15 billion in our common stock through the end of fiscal 2024.

During the three months ended March 3, 2023, we entered into an accelerated share repurchase agreement ("ASR") with a large financial institution whereupon we provided them with a prepayment of $1.4 billion and received an initial delivery of 3.2 million shares of our common stock. Subsequent to March 3, 2023, the ASR was settled, which resulted in total repurchases of 4.0 million shares at an average purchase price of $348.46.

During the three months ended March 3, 2023, we repurchased a total of 5.0 million shares, including approximately 1.8 million shares at an average price of $330.52 through a structured repurchase agreement entered into during fiscal 2022, as well as 3.2 million shares from the initial delivery of the ASR.

Subsequent to March 3, 2023, as part of the December 2020 stock repurchase authority, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1 billion. Upon completion of the $1 billion stock repurchase agreement, $4.15 billion remains under our December 2020 authority.

*[See Note 11 of our notes to condensed consolidated financial statements for further details regarding our stock repurchase program.](#i9ecc3edfc89346608b532b3f4b71fa31_73)*

**Indemnifications**

In the ordinary course of business, we provide indemnifications of varying scope to 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.

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**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

There have been no material changes in our market risk exposures for the three months ended March 3, 2023, as compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended December 2, 2022.

**ITEM 4. CONTROLS AND PROCEDURES**

Based on their evaluation as of March 3, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended March 3, 2023 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adobe have been detected.

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**PART II—OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

*[See Note 13 of our notes to condensed consolidated financial statements for information regarding our legal proceedings.](#i9ecc3edfc89346608b532b3f4b71fa31_79)*

**ITEM 1A. RISK FACTORS**

As previously discussed, our actual results could differ materially from our forward-looking statements. Below we discuss some of the factors that could cause these differences. These and many other factors described in this report could adversely affect our operations, performance and financial condition.

**Risks Related to Our Ability to Grow Our Business**

***The markets in which we participate are intensely competitive, and if we cannot continue to develop, acquire, market and offer new products and services or enhancements to existing products and services that meet customer requirements, our operating results could suffer.***

The markets for our products and services are characterized by intense competition, new industry standards, evolving distribution models, limited barriers to entry, new technology developments, short product life cycles, customer price sensitivity, global market conditions and frequent product introductions (including alternatives with limited functionality available at lower costs or free of charge). Any of these factors could create downward pressure on pricing and gross margins and could adversely affect our renewal and upsell and cross-sell rates, as well as our ability to attract new customers.

Our future success will depend on our continued ability to enhance and integrate our existing products and services, introduce new products and services in a timely and cost-effective manner, meet changing customer expectations and needs, extend our core technology into new applications, and anticipate emerging standards, business models, software delivery methods and other technological developments. For example, consumers continue to migrate from personal computers to tablet and mobile devices and from desktop to the web. While we offer our products on a variety of platforms, if we cannot continue adapting our products to tablet and mobile devices or the web, or if our competitors can adapt their products more quickly than us, our business could be harmed. In addition, releases of new devices or operating systems may make it more difficult for our products to perform or may require significant cost to adapt our solutions. The potential costs and delays incurred as a result could harm our business. If we fail to anticipate or misjudge customers' rapidly changing needs and expectations or adapt to emerging technological trends, our market share and results of operations could suffer.

Furthermore, some of our competitors and potential competitors enjoy competitive advantages such as greater financial, technical, sales, marketing and other resources, broader brand awareness and access to larger customer bases. As a result of these advantages, potential and current customers might select the products and services of our competitors, causing a loss of our market share. Our competitors, including large enterprises, may develop products, features or services that are similar to ours or that achieve greater acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies.

*For additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section titled "Competition" contained in Part I, Item 1 of our Annual Report on Form 10-K.*

***Introduction of new technology could harm our business and results of operations.***

The expectations and needs of technology consumers are constantly evolving. As new technology is developed, integration of our products and services with one another and other companies' offerings creates an increasingly complex ecosystem that is also partly reliant on third parties. If any disruptive technology, or competing products, services or operating systems that are not compatible with our solutions, achieve widespread acceptance, our operating results could suffer and our business could be harmed.

The introduction of, or limitations on, certain technologies may reduce the effectiveness of our products and our business operations. For example, some of our products and services, including those marketed or licensed through adobe.com, rely on tracking, third-party cookies or other identifiers to help our customers more effectively advertise and detect and prevent fraudulent activity. However, consumers can, with increasing ease, implement technologies to limit the ability to collect and use data to deliver or advertise services. Increased use of methods to control the use of these technologies through customers' browsers, operating systems, device settings or "ad-blocking" software or applications may harm our business.

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***We may not realize the anticipated benefits of past or future investments or acquisitions, and integration of acquisitions may disrupt our business and management.***

We may not realize the anticipated benefits of an investment or acquisition of a company, division, product or technology, each of which involves numerous risks. These risks include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to achieve the financial and strategic goals for the acquired and combined businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulty in, and the cost of, effectively integrating the operations, technologies, products or services, and personnel of the acquired business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential identified or unknown security vulnerabilities in acquired products that expose us to additional security risks or delay our ability to integrate the product into our offerings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• disruption of our ongoing business and distraction of our management and other employees from other opportunities and challenges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to retain personnel of the acquired business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to retain key customers, distributors, vendors and other business partners of the acquired business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to take advantage of anticipated tax benefits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• elevated delinquency or bad debt write-offs related to receivables of the acquired business we assume;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• additional costs of bringing acquired companies into compliance with laws and regulations applicable to a multinational corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulty in maintaining controls, procedures and policies during the transition and integration;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• failure of our due diligence processes to identify significant problems, liabilities or other challenges of an acquired company or technology;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, such as claims from terminated employees, customers, former stockholders or other third parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incurring significant exit charges if products or services acquired in business combinations are unsuccessful;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to conclude that our internal controls over financial reporting are effective;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent or impose conditions on such acquisitions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the failure of strategic investments to perform as expected or to meet financial projections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• additional stock-based compensation issued or assumed in connection with an acquisition, including the impact on stockholder dilution and our results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased accounts receivables collection times and working capital requirements associated with acquired business models; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incompatibility of business cultures.

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Mergers and acquisitions of technology companies are inherently risky. If we do not complete an announced acquisition transaction, including the pending acquisition of Figma, Inc., or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated, and in certain circumstances an acquisition could harm our financial position.

Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may also be impaired by adverse economic and political events, including trade tensions and increased global scrutiny of or restrictions on foreign investments. For example, a number of countries, including the United States and countries in Europe and the Asia-Pacific region, are considering or have adopted restrictions on foreign investments. Governments may continue to adopt or tighten restrictions of this nature, and such restrictions could negatively impact our business and financial results.

***The success of some of our product and service offerings depends on our ability to continue to attract and retain customers of and contributors to our online marketplaces for creative content.***

The success of some of our product and service offerings, such as Adobe Stock, depends on our ability to continue to retain existing and attract new customers and contributors to these online marketplaces for creative content. An increase in paying customers has generally resulted in more content from contributors, which increases the size of our collection and in turn attracts new paying customers. We rely on the functionality and features of our online marketplaces, the size and content of our collection and the effectiveness of our marketing efforts to attract new customers and contributors and retain existing ones. New technologies may render the features of our online marketplaces obsolete, our collection may fail to grow as anticipated or our marketing efforts may be unsuccessful, any of which may adversely affect our results of operations.

***If our products or platforms are used to create or disseminate objectionable content, particularly misleading content intended to manipulate public opinion, our brand reputation may be damaged, and our business and financial results may be harmed.***

We believe that our brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Adobe increases our ability to enter new categories, launch new and innovative products to better serve our customers and expand our customer base. Our brands may be negatively affected by the use of our products or services to create or disseminate newsworthy content that is deemed to be misleading, deceptive or intended to manipulate public opinion (e.g., "DeepFakes"), by the use of our products or services for illicit, objectionable or illegal ends, or by our failure to respond appropriately and expeditiously to such uses of our products and services. Such uses of our products and services may also cause us to face claims related to defamation, rights of publicity and privacy, illegal content, misinformation and personal injury torts. Maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful. If we fail to appropriately respond to objectionable content created using our products or services or shared on our platforms, our users may lose confidence in our brands and our business and financial results may be adversely affected. In addition, government regulation designed to address DeepFakes could adversely impact our product offerings.

***Social and ethical issues relating to the use of new and evolving technologies, such as AI, in our offerings may result in reputational harm and liability.***

Social and ethical issues relating to the use of new and evolving technologies such as artificial intelligence ("AI") in our offerings, may result in reputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues. We are increasingly building AI into many of our offerings, including our recent announcement of Adobe Firefly. As with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. If we enable or offer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm or legal liability. Potential government regulation related to AI use and ethics may also increase the burden and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our products and services. The rapid evolution of AI will require the application of resources to develop, test and maintain our products and services to help ensure that AI is implemented ethically in order to minimize unintended, harmful impact. Uncertainty around new and emerging AI applications such as generative AI content creation may require additional investment in the development of proprietary datasets and machine learning models, development of new approaches and processes to provide attribution or remuneration to content creators and building systems that enable creatives to have greater control over the use of their work in the development of AI, which may be costly and could impact our profit margin if we decide to expand generative AI into all our product offerings. Developing, testing and deploying AI systems may also increase the cost profile of our offerings due to the nature of the computing costs involved in such systems.

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**Risks Related to the Operation of Our Business**

***Security breaches in data centers we manage, or third parties manage on our behalf, may compromise the confidentiality, integrity or availability of employee and customer data, which could expose us to liability and adversely affect our reputation and business.***

We process and store significant amounts of employee and customer data, a large volume of which is hosted by third-party service providers. A security incident impacting our own data centers or those controlled by our service providers may compromise the confidentiality, integrity or availability of this data. Unauthorized access to or loss or disclosure of data stored by Adobe or our service providers may occur through physical break-ins, breaches of a secure network by an unauthorized party, software vulnerabilities or coding errors, employee mistakes, theft or misuse or other misconduct. It is also possible that unauthorized access to or disclosure of employee or customer data may occur through inadequate use of security controls by customers, service providers or employees. The compromise of personal, confidential or proprietary information could cause a loss of data, disrupt our operations, damage our reputation, give rise to remediation or other expenses and subject us to claims or other liabilities, regulatory investigations or fines. Adobe maintains insurance to cover operational risks, such as cyber risk and technology outages, but this insurance may not cover all costs associated with the consequences of personal, confidential or proprietary information being compromised. Further, such perceived or actual unauthorized loss or disclosure of the information we collect, process or store, or breach of our security could damage our reputation, result in the loss of customers and harm our business.

***We rely on data centers managed both by Adobe and third parties to host and deliver our services, as well as access, collect, process, use, transmit and store data, and any interruptions or delays in these hosted services, or failures in data collection or transmission could expose us to liability and harm our business and reputation.***

Much of our business relies on hardware and services that are hosted, managed and controlled directly by Adobe or third-party service providers, including our online store at adobe.com and our Creative Cloud, Document Cloud and Experience Cloud solutions. We do not have redundancy for all of our systems, many of our critical applications reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities. If our business relationship with a third-party provider of hosting or content delivery services is negatively affected, or if one of our content delivery suppliers were to terminate its agreement with us without adequate notice, we might not be able to deliver the corresponding hosted offerings to our customers, which could disrupt our business operations and those of our customers, subject us to reputational harm, costly and time-intensive notification requirements, and cause us to lose customers and future business. The COVID-19 pandemic has disrupted and may continue to disrupt the supply chain of hardware needed to maintain these third-party systems and services or to run our business. In addition, supply chain disruptions stemming from the Russia-Ukraine war may harm our customers and suppliers and further complicate existing supply chain constraints. Occasionally, we migrate data among data centers and to third-party hosted environments. If a transition among data centers or to third-party service providers encounters unexpected interruptions, unforeseen complexity or unplanned disruptions despite precautions undertaken during the process, this may impair our delivery of products and services to customers and result in increased costs and liabilities, which may harm our operating results, reputation and our business.

It is also possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption, cause the information that we collect or maintain to be incomplete or contain inaccuracies that our customers regard as significant, or cause us to fail to meet committed service levels or comply with applicable notification requirements. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors, including access to the internet, the failure of our network or software systems, security breaches or significant variability in visitor traffic on customer websites. In addition, the loss of data resulting from computer viruses, worms, ransomware or other malware may harm our systems could expose us to litigation or regulatory investigation, and costly and time-intensive notification requirements.

We may also find, on occasion, that we cannot deliver data and reports to our customers in near real time due to factors such as significant spikes in customer activity on their websites or failures of our network or software (or that of a third-party service provider). If we fail to plan infrastructure capacity appropriately and expand it proportionally with the needs of our customer base, and we experience a rapid and significant demand on the capacity of our data centers or those of third parties, service outages or performance issues could occur, which would impact our customers. Such a strain on our infrastructure capacity could subject us to regulatory and customer notification requirements, violations of service level agreement commitments or financial liabilities and result in customer dissatisfaction or harm our business. If we supply materially inaccurate information or experience significant interruptions in our systems, our reputation could be harmed, we could lose customers and we could be found liable for damages or incur other losses.

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***Security vulnerabilities in our products and systems, or in our supply chain, could lead to reduced revenue or to liability claims.***

Maintaining the security of our products and services is a critical issue for us and our customers. Cyberthreats are constantly evolving and becoming increasingly sophisticated and complex, making it increasingly difficult to detect and successfully defend against them. Certain unauthorized parties have in the past managed, and may again in the future manage, to gain access to and misuse some of our systems and software, or that of our third-party service providers, in order to access the authentication, payment and personal information of our end users and employees. In addition, cyber-attackers (which may include individuals or groups, as well as sophisticated groups with significant resources, such as nation-state and state-sponsored attackers) also develop and deploy viruses, worms, credential stuffing attack tools and other malicious software programs, some of which may be specifically designed to attack our products, services, information systems or networks. The frequency and sophistication of such threats continues to increase and often becomes further heightened in connection with geopolitical tensions. Hardware, software and operating system applications that we develop or procure from third parties have contained and may contain defects in design or manufacture, including bugs, vulnerabilities and other problems that could unexpectedly compromise the security of the system or impair a customer's ability to operate or use our products. Like other global companies, we face an increasingly difficult challenge to attract and retain highly qualified security personnel to assist us in combating these security threats. The costs to prevent, eliminate, mitigate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities are significant, and our efforts to address these problems, including notifying affected parties, may not be successful or may be delayed and could result in interruptions, delays, cessation of service and loss of existing or potential customers. It is impossible to predict the extent, frequency or impact these problems may have on us.

Outside parties have in the past and may in the future attempt to fraudulently induce our employees or users of our products or services to disclose sensitive, personal or confidential information via illegal electronic spamming, phishing or other tactics. This existing risk is compounded given the current hybrid model work environment, where a large portion of our workforce spends a portion of their time working in our offices and a portion of their time working from home. Unauthorized parties may also attempt to gain physical access to our facilities in order to infiltrate our information systems or attempt to gain logical access to our products, services or information systems for the purpose of exfiltrating content and data. These actual and potential breaches of our security measures and the accidental loss, inadvertent disclosure or unauthorized dissemination of proprietary information or sensitive, personal or confidential data about us, our employees, our customers or their end users, including the potential loss or disclosure of such information or data could expose us, our employees, our customers or other individuals affected to a risk of loss or misuse of this information. This may result in litigation and liability or fines, costly and time-intensive notice requirements, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business or damage our brand and reputation, thereby requiring time and resources to mitigate these impacts. These risks will likely increase as we expand our hosted offerings, integrate our products and services and store and process more data.

These issues affect our products and services in particular because cyber-attackers tend to focus their efforts on popular offerings with a large user base, and we expect them to continue to do so. From time to time we have identified, and in the future we may identify other, vulnerabilities in some of our applications and services and those of our third-party service providers. In some cases, such vulnerabilities may not be immediately detected, which may make it difficult to recover critical services and lead to damaged assets. We continuously monitor and develop our information technology networks and infrastructure in an effort to prevent, detect, address and mitigate the risk of threats to our data, systems and networks, including malware and computer virus attacks, ransomware, unauthorized access, business email compromise, misuse, denial-of-service attacks, system failures and disruptions. These continued enhancements and changes, as well as changes designed to update and enhance our protective measures to address new threats, may increase the risk of a system or process failure or the creation of a gap in the associated security measures. Any such failure or gap could materially and adversely affect our business, results of operations and financial results. We devote significant resources to address security vulnerabilities through engineering more secure products, enhancing security and reliability features in our products and systems, code hardening, conducting rigorous penetration tests, deploying updates to address security vulnerabilities, regularly reviewing our service providers' security controls, reviewing and auditing our hosted services against independent security control frameworks (such as ISO 27001, SOC 2 and PCI), providing resources, such as mandatory security training, for our workforce and improving our incident response time, but security vulnerabilities cannot be totally eliminated. The cost of undertaking these efforts could reduce our operating margins, and we may be unable to implement these measures quickly enough to prevent unauthorized access into our systems and products in all circumstances. Despite our preventative efforts, there is no assurance that our security measures will provide full effective protection from such events, and actual or perceived security vulnerabilities in our products and systems may harm our reputation or lead to claims against us (and have in the past led to such claims) and could lead some customers to stop using certain products or services or to reduce or delay future purchases. If we do not make the appropriate level of investment in our technology systems and we are not able to deliver the quality of data security and privacy our customers require or that

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meet our independent security control certification requirements, our business could be adversely affected. Customers may also adopt security measures designed to protect their existing computer systems from attack, which could delay adoption of new technologies. Moreover, delayed sales, lower margins or lost customers resulting from disruptions caused by cyber-attacks, overly burdensome preventative security measures or failure to fully meet independent security control certification requirements could adversely affect our financial results, stock price and reputation.

***Some of our enterprise offerings have extended and complex sales cycles, which can make our sales cycles unpredictable.***

Sales cycles for some of our enterprise offerings, including our Adobe Experience Cloud and Adobe Experience Platform solutions and Enterprise Term License Agreements ("ETLAs") in our Digital Media business, are multi-phased and complex, which also makes it difficult to predict when a given sales cycle will close. The complexity in these sales cycles is due to several factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the need for our sales representatives to educate customers about the use and benefit of large-scale deployments of our products and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the desire of organizations to undertake significant evaluation processes to determine their technology requirements prior to making information technology expenditures and the need for our representatives to spend a significant amount of time assisting with such evaluations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• intensifying competition within the industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the negotiation of large, complex, enterprise-wide contracts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the need for our customers to obtain requisition approvals from various decision makers within their organizations due to the complexity of our solutions touching multiple departments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• customer budget constraints, economic conditions and unplanned administrative delays.

We spend substantial time and expense on our sales efforts without assurance that potential customers will ultimately purchase our solutions. As we target our sales efforts at larger enterprise customers, these trends are expected to continue and could have a greater impact on our results of operations. Additionally, our enterprise sales pattern has historically been uneven, where a higher percentage of a quarter's total sales occur during the final weeks of each quarter, which is common in our industry.

***Our business could be harmed if we fail to effectively manage critical strategic third-party business relationships.***

As our offerings expand and our customer base grows, our relationships with strategic partners become increasingly valuable. If our contractual relationships with these third parties were to terminate, or if we were unable to renew on favorable terms, our business could be harmed. This is especially the case when the third party's offerings are integrated with our products and services, or where the third party's offerings are difficult to substitute or replace. Alternative arrangements for such products and services may not be available to us on commercially reasonable terms, and we may experience business interruptions upon a transition to an alternative partner. The failure of third parties to provide acceptable products and services or to update their technology may result in a disruption to our business operations and those of our customers, which may reduce our revenues and profits, cause us to lose customers and damage our reputation.

We increasingly utilize third-party distribution platforms, such as Apple's App Store and Google's Play Store, for the distribution of certain of our product offerings. Although we benefit from the strong brand recognition and large user base of these distribution platforms to attract new customers, the platform owners have wide discretion to change the pricing structure, terms of service and other policies with respect to us and other developers, and may offer or promote products that compete with our product offerings. Adverse changes by these third parties could adversely affect our financial results.

***Failure of our third-party customer service and technical support providers to adequately address customers' requests could harm our business and adversely affect our financial results.***

Our customers rely on our customer service support organization to resolve issues with our products and services. We depend heavily, and expect to continue to rely heavily, on third-party customer service and technical support representatives to provide such services. This strategy presents risks to our business since we may not be able to influence the quality of support as directly as if our own employees performed these activities. Our customers may react negatively to providing information to, and receiving support from, third-party organizations, especially if these third-party organizations are based overseas. If we encounter problems with our third-party customer service and technical support providers, our reputation may be harmed, our ability to sell our offerings could be adversely affected, and we could lose customers and associated revenue.

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***If we are unable to recruit and retain key personnel, our business may be harmed, and our attempts to operate under a hybrid work model may not be successful and adversely impact our business.***

Much of our future success depends on the continued service, availability and performance of our senior management and highly-skilled personnel across all levels of our organization. Our senior management has acquired specialized knowledge and skills with respect to our business, and the loss of any of these individuals could harm our business, especially if we are not successful in developing adequate succession plans. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel, immigration or the availability of work visas. Competition for experienced personnel in the information technology industry is intense and has recently intensified further due to industry trends in many areas where our employees are located. Further, the increased availability of hybrid or remote working arrangements has expanded the pool of companies that can compete for our employees and employment candidates. We may experience higher compensation costs to retain senior management and experienced personnel that may not be offset by improved productivity or increased sales. A hybrid work environment may also present operational, cybersecurity and workplace culture challenges. If we are unable to continue to successfully attract and retain highly skilled personnel and maintain our corporate culture in a hybrid work environment, our business may be harmed.

We continue to hire personnel in countries where exceptional technical knowledge and other expertise are offered at lower costs, which increases the efficiency of our global workforce structure and reduces our personnel related expenditures. Nonetheless, as globalization continues, competition for employees in these countries has increased, which may impact our ability to retain these employees and increase our compensation-related expenses. We may continue to expand our international operations and international sales and marketing activities, which would require significant management attention and resources. We may be unable to scale our infrastructure effectively or as quickly as our competitors in these markets, and our revenue may not increase sufficiently to offset these expected increases in costs, causing our results to suffer.

We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster innovation, teamwork and employee satisfaction. As we grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

***Failure to manage our sales, partner and distribution channels effectively could result in a loss of revenue and harm our business.***

We contract with a number of software distributors and other strategic partners, none of which are individually responsible for a material amount of our total net revenue in any recent period. Nonetheless, if an agreement with one of our distributors were terminated, any prolonged delay in securing a replacement distributor could have a negative impact on our results of operations.

Successfully managing our indirect distribution channel efforts to reach various customer segments for our products and services is a complex process across the broad range of geographies where we do business or plan to do business. Our distributors and other channel partners are independent businesses that we do not control. Notwithstanding the independence of our channel partners, we face legal risk and potential reputational harm from the activities of these third parties including, but not limited to, export control violations, workplace conditions, corruption and anti-competitive behavior.

We cannot be certain that our distribution channel will continue to market or sell our products and services effectively. If our partner and distribution channels are not successful, we may lose sales opportunities, customers and revenue. If our distributors favor our competitors' products or services for any reason, they may fail to market our products or services effectively, which would cause our results to suffer. If our OEMs through which we distribute products and services decide not to bundle our applications on their devices, our results could suffer. Further, the financial health of our distributors and partners and our continuing relationships with them are important to our success. Some of these distributors and partners may be unable to withstand adverse changes in economic conditions, which could result in insolvency, the inability of such distributors and partners to obtain credit to finance access to or purchases of our products and services, or a delay in paying their obligations to us.

We also sell some of our products and services through our direct sales force. Risks associated with this sales channel include more extended sales and collection cycles, challenges related to hiring, retaining and motivating our direct sales force, and substantial amounts of ongoing training for sales representatives. Moreover, recent hires may not be as productive as we would like, as in most cases it takes significant time for them to achieve full productivity. Our business could be seriously harmed if our expansion efforts of our direct sales do not generate a corresponding significant increase in revenue and we are unable to achieve the efficiencies we anticipate. In addition, the loss of key sales employees could impact our customer relationships and future ability to sell to certain accounts covered by such employees.

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***We face various risks associated with our operating as a multinational corporation.***

As a global business that generates approximately 40% of our total revenue from sales to customers outside of the Americas, we are subject to a number of risks, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inflation and actions taken by central banks to counter inflation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• foreign currency fluctuations and controls;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• international and regional economic, political and labor conditions, including any instability or security concerns abroad, such as uncertainty caused by economic sanctions, trade disputes, armed conflicts and wars;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• tax laws (including U.S. taxes on foreign subsidiaries);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased financial accounting and reporting burdens and complexities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in, or impositions of, legislative or regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in laws governing the free flow of data across international borders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• failure of laws to protect our intellectual property rights adequately;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inadequate local infrastructure and difficulties in managing and staffing international operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• costs and delays associated with developing products in multiple languages;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• operating in locations with a higher incidence of corruption and fraudulent business practices; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other factors beyond our control, such as terrorism, war, natural disasters, climate change and pandemics, including the COVID-19 pandemic.

Some of our third-party business partners have international operations and are also subject to these risks, and our business may be harmed if such partners are unable to appropriately manage these risks. If sales to any of our customers outside of the Americas are reduced, delayed or canceled because of any of the above factors, our revenue may decline.

**Risks Related to Laws and Regulations**

***We are subject to risks associated with compliance with laws and regulations globally, which may harm our business.***

We are a global company subject to varied and complex laws, regulations and customs, both domestically and internationally. These laws and regulations relate to a number of aspects of our business, including trade protection, import and export control, anti-boycott, sanctions and embargoes, data and transaction processing security, payment card industry data security standards, records management, user-generated content hosted on websites we operate, privacy practices, data residency, corporate governance, anti-trust and competition, employee and third-party complaints, anti-corruption, gift policies, conflicts of interest, securities regulations and other regulatory requirements affecting trade and investment. The application of these laws and regulations to our business is often unclear and may at times conflict. For example, in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us, including the Foreign Corrupt Practices Act. We cannot provide assurance that our employees, contractors, agents and business partners will not take actions in violation of our internal policies or U.S. laws. Compliance with these laws and regulations may involve significant costs or require changes in our business practices that result in reduced revenue and profitability. Non-compliance could also result in fines, damages, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.

In addition, approximately 50% of our employees are located outside the United States. Accordingly, we are exposed to changes in laws governing our employee relationships in various U.S. and foreign jurisdictions, including laws and regulations regarding wage and hour requirements, fair labor standards, employee data privacy, unemployment tax rates, workers' compensation rates, citizenship requirements and payroll and other taxes, which likely would have a direct impact on our operating costs.

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***Increasing regulatory focus on privacy and security issues and expanding laws could impact our business models and expose us to increased liability.***

As a global company, Adobe is subject to global data protection, privacy and security laws, regulations and codes of conduct that apply to our various business units and data processing activities. These laws, regulations and codes are inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. Government officials and regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. This increased scrutiny may result in new interpretations of existing laws, thereby further impacting Adobe's business. Globally, laws such as the General Data Protection Regulation ("GDPR") in Europe and the Personal Information Protection Law ("PIPL") in China, and new and emerging state laws in the United States on privacy, data and related technologies, such as the California Consumer Privacy Act, the California Privacy Rights Act and the Virginia Consumer Data Protection Act, as well as industry self-regulatory codes, create new compliance obligations and expand the scope of potential liability, either jointly or severally with our customers and suppliers. While we have invested in readiness to comply with applicable requirements, the dynamic and evolving nature of these laws, regulations and codes, as well as their interpretation by regulators and courts, may affect our ability (and our enterprise customers' ability) to reach current and prospective customers, to respond to both enterprise and individual customer requests under the laws (such as individual rights of access, correction and deletion of their personal information) and to implement our business models effectively. These laws, regulations and codes may also impact our innovation and business drivers in developing new and emerging technologies (e.g., artificial intelligence and machine learning). These requirements, among others, may impact demand for our offerings and force us to bear the burden of more onerous obligations in our contracts. Perception of our practices, products or services, even if unfounded, as a violation of individual privacy or data protection rights subjects us to public criticism, lawsuits, investigations, claims and other proceedings by regulators, industry groups or other third parties, all of which could disrupt or adversely impact our business and reputation and expose us to increased liability. Additionally, we collect and store information on behalf of our business customers and if our customers fail to comply with contractual obligations or applicable laws, it could result in litigation or reputational harm to us.

Transferring personal information across international borders is complex and subject to legal and regulatory requirements as well as active litigation and enforcement in a number of jurisdictions around the world, each of which could have an adverse impact on our ability to process and transfer personal data as part of our business operations. For example, European data transfers outside the European Economic Area are highly regulated and litigated. The mechanisms that we and many other companies rely upon for European data transfers (e.g., Standard Contractual Clauses) are the subject of regulatory interpretation and judicial decisions by the Court of Justice of the European Union. We are closely monitoring for developments related to valid transfer mechanisms available for transferring personal data outside the European Economic Area (including the Trans-Atlantic Data Privacy Framework) and other countries that have similar trans-border data flow requirements and adjusting our practices accordingly. The open judicial questions and regulatory interpretations related to the validity of transfers using Standard Contractual Clauses have resulted in some changes in the obligations required to provide our services in the European Union and could expose us to potential sanctions and fines for non-compliance. Several other countries, including China, Australia, New Zealand, Brazil, Hong Kong and Japan, have also established specific legal requirements for cross-border transfers of personal information and for data localization (i.e., where personal data must remain stored in the country). If other countries implement more restrictive regulations for cross-border data transfers or do not permit data to leave the country of origin, such developments could adversely impact our business and our enterprise customers' business, our financial condition and our results of operations in those jurisdictions.

***Our intellectual property portfolio is a valuable asset and we may not be able to protect our intellectual property rights, including our source code, from infringement or unauthorized copying, use or disclosure.***

Our intellectual property portfolio is a valuable asset. Infringement or misappropriation of our patents, trademarks, trade secrets, copyrights and other intellectual property rights could result in lost revenues and ultimately reduce their value. Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. We actively combat software piracy as we enforce our intellectual property rights, but we nonetheless lose significant revenue due to illegal use of our software. If piracy activities continue at historical levels or increase, they may further harm our business. We apply for patents in the United States and internationally to protect our newly created technology and if we are unable to obtain patent protection for the technology described in our pending patent, or if the patent is not obtained timely, this could result in revenue loss, or have other adverse effects on operations and harm our business. We offer our products and services in foreign countries and we may seek intellectual property protection from those foreign legal systems. Some of those foreign countries may not have as robust or comprehensive of intellectual property protection laws and schemes as those offered in the United States, and the mechanisms to enforce intellectual property rights may be inadequate to protect our technology, which could harm our business. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements with our customers, contractors, vendors and partners. However, there is a risk that our confidential information and trade

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secrets may be disclosed or published without our authorization, and in these situations, enforcing our rights may be difficult or costly.

If unauthorized disclosure of our source code occurs through security breach, cyber-attack or otherwise, we could lose future trade secret protection for that source code. Such loss could make it easier for third parties to compete with our products by copying functionality, which could cause us to lose customers and could adversely affect our revenue and operating margins.

***We may incur substantial costs defending against third parties alleging that we infringe their proprietary rights.***

We have been, are currently and may in the future be subject to claims, negotiations and complex, protracted litigation relating to disputes regarding the validity or alleged infringement of third-party intellectual property rights, including patent rights. Intellectual property disputes and litigation are typically costly and can be disruptive to our business operations by diverting the attention of management and key personnel. We may not prevail in every lawsuit or dispute. Third-party intellectual property disputes, including those initiated by patent assertion entities, could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from offering certain products or services, subject us to injunctions restricting our sales, 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. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products, in some cases to fulfill contractual obligations with our customers. Any of these occurrences could significantly harm our business.

***Changes in accounting principles, or interpretations thereof, could have a significant impact on our financial position and results of operations.***

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles, how the principles are interpreted, or the adoption of new accounting standards can have a significant effect on our reported results, could retroactively affect previously reported transactions, and may require that we make significant changes to our systems, processes and controls.

Changes resulting from these new standards may result in materially different financial results and may require that we change how we process, analyze and report financial information and that we change financial reporting controls. *[For additional information regarding new standards that may have significant impact to our](#i9ecc3edfc89346608b532b3f4b71fa31_34)[condensed consolidated financial statements, see the section titled "Adopted Accounting Guidance and Accounting Pronouncements Not Yet Effective" in Note 1 of our notes to condensed consolidated financial statements.](#i9ecc3edfc89346608b532b3f4b71fa31_34)*

Such changes in accounting principles may have an adverse effect on our business, financial position and results of operations, or cause an adverse deviation from our revenue and profitability targets, which may negatively impact our financial results.

***Changes in tax rules and regulations or interpretations thereof may adversely affect our effective tax rates.***

We are a United States-based multinational company subject to tax in multiple domestic and foreign tax jurisdictions. Significant judgment is required in determining our current provision for income taxes and deferred tax assets or liabilities. Tax laws in the United States and in foreign tax jurisdictions are dynamic and subject to change as new laws are passed and new interpretations are issued. The applicability and impact of changes in tax laws and interpretations thereof could adversely affect our effective income tax rate and cash flows in future years.

Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates are likely to be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, changes in jurisdictions in which our profits are determined to be earned and taxed, changes in the valuation of our deferred tax assets and liabilities, changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business, or unexpected negative changes in business and market conditions that could reduce certain tax benefits.

In addition, the United States and other countries and jurisdictions in which we conduct business, including those covered by governing bodies that enact tax laws applicable to us, such as the European Commission of the European Union, could make changes to relevant tax, accounting or other laws and interpretations thereof that have a material impact to us. These countries, governmental bodies and intergovernmental economic organizations such as the Organization for Economic Cooperation and Development, have or could make unprecedented assertions about how taxation is determined and, in some cases, have proposed or enacted new laws that are contrary to the way in which rules and regulations have historically been interpreted and applied. In the current global tax policy environment, any changes in laws, regulations and interpretations could

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adversely affect our effective tax rates, cause us to respond by making changes to our business structure, or result in other costs to us which could adversely affect our operations and financial results.

Moreover, we are subject to the examination of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. We believe our tax estimates to be reasonable; however, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our financial position and results of operations.

***Contracting with government entities exposes us to additional risks inherent in the government procurement process.***

We provide products and services, directly and indirectly, to a variety of domestic and foreign government entities, which introduces certain risks, including extended sales and collection cycles, varying governmental budgeting processes and adherence to complex procurement regulations and other government-specific contractual requirements. We have been, are currently and may in the future be subject to audits and investigations relating to our government contracts and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.

**Risks Related to Financial Performance**

***If our customers fail to renew subscriptions in accordance with our expectations, our future revenue and operating results could suffer, and our subscription offerings may create additional risk related to the timing of revenue recognition.***

Our offerings are typically subscription-based, pursuant to product and service agreements. Since our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period, which typically ranges from 1 to 36 months, our customers may not renew their subscriptions at the same or a higher level of service, for the same number of seats or for the same duration of time, if at all. Our varied customer base and flexible duration complicates our ability to precisely forecast renewal rates. Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our services, our ability to continue enhancing features and functionality, the reliability (including uptime) of our subscription offerings, the prices of offerings and competitors' offerings, the actual or perceived information security of our systems and services, decreases in the size of our customer base, reductions in our customers' spending levels or declines in customer activity as a result of general economic conditions or uncertainty in financial markets, including as a result of a global health crisis and geopolitical conflict, which has affected and may continue to affect certain sectors of the economy disproportionately. If our customers do not renew their subscriptions or if they renew on terms less favorable to us, our revenue may decline.

We generally recognize revenue from our subscription offerings ratably over the terms of their subscription agreements. As a result, most of the subscription revenue we report in each quarter is the result of subscription agreements entered into during previous quarters. Any reduction in new or renewed subscriptions in a quarter may not be reflected in our revenue results until a later quarter and may decrease our revenue in future quarters. Lower sales, reduced demand for our products and services, and increases in our attrition rate may not be fully reflected in our results of operations until future periods. Our subscription model could also make it difficult for us to rapidly increase our revenue from subscription-based or hosted services through additional sales in any period, as revenue from new customers will be recognized over the applicable subscription term.

Additionally, in connection with our sales efforts to enterprise customers, a number of factors could affect our revenue, including longer-than-expected sales and implementation cycles, potential deferral of revenue and alternative licensing arrangements. If any of our assumptions about revenue from our subscription-based offerings prove incorrect, our actual results may vary materially from those anticipated.

***We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.***

Our operating results are subject to fluctuations in foreign currency exchange rates due to the global scope of our business. Geopolitical and economic events, including war, trade disputes, economic sanctions and emerging market volatility, and associated uncertainty have caused, and may in the future cause currencies to fluctuate. We attempt to mitigate a portion of these risks through foreign currency hedging based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We regularly review our hedging program and make adjustments that we believe are appropriate. Our hedging activities have not and may not in the future offset more than a portion of the adverse financial impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely affect our financial condition or results of operations.

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***If our goodwill or amortizable intangible assets become impaired, then we could be required to record a significant charge to earnings.***

GAAP requires us to test for goodwill impairment at least annually. In addition, we review our goodwill and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable, including declines in stock price, market capitalization or cash flows, and slower growth rates in our industry. Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets was determined, negatively impacting our results of operations.

***We have issued $3.65 billion of notes in debt offerings and may incur other debt in the future, which may adversely affect our financial condition and future financial results.***

We have $3.65 billion in senior unsecured notes outstanding. We also have a $1.5 billion senior unsecured revolving credit agreement and a $3.5 billion delayed draw term loan agreement (together, "Credit Agreements"), both of which are currently undrawn. This debt may adversely affect our financial condition and future financial results by, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increasing our vulnerability to adverse changes in general economic and industry conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring the dedication of a portion of our expected cash flows from operations to service our debt, thereby reducing the amount of expected cash flows available for other purposes, including capital expenditures and acquisitions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

Our senior unsecured notes and our Credit Agreements impose restrictions on us and require us to maintain compliance with specified covenants. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the noteholders or lenders, then, subject to applicable cure periods, any outstanding debt may be declared immediately due and payable.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as the potential costs associated with a refinancing of our debt. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our Credit Agreements could increase. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and affect the terms of any such financing.

***Our investment portfolio may become impaired by deterioration of the financial markets.***

Our cash equivalent and short-term investment portfolio as of March 3, 2023 consisted of asset-backed securities, corporate debt securities, money market funds, municipal securities, time deposits, U.S. agency securities and U.S. Treasury securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

Should financial market conditions worsen in the future, including from impacts of inflationary pressures and rising interest rates or as a result of other geopolitical pressures, such as the Russia-Ukraine war, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of March 3, 2023, we had no material impairment charges associated with our short-term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions, market liquidity or credit availability, and we can provide no assurance that our investment portfolio will remain materially unimpaired.

**General Risk Factors**

***Catastrophic events, including global pandemics such as the COVID-19 pandemic, may disrupt our business and adversely affect our financial condition and results of operations.***

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and website for our development, marketing, operations, support, hosted services and sales activities. In addition, some of our businesses rely on third-party hosted services, and we do not control the operation of third-party data center facilities serving our customers from around the world, which increases our vulnerability. A disruption, infiltration or failure of these systems or third-party hosted services in the event of a major earthquake, fire, flood, tsunami or other weather

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event, power loss, telecommunications failure, software or hardware malfunctions, pandemics (including the COVID-19 pandemic), cyber-attack, war, terrorist attack or other catastrophic event that our disaster recovery plans do not adequately address, could cause system interruptions, reputational harm, loss of intellectual property, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data. Any of these events could prevent us from providing our products and services or could negatively impact a country or region in which we sell our products, which could in turn decrease that country's or region's demand for our products and services. Our corporate headquarters, a significant portion of our research and development activities, certain of our data centers and certain other critical business operations are located in the San Francisco Bay Area, and additional facilities where we conduct significant operations are located in the Salt Lake Valley Area, both of which are near major earthquake faults. A catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event, such as the COVID-19 pandemic.

The occurrence of regional epidemics or a global pandemic, such as the COVID-19 pandemic, have had and may continue to have an adverse effect on how we and our customers are operating our businesses and our operating results. Our operations have also been and may in the future be negatively affected by a range of external factors related to the pandemic that are not within our control, including the emergence and spread of more transmissible variants. The extent to which global pandemics, such as the COVID-19 pandemic, impact our financial condition or results of operations will depend on factors such as the duration and scope of the pandemic, as well as whether there is a material impact on the businesses or productivity of our customers, partners, employee, suppliers and other partners. To the extent that an epidemic or pandemic harms our business and results of operations, many of the other risks described in this Part II, Item 1A of this report may be heightened.

***Climate change may have a long-term impact on our business.***

While we seek to partner with organizations that mitigate their business risks associated with climate change, we recognize that there are inherent risks wherever business is conducted. Access to clean water and reliable energy in the communities where we conduct our business, whether for our offices or for our vendors, is a priority. Our major sites in California, Utah and India are vulnerable to climate change effects. While this danger has a low-assessed risk of disrupting normal business operations, it has the potential impact on employees' abilities to commute to work or to work from home and stay connected effectively. Climate-related events, including the increasing frequency of extreme weather events and their impact on U.S., India and other major regions' critical infrastructure, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. To inform our disclosures and take potential action as appropriate, Adobe is aligned with the guidelines of the Financial Stability Board's Task Force on Climate-related Financial Disclosures recommendations and the Sustainability Accounting Standards Board and the Global Reporting Initiative environmental metrics. Regulatory developments, changing market dynamics and stakeholder expectations regarding climate change may impact our business, financial condition and results of operations.

***Uncertainty about current and future economic conditions and other adverse changes in general political conditions in any of the major countries in which we do business could adversely affect our operating results.***

As our business has grown, we have become increasingly subject to the risks arising from adverse changes in economic and political conditions, both domestically and globally, including trends toward protectionism and nationalism, other unfavorable changes in economic conditions, such as inflation, rising interest rates, fluctuations in foreign currency exchange rates or a recession, and other events beyond our control, such as economic sanctions, natural disasters, pandemics, including the COVID-19 pandemic, epidemics, political instability, armed conflicts and wars, including the Russia-Ukraine war. Worsening economic conditions have had and may continue to have an adverse impact on the businesses and financial health of many of our customers and hurt their creditworthiness. As a result, current or potential customers may be unable to fund software purchases, which could cause them to delay, decrease or cancel purchases of our products and services. Uncertainty about the effects of current and future economic and political conditions on us, our customers, suppliers and partners makes it difficult for us to forecast operating results and to make decisions about future investments. If economic growth in countries where we do business slows, customers may delay or reduce technology purchases, advertising spending or marketing spending. This could result in reductions in sales of our products and services, more extended sales cycles, slower adoption of new technologies and increased price competition. Among our customers are government entities, including the U.S. federal government, and our revenue could decline if spending cuts impact the government's ability to purchase our products and services. Deterioration in economic conditions in any of the countries in which we do business could also cause slower or impaired collections on accounts receivable, which may adversely impact our liquidity and financial condition. A disruption in financial markets could impair our banking partners, on which we rely for operating cash management and derivative programs. Furthermore, if our customers are negatively impacted by these disruptions, such as being unable to access their existing cash to

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fulfill their payment obligations to us, our business may be negatively impacted. The occurrence of any of these events could harm our business, financial condition and results of operations.

***Revenue, margin or earnings shortfalls or the volatility of the market generally may cause the market price of our stock to decline.***

In the past, the market price for our common stock experienced significant fluctuations and it may do so in the future. A number of factors may affect the market price for our common stock, such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shortfalls in, or changes in expectations about, our revenue, margins, earnings, Annualized Recurring Revenue ("ARR"), sales of our Digital Experience offerings, or other key performance metrics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in estimates or recommendations by securities analysts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• whether our results meet analysts' expectations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compression or expansion of multiples used by investors and analysts to value high technology SaaS companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the announcement of new products or services, product enhancements, service introductions, strategic alliances or significant agreements by us or our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the loss of large customers or our inability to increase sales to existing customers, retain customers or attract new customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• recruitment or departure of key personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• variations in our or our competitors' results of operations, changes in the competitive landscape generally and developments in our industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• general socio-economic, political or market conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• macroeconomic conditions and the economic impact of the COVID-19 pandemic, inflation and rising interest rates and global conflicts, including the Russia-Ukraine war; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• unusual events such as significant acquisitions by us or our competitors, divestitures, litigation, regulatory actions and other factors, including factors unrelated to our operating performance.

In addition, the market for technology stocks or the stock market in general may experience uneven investor confidence, which may cause the market price for our common stock to decline for reasons unrelated to our operating performance. Volatility in the market price of a company's securities for a period of time may increase the company's susceptibility to securities class action litigation. Oftentimes, this type of litigation is expensive and diverts management's attention and resources which may adversely affect our business.

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**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

Below is a summary of stock repurchases for the three months ended March 3, 2023. *[See Note 11 of our notes to condensed consolidated financial statements for information regarding our stock repurchase program.](#i9ecc3edfc89346608b532b3f4b71fa31_73)*

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <br>**<u>Period</u>** | **Total Number of Shares<br>Repurchased** | **Average<br>Price Paid<br>Per<br>Share** | **Total<br>Number of<br>Shares<br>Purchased<br>as Part of<br>Publicly<br>Announced<br>Plans** | <br>**Approximate**<br>**Dollar Value**<br>**that May**<br>**Yet be**<br>**Purchased**<br>**Under the**<br>**Plans** <sup>(1)</sup> | |
|  | &nbsp;&nbsp;&nbsp;&nbsp; (in millions, except average price per share) | &nbsp;&nbsp;&nbsp;&nbsp; (in millions, except average price per share) | &nbsp;&nbsp;&nbsp;&nbsp; (in millions, except average price per share) | &nbsp;&nbsp;&nbsp;&nbsp; (in millions, except average price per share) |  |
| Beginning repurchase authority |  |  |  | $7133 |  |
| December 3, 2022—December 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Accelerated share repurchase | 3.2 | $— | 3.2 | $(1400) | <sup>(2)</sup> |
| &nbsp;&nbsp;&nbsp;Other shares repurchased | 1.8 | $330.52 | 1.8 | $(583) |  |
| December 31, 2022—January 27, 2023 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Shares repurchased |  | $— |  | $— |  |
| January 28, 2023—March 3, 2023 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Shares repurchased |  | $— |  | $— |  |
| Total | 5.0 |  | 5.0 | $5150 |  |

---

<sup>_________________________________________</sup>

<sup>(1)</sup> In December 2020, the Board of Directors granted authority to repurchase up to $15 billion in our common stock through the end of fiscal 2024.

<sup>(2)</sup> In December 2022, we entered into an accelerated share repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1.4 billion and received an initial delivery of 3.2 million shares of our common stock. Subsequent to March 3, 2023, the accelerated share repurchase agreement was settled, which resulted in total repurchases of 4.0 million shares at an average purchase price of $348.46.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

**ITEM 5. OTHER INFORMATION**

None.

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**ITEM 6. EXHIBITS**

**INDEX TO EXHIBITS**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** | | |
|<br>**Exhibit<br>Number** |<br>**Exhibit Description** | **Form** | **Filing Date** | **Exhibit Number** |<br>**SEC File No.** |<br>**Filed<br>Herewith** |
| 3.1 | [Restated Certificate of Incorporation of Adobe](http://www.sec.gov/Archives/edgar/data/796343/000110465911022472/a11-10827_1ex3d3.htm) | 8-K | 4/26/11 | 3.3 | 000-15175 |  |
| 3.2 | [Certificate of Amendment to Restated Certificate of Adobe](http://www.sec.gov/Archives/edgar/data/796343/000079634318000168/exhibit31.htm) | 8-K | 10/9/18 | 3.1 | 000-15175 |  |
| 3.3 | [Amended and Restated Bylaws](http://www.sec.gov/Archives/edgar/data/796343/000079634322000027/adbeex31amendedandrestated.htm) | 8-K | 1/18/22 | 3.1 | 000-15175 |  |
| 10.1 | [Term Loan Credit Agreement, dated as of January 19, 2023, among Adobe Inc., Bank of America, N.A., as administrative agent, and the other lenders party thereto](http://www.sec.gov/Archives/edgar/data/796343/000119312523010953/d400939dex101.htm) | 8-K | 1/19/23 | 10.1 | 000-15175 |  |
| 10.2 | [2023 Performance Share Program pursuant to 2019 Equity Incentive Plan\*](http://www.sec.gov/Archives/edgar/data/796343/000079634323000011/adbe8-kex10212623.htm) | 8-K | 1/26/23 | 10.2 | 000-15175 |  |
| 10.3 | [Form of 2023 Performance Share Award Grant Notice and Award Agreement pursuant to 2023 Performance Share Program and 2019 Equity Incentive Plan\*](http://www.sec.gov/Archives/edgar/data/796343/000079634323000011/adbe8-kex10312623.htm) | 8-K | 1/26/23 | 10.3 | 000-15175 |  |
| 10.4 | [2022 Performance Share Program, as amended and restated\*](http://www.sec.gov/Archives/edgar/data/796343/000079634323000011/adbe8-kex10412623.htm) | 8-K | 1/26/23 | 10.4 | 000-15175 |  |
| 10.5 | [2023 Executive Annual Incentive Plan\*](http://www.sec.gov/Archives/edgar/data/796343/000079634323000011/adbe8-kex10512623.htm) | 8-K | 1/26/23 | 10.5 | 000-15175 |  |
| 10.6 | [Form of Restricted Stock Unit Grant Notice and Award Agreement pursuant to 2019 Equity Incentive Plan (for awards granted on or after January 24, 2023)\*](adbeex106q123.htm) |  |  |  |  | X |
| 10.7 | [Form of Director Grant Restricted Stock Unit Grant Notice and Award Agreement pursuant to 2019 Equity Incentive Plan\*](adbeex107q123.htm) |  |  |  |  | X |
| 31.1 | [Certification of Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934](adbeex311q123.htm) |  |  |  |  | X |
| 31.2 | [Certification of Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934](adbeex312q123.htm) |  |  |  |  | X |
| 32.1 | [Certification of Chief Executive Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934†](adbeex321q123.htm) |  |  |  |  | X |
| 32.2 | [Certification of Chief Financial Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934†](adbeex322q123.htm) |  |  |  |  | X |
| 101.INS | Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |  |  |  |  | X |
| 101.SCH | Inline XBRL Taxonomy Extension Schema |  |  |  |  | X |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation |  |  |  |  | X |
| 101.LAB | Inline XBRL Taxonomy Extension Labels |  |  |  |  | X |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation |  |  |  |  | X |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** | | |
|<br>**Exhibit<br>Number** |<br>**Exhibit Description** | **Form** | **Filing Date** | **Exhibit Number** |<br>**SEC File No.** |<br>**Filed<br>Herewith** |
| 101.DEF | Inline XBRL Taxonomy Extension Definition |  |  |  |  | X |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  |  |  |  |  |

---

___________________________

---

| | |
|:---|:---|
| \* | Compensatory plan or arrangement. |
| † | The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Adobe Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing. |

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**SIGNATURE**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | |
|:---|:---|
| ADOBE INC. | ADOBE INC. |
| By: | /s/ DANIEL DURN |
|  | Daniel Durn |
|  | Executive Vice President and |
|  | Chief Financial Officer |
|  | (Principal Financial Officer) |

---

Date: March 29, 2023

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**SUMMARY OF TRADEMARKS**

The following trademarks of Adobe Inc. or its subsidiaries, which may be registered in the United States and/or other countries, are referenced in this Form 10-Q:

Acrobat

Acrobat Scan

Acrobat Sign

Adobe

Adobe Analytics

Adobe Audience Manager

Adobe Campaign

Adobe Commerce

Adobe Experience Cloud

Adobe Express

Adobe Firefly

Adobe Stock

Adobe Target

Behance

Creative Cloud

Document Cloud

Journey Optimizer

Marketo

Workfront

All other trademarks are the property of their respective owners.

## Exhibit 10.6

**EXHIBIT 10.6**

**ADOBE INC.**

**2019 EQUITY INCENTIVE PLAN RESTRICTED STOCK UNIT GRANT NOTICE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(GLOBAL)**

Adobe Inc. (the "***Company***"), pursuant to its 2019 Equity Incentive Plan (the "***Plan***"), hereby awards to you the Restricted Stock Unit Award (the "***Award***") covering the number of Restricted Stock Units set forth below. This Award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Unit Award Agreement, including the Appendix attached thereto (the "***Award Agreement***"), and the Plan, each of which are incorporated herein in their entirety. Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Plan.

---

| |
|:---|
| Participant: |
| Date of Grant: |
| Vesting Commencement Date: |
| Number of Restricted Stock Units: |

---

**Vesting Schedule**: *[Insert Vesting Schedule]* 

&nbsp;&nbsp;&nbsp;&nbsp;

**Delivery of Shares**: Subject to the limitations contained herein and the provisions of the Plan, the Company shall settle vested Restricted Stock Units by delivering to you shares of Stock, as provided in Sections 3 and 5 of the Award Agreement.

**Additional Terms/Acknowledgements:** You acknowledge receipt of, and understand and agree to, this Restricted Stock Unit Grant Notice (the "***Grant Notice***"), the Award Agreement, and the Plan. You further acknowledge that as of the Date of Grant, this Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between you, the Company and any other applicable Participating Company regarding the Award and supersede all prior oral and written agreements on that subject with the exception of any applicable change of control plan approved by the Board or a committee thereof and/or an applicable individual written retention agreement or severance provision between the Company, or a subsidiary of the Company, and you, to the extent applicable to you.

**ADOBE INC.**

**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**

---

| | |
|:---|:---|
| By: |  |
|  | Shantanu Narayen |
|  | Chief Executive Officer |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address: 345 Park Avenue<br>San Jose, CA 95110-2704 USA |

---

------

**ADOBE INC.**

**2019 EQUITY INCENTIVE PLAN**

**RESTRICTED STOCK UNIT AWARD AGREEMENT**

**(GLOBAL)**

Pursuant to the Restricted Stock Unit Grant Notice (the "***Grant Notice***") and this Award Agreement, including the attached Appendix (the "***Award Agreement***"), Adobe Inc. (the "***Company***") has awarded you, pursuant to its 2019 Equity Incentive Plan (the "***Plan***"), a Restricted Stock Unit Award (the "***Award***") for the number of Restricted Stock Units as indicated in the Grant Notice. Unless otherwise defined herein or in the Grant Notice, capitalized terms shall have the meanings set forth in the Plan. Subject to adjustment and the terms and conditions as provided herein and in the Plan, each Restricted Stock Unit shall represent the right to receive one (1) share of Stock.

The details of your Award, in addition to those set forth in the Grant Notice, are as follows.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.VESTING.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**The Restricted Stock Units shall vest, if at all, as provided in the Vesting Schedule set forth in your Grant Notice, this Award Agreement and the Plan, provided that vesting shall cease upon the termination of your Service, except as otherwise set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**If your Service terminates due to your death or Disability, then you will be given credit for an additional twelve (12) months of continuous Service such that the number of Restricted Stock Units that otherwise would have vested had your Service continued for an additional twelve (12) months following your termination will accelerate and become vested as of the date of your Service termination; provided, however, that in no event shall such applicable vesting exceed 100% of the number of Restricted Stock Units subject to your Award. For purposes of this provision, "***Disability***" shall mean your permanent and total disability within the meaning of Section 22(e)(3) of the U.S. Internal Revenue Code of 1986, as amended (the "***Code***"), and any applicable regulations promulgated thereunder to the extent not inconsistent with the regulations under Code Section 409A. Except as set forth in this Section 1(b), any Restricted Stock Units subject to the Award that have not vested at the time of your termination of Service for any or no reason will be forfeited immediately and automatically transferred to and reacquired by the Company at no cost to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**For purposes of the Award, your Service will be considered terminated as of the date you are no longer actively providing Service to a Participating Company (regardless of the reason for such termination and whether or not later found to be invalid or in breach of labor laws in the jurisdiction where you are employed or providing Service or the terms of your employment or service agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Company your right to vest in the Award under the Plan, if any, will terminate as of such date and will not be extended by any notice period (*e.g*., your period of Service would not include any contractual notice period or any period of "garden leave" or similar period mandated under labor laws in the jurisdiction where you are employed or providing Service or the terms of your employment or service agreement, if any). The Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of your Award (including whether you may still be considered to be providing Services while on a leave of absence, in accordance with the Company's Leave of Absence Policy, as amended from time to time). Any such determination by the Committee for the purposes of this Award Agreement shall have no effect upon any determination of the rights or obligations of you or the Company (or any Participating Company, as applicable) for any other purpose.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**The Committee, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock Units will be considered as having vested as of the date specified by the Committee. Notwithstanding Section 5 and in accordance with Section 15, the payment of shares of Stock vesting pursuant to this Section 1 shall in all cases be paid at a time or in a manner that is exempt from, or complies with, Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)**The Restricted Stock Units are subject to the Company's Leave of Absence Policy, as amended from time to time, which may provide for a pause in vesting in certain circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.NUMBER OF RESTRICTED STOCK UNITS AND UNDERLYING SHARES OF STOCK.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**The Restricted Stock Units subject to your Award and the shares of Stock deliverable with respect to such Restricted Stock Units will be adjusted from time to time for capitalization adjustments, as provided in Section 4.2 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**Any additional Restricted Stock Units, shares of Stock, cash or other property that become subject to the Award pursuant to this Section 2 shall be subject, in a manner determined by the Committee, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Restricted Stock Units and shares of Stock covered by your Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.PAYMENT BY YOU.** Subject to Section 11 below, and except as otherwise provided in the Grant Notice, you will not be required to make any payment to the Company with respect to your receipt of the Award, the vesting of the Restricted Stock Units, or the delivery of the shares of Stock underlying the Restricted Stock Units; provided, however, that your continued Service is required for vesting of the Restricted Stock Units as set forth in the Grant Notice and this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.RIGHTS AS A STOCKHOLDER.** Neither you nor any person claiming under or through you will have any of the rights or privileges of a stockholder of the Company in respect of any shares of Stock hereunder unless and until certificates representing shares of Stock (or other evidence of ownership as so designated by the Company) (either, "***Certificates***") will have been issued to you pursuant to Section 5. After such issuance, you will have all the rights of a stockholder of the Company with respect to voting such shares of Stock and receipt of dividends and other distributions on such shares of Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.DELIVERY OF SHARES.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**<u>General</u>. Each Restricted Stock Unit represents the right to receive one (1) share of Stock on the date that such Restricted Stock Unit vests. Unless and until the Restricted Stock Units will have vested in the manner set forth in Section 1, you will have no right to payment of any such Restricted Stock Units. Any Restricted Stock Units that vest in accordance with Section 1 will be paid to you in whole shares of Stock (unless the issuance of fractional shares is permitted under the Plan) as soon as practicable after vesting, but in each such case within the period thirty (30) days following the vesting date, subject to you satisfying any applicable tax withholding obligations as set forth in Section 11. In no

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event will you be permitted, directly or indirectly, to specify the taxable year of the payment of any Restricted Stock Units payable under this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**<u>Delivery Following Death</u>. If you are deceased at the time that shares of Stock pursuant to Restricted Stock Units, if any, are to be delivered to you, such delivery will be made to your designated beneficiary, or if no beneficiary has survived you or been designated, or if the beneficiary designation is not enforceable and/or is not valid under the inheritance or other laws in your country (as determined by the Company in its sole discretion), to the administrator or executor of your estate. Any such transferee must furnish the Company with (i) written notice of his or her status as a transferee, and (ii) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer in the applicable country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.COMPLIANCE WITH LAW.** The grant of your Award and the issuance of any shares of Stock thereunder shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. You may not be issued any shares of Stock if such issuance of shares of Stock would constitute a violation of any applicable federal, state or foreign securities laws, any other governmental regulatory body, or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. You understand that the Company is under no obligation to register or qualify the shares with the United States Securities and Exchange Commission or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares of Stock.

In addition, you may not be issued any shares of Stock unless (i) a registration statement under the Securities Act shall at the time of issuance be in effect with respect to the shares of Stock or (ii) in the opinion of legal counsel to the Company, the shares of Stock may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. YOU ARE CAUTIONED THAT THE SHARES OF STOCK MAY NOT BE ISSUED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. Where the Company determines that the delivery of any shares of Stock to settle this Award would violate federal securities laws or other applicable laws or rules or regulations promulgated by any governmental agency, the Company will defer delivery until the earliest date at which the Company reasonably anticipates that delivery of shares of Stock will no longer cause such violation. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares of Stock shall relieve the Company of any liability in respect of the failure to issue or sell such shares of Stock as to which such requisite authority shall not have been obtained. As a condition to the issuance of any shares of Stock pursuant to this Award, the Company may require you to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Further, you agree that the Company shall have unilateral authority to amend the Plan and the Award Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares of Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.RESTRICTIVE LEGENDS.** The shares of Stock issued pursuant to this Award shall be endorsed with appropriate legends, if any, determined by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.TRANSFERABILITY.** Except to the limited extent permitted under Section 5(b), this Award and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privileged conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this Award and the rights and privileges hereby immediately will become null and void.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.AWARD NOT A SERVICE CONTRACT.** Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the Service of a Participating Company, or on the part of a Participating Company to continue such Service. In addition, nothing in your Award shall obligate any Participating Company, its respective stockholders, boards of directors, Officers or Employees to continue any relationship that you might have as an Employee, Director or Consultant for the Participating Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.UNSECURED OBLIGATION.** Your Award is unfunded, and even as to any Restricted Stock Units that vest, you shall be considered an unsecured creditor of the Company with respect to the Company's obligation, if any, to issue shares of Stock pursuant to this Award Agreement. You shall not have voting or any other rights as a stockholder of the Company with respect to the shares of Stock acquired pursuant to this Award Agreement until such shares of Stock are issued to you pursuant to this Award Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company with respect to the shares of Stock so issued. Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.TAX OBLIGATIONS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**<u>General</u>. Regardless of any action taken by the Company or any other Participating Company with respect to any or all federal, state, local and foreign income, employment, social insurance, payroll taxes, payment on account or other taxes related to your participation in the Plan and legally applicable to you or deemed by the Company to be an appropriate charge to you even if technically due by a Participating Company ("***Tax-Related Items***"), you acknowledge that the ultimate liability for all Tax- Related Items is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company or any other Participating Company. You further acknowledge that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of your Award, including, but not limited to, the grant, vesting or settlement of this Award, subsequent sale of Stock acquired pursuant to this Award, or the receipt of any dividends and/or Dividend Equivalents and (ii) does not commit to and is under no obligation to structure the terms of the grant or any other aspect of your Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you have become subject to tax in more than one jurisdiction, as applicable, you acknowledge that any Participating Company you are providing (or have provided) Service to may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**<u>Withholding Arrangements</u>. Prior to any relevant taxable or tax withholding event, as applicable, you will pay or make adequate arrangements satisfactory to the Participating Company Group to satisfy all Tax-Related Items. In this regard, you hereby authorize the applicable Participating Company, or its respective agents, in their sole discretion and subject to any limitations under applicable law, to satisfy any applicable withholding obligations with regard to all Tax-Related Items by one or a combination of the following means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.withholding of that number of whole vested shares of Stock otherwise deliverable to you pursuant to this Award Agreement having a Fair Market Value not in excess of the amount of the withholding obligation for Tax-Related Items determined by the Company after considering required withholding rates and to the extent permitted under the Plan, the Company may determine such amount by considering other applicable withholding rates up to the maximum rate applicable in your jurisdiction. For tax purposes, you are deemed to have been issued the full number of shares of Stock subject to the vested Award, notwithstanding that

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a number of the shares of Stock are held back solely for the purpose of paying the Tax-Related Items;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.withholding from proceeds of the sale of shares of Stock acquired upon vesting/settlement of the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization, without further consent);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.tender by you of a payment in cash or check to the applicable Participating Company of any amount of the Tax-Related Items;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.withholding by any Participating Company of any amount of the Tax-Related Items from your salary, wages or any other cash compensation owed to you by any Participating Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.in the event this Award is settled in whole or in part in cash, withholding from the cash to be distributed to you in settlement of this Award; and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi.any other method approved by the Company, to the extent permitted by applicable law and under the terms of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other withholding rates, including maximum withholding rates in your jurisdiction(s). In the event of over-withholding, you may receive a refund of any over-withheld amount in cash (with no entitlement to the equivalent in shares of Stock), or, if not refunded, you may seek a refund from the applicable tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to the applicable tax authorities or to a Participating Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**You shall pay to the applicable Participating Company any amount of Tax-Related Items that the Participating Company may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company shall have no obligation to issue or deliver shares, cash or the proceeds of the sale of Stock until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section 11.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)**Notwithstanding the foregoing, if you are subject to Section 16 of the Exchange Act, the Company will withhold using the method described under 11(b)(i) above unless the use of such withholding method is problematic under applicable laws or has materially adverse accounting consequences, in which case the Committee (as constituted to satisfy the requirements of Exchange Act Rule 16b-3) shall determine which of the other methods described in Section 11(b) above shall be used to satisfy the withholding obligation for Tax-Related Items.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.NATURE OF AWARD.** In accepting your Award, you acknowledge, understand and agree that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**the Plan is established voluntarily by the Company; it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan, in accordance with Section 14 of the Plan;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**the grant of your Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted in the past;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**all decisions with respect to future Awards or other grants, if any, will be at the sole discretion of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**the Award and your participation in the Plan shall not create a right to employment or be interpreted as forming an employment or service contract with any Participating Company and shall not interfere with any ability of any applicable Participating Company to terminate your employment or service relationship (if any);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)**you are voluntarily participating in the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)**the Award and the shares of Stock subject to the Award, and the income from and value of same, are not intended to replace any pension rights or compensation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)**the Award and the shares of Stock subject to the Award, and the income from and value of same, are not part of normal or expected compensation or salary for purposes of, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay bonuses, long-service awards, pension or retirement or welfare benefits or similar mandatory payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)**the future value of the underlying shares of Stock subject to your Award is unknown, indeterminable and cannot be predicted with certainty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)**no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the termination of your Service with any Participating Company (for any reason whatsoever, whether or not later found to be invalid or in breach of labor laws in the jurisdiction where you are employed or providing Service or the terms of your employment or service agreement, if any);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(j)**unless otherwise provided in the Plan or by the Company in its discretion, the Award and the benefits evidenced by this Award Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(k)**unless otherwise agreed with the Company, the Award and the shares of Stock subject to the Award, and any income from and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of any Subsidiary Corporation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(l)**the Participating Company Group shall not be liable for any foreign exchange rate fluctuation between the United States Dollar and your local currency (if different) that may affect the value of the Award or of any amounts due to you pursuant to the settlement of the Award or the subsequent sale of any shares of Stock acquired upon settlement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.DELIVERY OF DOCUMENTS AND NOTICES.** Any document relating to this Award, participating in the Plan and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Award Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, or with a nationally recognized courier designating express or expedited service with evidence of delivery, addressed to the other party at the address, including email address, if any, provided for you by the

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Company or a Participating Company, or at such other address as such party may designate in writing from time to time to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**<u>Description of Electronic Delivery</u>*.* The Plan and the Award documents, which may include but do not necessarily include the Plan prospectus, the Grant Notice, this Award Agreement, Certificates, and United States financial reports of the Company, may be delivered to you electronically by the Company or a third party designated by the Company. Such means of delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other delivery determined at the Committee's discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**<u>Consent to Electronic Delivery</u>. You acknowledge that you have read Section 13 and consent to the electronic delivery of the Plan and Award documents by the Company or a third party designated by the Company and agree to participate in the Plan through any online or electronic system established and maintained by the Company or a third party designated by the Company, as described in Section 13. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at equity@adobe.com. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide the Company or any designated third party with a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at equity@adobe.com. Finally, you understand that you are not required to consent to electronic delivery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.DATA PRIVACY NOTICE**. ***You understand that the Participating Company Group holds certain personal information about you, including, but not limited to, your name, home address, email address and telephone number, date of birth, social insurance number (to the extent permitted under applicable law), passport or other identification number, salary or details regarding compensation, nationality, job title, any shares of Stock or directorships held in the Company, details of all Awards or any other entitlement to shares of Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor (all "Data"), for the exclusive purpose of implementing, administering and managing the Plan. Adobe processes such Data in accordance with the Adobe Employee Privacy Policy.***

***You understand that Data will be transferred to E\*TRADE Financial Corporate Services, Inc. and/or E\*TRADE Securities, LLC ("E\*TRADE"), or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipients' country (e.g., the United States) may have different data privacy laws and protections than your country. You understand that if you reside outside the United States, you may request a list with the names and addresses of any potential recipients of Data by contacting AskPrivacy@adobe.com. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that if you reside outside the United States, you may, at any time, view or access Data or require it to be provided to another company, request information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting AskPrivacy@adobe.com.***

***If you are an employee of or providing Service to an affiliate of the Company in the European Economic Area, or Switzerland or the United Kingdom (collectively, "EEA+"), the grant of consent***

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***below is not relevant to you. The Company (and other authorized recipients of Data) process Data for the purpose of implementing, administering and managing the Plan; this is necessary in order to perform Company's contractual obligations under this Award Agreement. If you do not provide Data required for this purpose, the Company will not be able to perform its obligations under this Award Agreement and this may affect your ability to participate in the Plan. The Company and E\*TRADE have entered into standard contract clauses, in the form authorized by the European Commission, with its affiliates in the European Economic Area in order to provide adequate protection for Data. The Company is the controller responsible for Data processing described above and can be contacted at 345 Park Avenue, San Jose, California 95110 USA, or AskPrivacy@adobe.com. You are entitled to complain to an EEA data protection authority in the country where you live, work, or believe any breach of data protection law has occurred. For more information regarding your rights related to the processing of your Data, please review the EU Employee Privacy Notice.***

***Unless you are employee of or providing Service to an affiliate of the Company in the EEA+, you hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your Data by and among the members of the Participating Company Group and by E\*TRADE and any other company selected by Company to assist it in administering the Plan, for the exclusive purpose of implementing, administering and managing your participation in the Plan. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your employment status or service with the applicable Participating Company will not be affected: the only consequence of refusing or withdrawing your consent is that the Company would not be able to grant Restricted Stock Units or other equity to you awards or administer or maintain such awards. Access to and management of previously awarded grants may also be impacted. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact AskPrivacy@adobe.com.***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.APPLICATION OF SECTION 409A (ONLY APPLICABLE TO U.S. TAXPAYERS).** Absent a proper deferral election, it is intended that all of the benefits and payments provided under this Award satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under the "short-term deferral" rule set forth in United States Treasury Regulation Section 1.409A-1(b)(4), and this Award will be construed to the greatest extent possible as consistent with those provisions. To the extent not so exempt, this Award and the payments and benefits to be provided hereunder are intended to, and will be construed and implemented so as to, comply in all respects with the applicable provisions of Code Section 409A, and any provisions calling for payments on a termination of employment or other service shall be read to mean a "separation from service" (as defined under Treasury Regulation Section 1.409-1(h) without reference to alternative definitions thereunder). For purposes of Code Section 409A, each payment, installment and benefit under this Award is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). Notwithstanding any other provision of this Award, to the extent that (a) one or more of the payments or benefits received or to be received by you upon "separation from service" pursuant to this Plan would constitute deferred compensation subject to the requirements of Code Section 409A, and (b) you are a "specified employee" within the meaning of Code Section 409A at the time of separation from service, then to the extent delayed commencement of any portion of such payments or benefits is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments and benefits shall not be provided to you prior to the earliest of (i) the expiration of the six (6)-month period measured from the date of separation from service, (ii) the date of your death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation on you. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments and benefits deferred pursuant to this paragraph shall be paid in a

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lump sum to you, and any remaining payments and benefits due shall be paid as otherwise provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.BINDING AGREEMENT.** Subject to the limitation on the transferability of this Award contained herein, the Award Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.COMMITTEE AUTHORITY.** The Committee will have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon you, the Company and all other interested persons. No member of the Committee will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.HEADINGS.** The headings of the Sections in this Award Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Award Agreement or to affect the meaning of this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.MISCELLANEOUS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.AGREEMENT SEVERABLE.** The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.GOVERNING PLAN DOCUMENT.** Your Award is subject to all the provisions of the Plan, which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between one or more provisions of your Award Agreement and one or more provisions of the Plan, the provisions of the Plan shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.APPLICABLE LAW AND VENUE.** The Award and the provisions of this Award Agreement shall be governed by, and subject to, the laws of the State of California, United States of America. For purposes of any action, lawsuit or other proceedings brought to enforce this Award Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of Santa Clara County, California, or the federal courts of the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.NO ADVICE REGARDING GRANT.** The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Stock. You understand and agree that you should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.LANGUAGE.** You acknowledge that you are sufficiently proficient in the English language, or have consulted with an advisor who is sufficiently proficient in English, so as to allow you to understand the provisions of this Award Agreement and the Plan. If you received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**25.APPENDIX.** Notwithstanding any provisions in this Award Agreement, the Award shall be subject to any special terms and conditions for your country set forth in the Appendix to this Award Agreement" ("<u>Exhibit A</u>" for Employees and "<u>Exhibit B</u>" for Consultants). Moreover, if you relocate to one of the countries included in the Appendix or to a country not included in the Appendix, the special terms and conditions for such country set forth in the Appendix (or other terms and conditions) may apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Award Agreement. In accepting the Award, you acknowledge receipt of, understand and agree to the additional terms and conditions included in the Appendix.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**26.IMPOSITION OF OTHER REQUIREMENTS.** The Company reserves the right to impose other requirements on your participation in the Plan, on the Award and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**27.WAIVER.** You acknowledge that a waiver by the Company of a breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by you or another Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**28.INSIDER TRADING RESTRICTIONS/MARKET ABUSE LAWS.** You acknowledge that you may be subject to insider-trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States and your country of residence, which may affect your ability to acquire, sell or attempt to sell or otherwise dispose of shares of Stock or rights to shares of Stock (*e.g.*, the Award) during such times as you are considered to have "inside information" regarding the Company as defined in the laws or regulations in applicable jurisdictions. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You should consult your personal legal advisor for further details regarding any insider trading restrictions and/or market-abuse laws in your country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.FOREIGN ASSET/ACCOUNT REPORTING REQUIREMENTS AND EXCHANGE CONTROLS.** Your country may have certain foreign asset and/or account reporting requirements and exchange controls which may affect your ability to acquire or hold shares of Stock under the Plan or cash received from participating in the Plan (including from any dividends received or sale proceeds arising from the sale of shares of Stock) in a brokerage or bank account outside your country. You may be required to report such accounts, assets or transactions to the tax or other authorities in your country. You also may be required to repatriate sale proceeds or other funds received as a result of your participation in the Plan to your country through a designated bank or broker and/or within a certain time after receipt. You acknowledge that it is your responsibility to be compliant with such regulations, and you should consult your personal legal advisor for any details.

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**APPENDIX TO**

**ADOBE INC.**

**2019 EQUITY INCENTIVE PLAN**

**RESTRICTED STOCK UNIT AWARD AGREEMENT**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(GLOBAL)**

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Grant Notice, the Award Agreement or the Plan.

This Appendix includes additional terms and conditions that govern the Award granted to you under the Plan if you work and/or reside in any of the countries listed below. <u>Exhibit A</u> includes such provisions for Employees while <u>Exhibit B</u> includes such provisions for Consultants. The Appendix is part of the Award Agreement. To the extent there are any inconsistencies between these additional terms and conditions and those set forth in the main body of the Award Agreement, these terms and conditions shall prevail.

If you are a citizen or resident of a country other than the one in which you are currently residing and/or working, transfer employment, service and/or residency to another country after the Date of Grant, or are considered a resident of another country for local law purposes, the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to you.

This Appendix also includes information regarding exchange control and certain other issues which you should be aware with respect to your participation in the Plan. <u>Exhibit A</u> includes such information for Employees while <u>Exhibit B</u> includes such information for Consultants. The information is based on the securities, exchange control and other laws in effect in the respective countries as of January 2023. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you do not rely on the information noted herein as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time your Award is granted or vests or when you sell shares of Stock acquired under the Plan.

In addition, the information is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.

Finally, if you are a citizen or resident of a country other than the country in which you are residing and/or working, or you transfer employment, service or residency after the Award is granted to you, or are considered a resident of another country for local law purposes, the information contained in this Appendix may not be applicable to you in the same manner.

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**<u>EXHIBIT A</u>**

**COUNTRY-SPECIFIC TERMS AND CONDITIONS FOR EMPLOYEES OUTSIDE THE UNITED STATES**

**\*\*\***

**<u>Armenia</u>**

There are no country-specific provisions.

**<u>Australia</u>**

<u>Securities Law Information</u>

This offer is being made under Division 1A, Part 7.12 of the Australia Corporations Act 2001 (Cth).

Please note that if you offer shares of Stock for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice on your disclosure obligations prior to making any such offer.

<u>Tax Information</u>

The Plan is a plan to which subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the "***Act***") applies (subject to conditions in that Act).

<u>Exchange Control Information</u>

Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers of any amount. If an Australian bank is assisting with the transaction, the bank will file the report on your behalf.

**<u>Austria</u>**

<u>Exchange Control Information</u>

Austrian residents who hold securities (including shares of Stock obtained through the Plan) or cash (including proceeds from the sale of shares of Stock) outside Austria may be required to submit reports to the Austrian National Bank. If the value of the shares of Stock meets or exceeds a certain threshold, you must report the securities held on a quarterly basis to the Austrian National Bank as of the last day of the quarter, on or before the 15th day of the month following the end of the calendar quarter. In all other cases, an annual reporting obligation applies and the report has to be filed as of December 31 on or before January 31 of the following year using the form P2. Where the cash amounts held outside of Austria meets or exceeds a certain threshold, monthly reporting obligations apply as explained in the next paragraph.

If you sell your shares of Stock, or receive any cash dividends, you may have exchange control obligations if you hold the cash proceeds outside of Austria. If the transaction volume of all your accounts abroad meets or exceeds a certain threshold, you must report to the Austrian National Bank the movements and balances of all accounts on a monthly basis, as of the last day of the month, on or before the 15th day of the following month, on the prescribed form (Meldungen SI-Forderungen und/oder SI-Verpflichtungen).

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**<u>Belgium</u>**

<u>Foreign Asset/Account Reporting Information</u>

Belgian residents are required to report any securities (*e.g.,* shares of Stock acquired under the Plan) or bank accounts (including brokerage accounts) held outside Belgium on their annual tax return. In a separate report, Belgian residents are required to provide the National Bank of Belgium with certain details regarding such foreign accounts (including the account number, bank name and country in which any such account was opened). This report, as well as additional information on how to complete it, can be found on the website of the National Bank of Belgium*, www.nbb.be,* under *Kredietcentrales / Centrales des crédits* caption.

**<u>Brazil</u>**

<u>Nature of Award</u> 

This provision supplements Section 12 of the Award Agreement:

By accepting this Award, you acknowledge, understand and agree that (i) you are making an investment decision and (ii) the value of the underlying shares of Stock is not fixed and may increase or decrease without compensation to you.

<u>Compliance with Laws</u>

By accepting this Award, you acknowledge your agreement to comply with applicable Brazilian laws and pay any and all Tax-Related Items associated with the vesting of your Award, the sale of the shares of Stock acquired pursuant to the Plan and the receipt of any dividends.

<u>Exchange Control Information</u>

You must prepare and submit a declaration of assets and rights held outside of Brazil to the Central Bank if you hold assets or rights valued at more than US$1,000,000. The assets and rights that must be reported include shares of Stock.

**<u>Canada</u>**

<u>Delivery of Shares</u>

This provision supplements Section 5 of the Award Agreement:

Notwithstanding any discretion referred to in Section 3.3(e) of the Plan, the Restricted Stock Units granted to Participants in Canada do not represent the right to receive a cash payment equal to the value of the shares of Stock, or a combination of cash and shares of Stock; vested Restricted Stock Units will be paid to Participants in Canada in shares of Stock only.

<u>Securities Law Information</u>

You acknowledge and agree that you are permitted to sell shares of Stock acquired under the Plan through E\*TRADE or such other broker designated under the Plan, provided that such sale takes place outside of Canada through the facilities of a stock exchange on which the Company's shares of Stock are listed. The Company's shares of Stock are currently traded on the Nasdaq Global Select Market which is located outside of Canada, under the ticker symbol "ADBE" and shares of Stock acquired under the Plan may be sold through this exchange.

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<u>Termination of Service</u>

This provision replaces Section 1(c) of the Award Agreement:

For purposes of the Award, your Service will terminate, and your right (if any) to earn, seek damages in lieu of, or otherwise be paid any portion of the Restricted Stock Units pursuant to this Award Agreement, will be measured by, the date that is the earlier of:

(ii)the date your employment with the Participating Company is terminated, whether by you, by the Participating Company, or by way of contractual frustration; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.the date you receive written notice of termination from the Participating Company;

regardless of any period during which notice, pay in lieu of notice or related payments or damages are provided or required to be provided under local law. For greater certainty, other than as specifically set forth in Section 1(b), you will not earn or be entitled to any pro-rated vesting for that portion of time before the date on which your right to vest terminates, nor will you be entitled to any compensation for lost vesting. Notwithstanding the foregoing, if applicable employment standards or pension-related legislation explicitly and minimally requires continued vesting during a statutory notice period, your right to vest in the Restricted Stock Units, if any, will terminate effective upon the expiry of your minimum statutory notice period, but (other than as specifically set forth in Section 1(b)) you will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of your statutory notice period, nor will you be entitled to any compensation for lost vesting. In any event, if your employment agreement is contractually frustrated due to illness, injury or disability, and employment standards or pension-related legislation explicitly and minimally requires continued vesting during a statutory notice period, then the additional vesting provided under Section 1(b) is deemed to be inclusive of any entitlements that arise during the applicable statutory notice period.

Any such determination by the Committee for the purposes of this Award Agreement shall have no effect upon any determination of the rights or obligations of you or the Company (or any Participating Company, as applicable) for any other purpose.

<u>Nature of Award</u>

This provision replaces Section 12(g) of the Award Agreement:

the Award and the shares of Stock subject to the Award, and the income from and value of same, are not part of normal or expected compensation or salary for purposes of, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay bonuses, long-service awards, pension or retirement or welfare benefits or similar mandatory payments, except to the extent explicitly and minimally required under employment standards or pension-related legislation;

<u>Foreign Asset/Account Reporting Information</u>

You may be required to report foreign specified property (including shares of Stock and rights to shares of Stock such as Restricted Stock Units) on form T1135 (Foreign Income Verification Statement) if the total cost of your foreign specified property exceeds C$100,000 at any time in the year. If applicable, the form must be filed by April 30 of the following year. When shares of Stock are acquired, their cost generally is the adjusted cost base ("***ACB***") of the Stock. The ACB ordinarily would equal the fair market value of the Stock at the time of acquisition, but if you own other shares of Stock of the same company, this ACB may have to be leveraged with the ACB of the other Stock. Please refer to form T1135 (Foreign Income Verification Statement) and consult your tax advisor for further details.

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*The following provisions will apply if you are a resident of Quebec:*

<u>French Language Provisions</u>

A French translation of this document and certain other documents related to the Restricted Stock Units have been made available to you. You understand that, from time to time, additional information related to the Restricted Stock Units may be provided in English and such information may not be immediately available in French. However, upon request, the Company will provide a translation of such information into French as soon as reasonably practicable. Notwithstanding anything to the contrary in the Award Agreement, and unless you indicate otherwise, the French version of this document and certain other documents related to the Restricted Stock Units will govern your participation in the Plan.

*<u>Dispositions Relatives à la Langue Française</u>*

*Une traduction française du présent document et de certains autres documents relatifs aux Droits sur des Actions Assujettis à des Restrictions a été mise à votre disposition. Vous comprenez que, de temps à autre, des informations supplémentaires relatives aux Droits sur des Actions Assujettis à des Restrictions pourraient être fournies en anglais et que ces informations pourraient ne pas être immédiatement disponibles en français. Toutefois, sur demande, la Société fournira une traduction de ces informations en français dès que cela sera raisonnablement possible. Nonobstant toute disposition contraire dans le Contrat d'Attribution, et sauf indication contraire de votre part, la version française du présent document et de certains autres documents relatifs aux Droits sur des Actions Assujettis à des Restrictions régira votre participation au Régime.*

<u>Data Privacy</u>

This provision supplements Section 14 of the Award Agreement:

You hereby authorize the Participating Company Group and their representatives to discuss with, and obtain from, personnel, professional or not, involved in the administration and operation of the Plan, all relevant information that is necessary for the purposes of administering the Plan. You further authorize the Participating Company Group to disclose and discuss the Plan with their advisors. You acknowledge and agree that your personal information, including any sensitive personal information, may be transferred or disclosed outside of the Province of Quebec, including to the United States. You further authorize the Participating Company Group to record such information and to keep such information in your employee file. You also acknowledge and authorize the Participating Company Group and other parties involved in the administration of the Plan to use technology for profiling purposes and to make automated decisions that may have an impact on you or the administration of the Plan.

**<u>Chile</u>**

<u>Securities Law Information</u>

The offer of Restricted Stock Units constitutes a private offering of securities in Chile effective as of the Date of Grant. The offer of Restricted Stock Units is made subject to general ruling N° 336 of the Chilean Commission for the Financial Market ("***CMF***"). The offer refers to securities not registered at the securities registry or at the foreign securities registry of the CMF, and, therefore, such securities are not subject to oversight of the CMF. Given that the Restricted Stock Units are not registered in Chile, the Company is not required to provide public information about the Restricted Stock Units or the shares of Stock in Chile. Unless the Restricted Stock Units and/or the shares of Stock are registered with the CMF, a public offering of such securities cannot be made in Chile.

*Esta oferta de Unidades de Acciones Restringidas constituye una oferta privada de valores en Chile y se inicia en la Fecha de la Concesión. Esta oferta de Unidades de Acciones Restringidas se acoge a las disposiciones de la Norma de Carácter General N° 336 de la Comisión para el Mercado Financiero de* 

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*Chile ("CMF"). Esta oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de Valores Extranjeros que lleva la CMF, por lo que tales valores no están sujetos a la fiscalización de ésta. Por tratarse las Unidades de Acciones Restringidas de valores no registrados en Chile, no existe obligación por parte de la Compañía de entregar en Chile información pública respecto de los Unidades de Acciones Restringidas o sus Acciones. Estos valores no podrán ser objeto de oferta pública en Chile mientras no sean inscritos en el Registro de Valores correspondiente.*

<u>Exchange Control Information</u>

You are not required to repatriate funds obtained from the sale of shares of Stock or dividends to Chile. However, if you decide to repatriate such funds and the amount of funds to be repatriated exceeds US$10,000, you must effect such repatriation through the Formal Exchange Market (i.e., a commercial bank or registered foreign exchange office). You also understand that if you do not repatriate the funds and use such funds for the payment of other obligations contemplated under a different Chapter of the Foreign Exchange Regulations, you must sign Annex 1 of the Manual of Chapter XII of the Foreign Exchange Regulations and file it directly with the Central Bank of Chile within the first ten (10) days of the month immediately following the transaction.

Further, if the value of your aggregate investments in Chile meets or exceeds US$5,000,000 (including the value of shares of Stock acquired under the Plan), you must report the status of such investments quarterly to the Central Bank using Annex 3.1 of Chapter XII of the Foreign Exchange Regulations.

<u>Tax Reporting Information and Registration</u>

The Chilean Internal Revenue Service ("***CIRS***") requires all taxpayers to provide information annually regarding: (i) the results of investments held abroad and (ii) any taxes paid abroad which will be used as a credit against Chilean income taxes. The sworn statements disclosing this information (or Formularios) must be submitted electronically through the CIRS website at www.sii.cl, using Form 1929, which is due on June 30 each year.

**<u>People's Republic of China (</u>**<u>"</u>***<u>PRC</u>***<u>"</u>**<u>)</u>**

<u>Delivery of Shares</u>

This provision supplements Section 5 of the Award Agreement:

You understand and agree that the Company may require that any shares of Stock issued to you pursuant to any vested Restricted Stock Units be sold as soon as practicable after issuance. If the Company, in its discretion, does not require that the shares of Stock be sold as soon as practicable after issuance, as described in the preceding sentence, you understand and agree that any shares of Stock acquired under the Plan must be (i) maintained in an account with the Company's designated broker for the Plan (currently, E\*Trade) and (ii) sold no later than six (6) months after termination of your Service with the Participating Company Group or within any such other time frame as the Company determines to be necessary or advisable for legal or administrative reasons.

You understand that any shares of Stock acquired by you under the Plan that have not been sold within the required deadline will be automatically sold by the Company's designated broker at the Company's direction, pursuant to this authorization. You agree that the Company is authorized to instruct the designated broker to assist with the mandatory sale of such shares of Stock (on your behalf pursuant to this authorization), and you expressly authorize the designated broker to complete the sale. You also agree to sign any agreements, forms and/or consents that may be reasonably requested by Company (or the designated broker) to effectuate the sale of Stock (including, without limitation, as to the transfers of the proceeds and other exchange control matters noted below) and to otherwise cooperate with the Company with respect to such matters, provided that you will not be permitted to exercise any influence over how, when or whether the sale of shares of Stock occurs. You acknowledge that the designated broker is under

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no obligation to arrange for the sale of shares of Stock at any particular price. When the shares of Stock are sold, the proceeds from the sale (less any Tax-Related Items, brokerage fees or commissions) will be remitted to you in accordance with the applicable exchange control laws and regulations.

<u>Compliance with Law</u>

This provision supplements Section 6 of the Award Agreement:

Your participation in the Plan is subject to the registration of the Plan with the PRC State Administration of Foreign Exchange ("***SAFE***") or its local counterpart. Without limitation to the foregoing, the issuance and delivery of shares of Stock pursuant to any vested Restricted Stock Units will be delayed until all necessary exchange control registration or other approvals with respect to the Restricted Stock Units under the Plan have been completed or obtained from SAFE or its local counterpart or the Company has otherwise determined that the issuance of Stock can be made in compliance with applicable laws.

<u>Exchange Control Restrictions</u>

You understand and agree that you will be required to immediately repatriate any funds received in connection with the Plan (*e.g.*, proceeds from the sale of shares of Stock, cash dividends) to China. You further understand that the repatriation of such funds may need to be effectuated through a special exchange control account established by the Company and/or a subsidiary of the Company, and you hereby consent and agree that such funds may be transferred to such special account prior to being delivered to you.

You also understand that the Company will deliver any funds to which you are entitled under the Plan as soon as practicable, but there may be delays in distributing the funds to due to exchange control requirements in China. Funds may be paid to you in U.S. dollars or in local currency, at the Company's discretion. If the funds are paid in U.S. dollars, you will be required to set up a U.S. dollar bank account in China (if you do not already have one) so that the funds can be deposited into this account. If the funds are paid in local currency, there may be delays in converting the funds to local currency. Due to fluctuations in the trading price of the Stock and applicable currency exchange rates, the amount of proceeds ultimately distributed to you may be more or less than the market value of the shares of Stock at vesting. You understand and agree that neither the Company nor any subsidiary of the Company is responsible for any loss you may incur as a result of such fluctuations and that the Company and its subsidiaries assume no liability for any fluctuation in the price of the shares of Stock or the applicable currency exchange rate.

You agree to cooperate with the Company with respect to exchange control matters in China and comply with any other requirements that may be imposed by the Company in the future to facilitate compliance with exchange control laws and regulations.

**<u>Colombia</u>**

<u>Labor Law Acknowledgement</u>

This provision supplements Section 12 of the Award Agreement:

By accepting this Award, you acknowledge that pursuant to Article 128 of the Colombia Labor Code, the Plan and related benefits do not constitute a component of your "salary" for any legal purposes. Therefore, the Award and related benefits will not be included and/or considered for purposes of calculating any and all labor benefits, including but not limited to legal/fringe benefits, vacations, indemnities, payroll taxes, social insurance contributions and/or other labor-related amounts which may be payable.

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<u>Securities Law Information</u>

The shares of Stock are not and will not be registered in the Colombian registry of publicly traded securities (*Registro Nacional de Valores y Emisores*) and therefore the shares of Stock may not be offered to the public in Colombia. Nothing in this Award Agreement should be construed as the making of a public offer of securities in Colombia. An offer of shares of Stock to employees will not be considered a public offer provided that it meets the conditions set forth in Article 6.1.1.1.1 in Decree 2555, 2010.

<u>Exchange Control Information</u>

Colombian residents must register shares of Stock acquired under the Plan, regardless of value, with the Central Bank of Colombia (*Banco de la República*) as foreign investments held abroad. In addition, the liquidation of such investments must be transferred through the Colombian foreign exchange market (*e.g*., local banks), which includes the obligation of correctly completing and filing the appropriate foreign exchange form (*declaración de cambio*). You are responsible for complying with applicable exchange control requirements in Colombia.

<u>Foreign Asset/Account Reporting Information</u>

You must file an annual informative return with the Colombian Tax Office detailing any assets held abroad. If the individual value of any of these assets exceeds a certain threshold, you must describe each asset and indicate the jurisdiction in which it is located, its nature and its value.

**<u>Czech Republic</u>**

<u>Exchange Control Information</u>

The Czech National Bank may require you to fulfill certain notification duties in relation to the Award and the opening and maintenance of a foreign account (*e.g.,* may be required to report foreign direct investments, financial credits from abroad, investment in foreign securities, and associated collections and payments). However, because exchange control regulations change frequently and without notice, you should consult your personal legal advisor prior to the vesting of the Award and the sale of shares of Stock and before opening any foreign accounts in connection with the Plan to ensure compliance with current regulations. It is your responsibility to comply with any applicable Czech exchange control laws.

**<u>Denmark</u>**

<u>Stock Option Act</u>

You acknowledge that you have received an Employer Statement in Danish, attached hereto as <u>Exhibit A-I</u>, which is being provided to comply with the Danish Stock Option Act, as amended and with effect from January 1, 2019, to the extent such Act applies to you and to the Award.

<u>Foreign Asset/Account Reporting Information</u>

You acknowledge that if you establish an account holding shares of Stock or an account holding cash outside of Denmark, you must report the account to the Danish Tax Administration. The form which should be used in this respect may be obtained from a local bank.

**<u>Finland</u>**

<u>Vesting Schedule</u>

Notwithstanding the Vesting Schedule set forth in the Grant Notice, under no circumstances will any RSUs vest prior to the first anniversary of the Date of Grant. As such, if the first anniversary of the Vesting Commencement Date is prior to the first anniversary of the Date of Grant, the portion of the Award that would have vested prior to the first anniversary of the Date of Grant shall vest on the first

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anniversary of the Date of Grant. The remainder of the Award shall vest according to the Vesting Schedule set forth in the Grant Notice as measured from the Vesting Commencement Date.

**<u>France</u>**

<u>Consent to Receive Information in English</u>

By accepting the Restricted Stock Units, you confirm having read and understood the documents related to the Restricted Stock Units (the Plan and the Award Agreement) which were provided in the English language. You accept the terms of these documents accordingly.

*<u>Consentement Relatif à l'Utilisation de l'Anglais</u>*

*En acceptant l'attribution («Restricted Stock Units»), vouz confirmez avoir lu et compris les documents relatifs à les Restricted Stock Units (le Plan et le Contrat d'Attribution) qui ont été remis en anglais. Vous acceptez les termes de ces documents en connaissance de cause.*

<u>Tax Treatment</u>

The Restricted Stock Units are intended to constitute awards that qualify for the special tax and social security treatment in France applicable to Restricted Stock Units granted for no consideration under Sections L. 225-197-1 to L. 225-197-5 and Sections L. 22-10-59 to L. 22-10-60 of the French Commercial Code, as amended ("***French-Qualified RSUs***"). As such, they will be governed by the provisions in this Award Agreement, including the following provisions applicable to French-Qualified RSUs, the French Sub-Plan for Restricted Stock Units and Performance Shares under the 2019 Equity Incentive Plan ("***French Sub-Plan***") and the Plan. By accepting the French-Qualified RSUs, you acknowledge that you have received a copy of the Plan and the French Sub-Plan.

Certain events may affect the status of the Restricted Stock Units as French-Qualified RSUs, and the French-Qualified RSUs or the underlying shares of Stock may be disqualified in the future. The Company does not make any undertaking or representation to maintain the qualified status of the French-Qualified RSUs or of the underlying shares of Stock.

Capitalized terms used but not defined in the following provisions, in the Award Agreement or the Plan shall have the meanings ascribed to them in the French Sub-Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)<u>Minimum Vesting Period</u>. Notwithstanding the Vesting Schedule set forth in the Grant Notice, under no circumstances will the French-Qualified RSUs vest prior to the expiration of such period as is required to comply with the minimum vesting period applicable to French-Qualified RSUs under Sections L. 225-197-1 to L. 225-197-5 and Sections L. 22-10-59 to L. 22-10-60 of the French Commercial Code, as amended, the relevant sections of the French Tax Code and/or the relevant sections of the French Social Security Code, as amended, except in the case of your death. The minimum vesting period is currently one (1) year from the Date of Grant. As such, if the first anniversary of the Vesting Commencement Date is prior to the first anniversary of the Date of Grant, the portion of the French-Qualified RSUs that would have vested prior to the first anniversary of the Date of Grant shall vest on the first anniversary of the Date of Grant. The remainder of the French-Qualified RSUs shall vest according to the Vesting Schedule set forth in the Grant Notice as measured from the Vesting Commencement Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)<u>Termination of Service Due to Death or Disability</u>. This provision replaces Section 1(b) of the Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)In the event of your death, the applicable vesting requirements will be considered met in full and your heirs may request the issuance of the shares of Stock subject to the French- Qualified RSUs within six (6) months from the date of your death. If your heirs do not request the shares within six (6) months from the date of your death, the French-Qualified RSUs will be forfeited.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.If your Service terminates due to your Disability (as defined in the French Sub-Plan), then you will be given credit for an additional twelve (12) months of continuous Service such that the number of Restricted Stock Units that otherwise would have vested had your Service continued for an additional twelve (12) months following your termination will accelerate and become vested as of the date of your Service termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)<u>Restriction on Disposition of Shares</u>. You may not sell or transfer the shares of Stock you acquire upon the vesting of the French-Qualified RSUs until such time as is required to comply with the minimum holding period applicable to shares of Stock underlying French-Qualified RSUs under Sections L. 225-197-1 to L. 225-197-5 and Sections L. 22-10-59 to L. 22-10-60 of the French Commercial Code, as amended, the relevant sections of the French Tax Code and/or the relevant sections of the French Social Security Code, as amended, except in the case of your death or Disability (as defined in the French Sub-Plan). The minimum holding period is currently two (2) years from the Date of Grant.

Except in the case of the termination of your Service due to death or Disability (as defined in the French Sub-Plan), the minimum holding period restriction will continue to apply even if you are no longer providing Service.

Furthermore, the shares of Stock underlying French-Qualified RSUs cannot be sold during a Restricted Period (as defined in the French Sub-Plan), to the extent applicable under French law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)<u>Holding Periods for Managing Corporate Officers</u>. If, on the Date of Grant, you qualify as a managing corporate officer under French law ("*mandataires sociaux*") or any similar official capacity of the Company or any other Participating Company, you may not sell 20% of the shares of Stock acquired upon vesting of the French-Qualified RSUs until the termination of such official capacity, as long as this restriction is applicable to French-Qualified RSUs.

<u>Foreign Asset/Account Reporting Information</u>

French residents holding cash or securities (including shares of Stock) outside of France or maintaining a foreign bank or brokerage account (including accounts opened or closed during the tax year) must declare such assets and accounts to the French tax authorities when filing an annual tax return.

**<u>Germany</u>**

<u>Exchange Control Information</u>

Cross-border payments in excess of €12,500 must be reported to the German Federal Bank (Bundesbank). If you receive a payment in excess of this amount (including if you acquire shares of Stock with a value in excess of this amount or sell shares of Stock and receive proceeds in excess of this amount), you must report the payment to the Bundesbank. More information is available on the "General Statistics Reporting Portal" (Allgemeine Meldeportal Statistik) which can be accessed via the Bundesbank's website (www.bundesbank.de).

**<u>Hong Kong</u>**

<u>Restriction on Sale of Shares</u>

Shares received under the Plan are accepted as a personal investment. In the event the Restricted Stock Units vest and shares of Stock are paid to you within six (6) months of the Date of Grant, you agree not to dispose of the shares of Stock acquired prior to the six (6)-month anniversary of the Date of Grant.

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<u>Securities Law Information</u>

*WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the grant. If you have any questions regarding the contents of this Award Agreement or the Plan, you should obtain independent professional advice. Neither the grant of the Restricted Stock Units nor the issuance of shares of Stock upon vesting of the Restricted Stock Units constitutes a public offering of securities under Hong Kong law and is available only to eligible employees and other service providers of the applicable Participating Company. This Award Agreement, the Plan and other incidental communication materials distributed in connection with the Restricted Stock Units (i) have not been prepared in accordance with and are not intended to constitute a "prospectus" for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible employee or other service provider of the applicable Participating Company and may not be distributed to any other person.*

**<u>India</u>**

<u>Exchange Control Information</u>

You must repatriate all funds received in connection with the Plan (including proceeds from the sale of shares of Stock and any cash dividends paid on shares of Stock acquired under the Plan) to India within one hundred eighty (180) days of receipt, or within such other time frame as may be prescribed under applicable Indian exchange control laws as may be amended from time to time. You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or any Participating Company requests proof of repatriation. You may also be required to provide information to the Company or a Participating Company in India to facilitate their compliance with exchange control filing requirements in India. You should consult with your personal legal advisor with respect to your requirements.

<u>Foreign Asset/Account Reporting Information</u>

You are required to declare any foreign bank accounts and any foreign financial assets (including shares of Stock held outside India) in your annual tax return. You acknowledge that you are responsible for complying with this reporting obligation and you should confer with your personal tax advisor in this regard.

**<u>Ireland</u>**

<u>Director Notification Requirement</u>

If you are a director, shadow director or secretary of the Company or an Irish Subsidiary Corporation, you must notify the Company or the Irish Subsidiary, as applicable, in writing within a specified time period of (i) receiving or disposing of an interest in the Company (*e.g.*, Restricted Stock Units, shares of Stock), (ii) becoming aware of the event giving rise to the notification requirement, or (iii) becoming a director or secretary if such an interest exists at the time, if in each case the interest represents more than 1% of the Company. This notification requirement also applies with respect to the interests of a spouse or minor child (whose interests will be attributed to the director, shadow director or secretary).

**<u>Israel</u>**

<u>Immediate Sale of Shares of Stock</u>

This provision supplements Section 5 of the Award Agreement:

Due to local tax considerations, upon the vesting of the Award, the Company reserves the right to require the immediate sale of any shares of Stock to be issued to you upon vesting and settlement of the Award. You further agree that the Company is authorized to instruct its designated broker to assist with the

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mandatory sale of such shares of Stock (on your behalf pursuant to this authorization) and you expressly authorize the Company's designated broker to complete the sale of such shares of Stock. You acknowledge that the Company's designated broker is under no obligation to arrange for the sale of the shares of Stock at any particular price. Upon the sale of the shares of Stock, the Company agrees to pay you the cash proceeds from the sale of the shares of Stock, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.

You acknowledge that you are not aware of any material nonpublic information with respect to the Company or any securities of the Company as of the date of this Award Agreement. The Company may, in its sole discretion, determine that the shares of Stock subject to the Award will not be subject to this immediate sale requirement.

<u>Securities Law Information</u>

The grant of the Award does not constitute a public offering under the Securities Law, 1968.

**<u>Italy</u>**

<u>Plan Document Acknowledgment</u>

By accepting this Award, you acknowledge that you have received a copy of the Plan, reviewed the Plan, the Award Agreement and this Appendix in their entirety and fully understand and accept all provisions of the Plan, the Award Agreement and this Appendix.

In addition, you further acknowledge that you have read and specifically and expressly approve the following Sections of the Award Agreement and this Appendix: Section 6 (Compliance with Law); Section 9 (Award Not a Service Contract); Section 11 (Tax Obligations); Section 12 (Nature of Award); Section 13 (Delivery of Documents and Notices); Section 21 (Governing Plan Document); Section 22 (Applicable Law and Venue); Section 25 (Appendix); and Section 26 (Imposition of Other Requirements).

<u>Foreign Asset/Account Reporting Information</u>

If, at any time during the fiscal year, you hold investments or financial assets outside of Italy (*e.g.,* cash, shares of Stock) which may generate income taxable in Italy (or if you are the beneficial owner of such an investment or asset even if you do not directly hold the investment or asset), you are required to report such investments or assets on your annual tax return (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax return is due.

**<u>Japan</u>**

<u>Foreign Asset/Account Reporting Information</u>

You will be required to report details of any assets (including any shares of Stock acquired under the Plan) held outside of Japan as of December 31st of each year, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th of the following year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to report details of any outstanding Awards or shares of Stock held by you in the report.

<u>Exchange Control Information</u>

If the value of shares of Stock that may be acquired in any one transaction exceeds ¥100,000,000, you must file a Securities Acquisition Report with the Ministry of Finance ("***MOF***") within twenty (20) days of acquisition.

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**<u>Korea</u>**

<u>Foreign Asset/Account Reporting Information</u>

Korean residents must declare all foreign financial accounts (*e.g.,* non-Korean bank accounts, brokerage accounts) to the Korean tax authority and file a report with respect to such accounts in June of the immediately following year if the monthly balance of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during a calendar year. You are responsible for complying with this reporting obligation and should consult with your personal tax advisor to determine how to value your foreign accounts for such purposes and whether you are required to file a report with respect to such accounts.

**<u>Mexico</u>**

<u>Plan Document Acknowledgment</u>

By accepting the Restricted Stock Units, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Award Agreement in their entirety, and fully understand and accept all provisions of the Plan and the Award Agreement, including this Appendix. In addition, you expressly approve that: (i) participation in the Plan does not constitute an acquired right; (ii) the Plan and participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) participation in the Plan is voluntary; and (iv) the Company and any other Participating Company are not responsible for any decrease in the value of the shares of Stock acquired upon vesting of the Restricted Stock Units.

<u>Labor Law Policy and Acknowledgment</u>

By accepting this Award, you expressly recognize that Adobe Inc., with offices at 345 Park Avenue, San Jose, California 95110, U.S.A., is solely responsible for the administration of the Plan and that your participation in the Plan and acquisition of shares does not constitute an employment relationship between you and the Company since you are participating in the Plan on a wholly commercial basis and your sole employer is Adobe Inc-Mexico Representative Office ("***Adobe-Mexico***"), not the Company in the United States. Based on the foregoing, you expressly recognize that the Plan and the benefits that you may derive from participation in the Plan do not establish any rights between you and your employer, Adobe-Mexico, and do not form part of the employment conditions and/or benefits provided by Adobe-Mexico and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of your employment.

You further understand that your participation in the Plan is as a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue your participation at any time without any liability to you.

Finally, you hereby declare that you do not reserve to yourself any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and you therefore grant a full and broad release to the Company, its subsidiaries, affiliates, branches, representation offices, its shareholders, officers, agents or legal representatives with respect to any claim that may arise.

*<u>Reconocimiento del Documento del Plan</u>*

*Al aceptar las Unidades de Acciones Restringidas, usted reconoce que ha recibido copias del Plan, ha revisado el Plan y el Contrato del Premio en su totalidad y que entiende y acepta completamente todas las disposiciones contenidas en el Plan y en el Contrato del Premio, incluyendo este Apéndice. Adicionalmente, usted expresamente aprueba de que (i) la participación en el Plan no constituye un derecho adquirido; (ii) el Plan y la participación en el Plan se ofrecen por la Compañía de forma enteramente discrecional; (iii) la participación en el Plan es voluntaria; y (iv) la Compañía y cualquier* 

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*otra Compañía del Grupo Participativo no son responsables por cualquier disminución en el valor de las acciones adquiridas cuando las Unidades de Acciones Restringidas se maduren.*

*<u>Política Laboral y Reconocimiento/Aceptación</u>*

*Aceptando este Premio*<sup>1</sup>*, , usted reconoce que Adobe Inc., con sus oficinas registradas en 345 Park Avenue, San Jose, California 95110, U.S.A., es el único responsable de la administración del Plan y que su participación en el mismo y la adquisición de acciones no constituye de ninguna manera una relación laboral entre usted y la Compañía, toda vez que su participación en el Plan se deriva únicamente de una relación comercial con la Compañía, reconociendo expresamente que su único empleador es Adobe Inc- Mexico Representative Office (*"*Adobe- México*"*), y no la Compañía en los Estados Unidos. Derivado de lo anterior, ustecd expresamente reconoce que el Plan y los beneficios que pudieran derivar del mismo no establecen ningún derecho entre usted y su empleador, Adobe-México, y no forman parte de las condiciones laborales y/o prestaciones otorgadas por Adobe-México, y usted expresamente reconoce que cualquier modificación al Plan o la terminación del mismo de manera alguna podrá ser interpretada como una modificación de los condiciones de su empleo.*

*Asimismo, usted entiende que su participación en el Plan es resultado de la decisión unilateral y discrecional de la Compañía; por lo tanto, la Compañía se reserva el derecho absoluto para modificar y/o terminar su participación en cualquier momento, sin ninguna responsabilidad para usted.*

*Finalmente, el participante manifiesta que no se reserva ninguna acción o derecho que origine una demanda en contra de la Compañía, por cualquier compensación o daño en relación con cualquier disposición del Plan o de los beneficios derivados del mismo, y en consecuencia el participante otorga un amplio y total finiquito a la Compañía, sus entidades relacionadas, afiliadas, sucursales, oficinas derepresentación, sus accionistas, directores, agentes y representantes legales con respecto a cualquier demanda que pudiera surgir.*

<sup>1</sup> *El término* "*Premio*" *se refiere a la palabra* "*Award.*"

**<u>Moldova</u>**

<u>Exchange Control Information</u>

You may be required to repatriate funds received in connection with the Plan (*e.g.*, proceeds received from the sale of shares of Stock) to Moldova within a reasonable time from receipt. You should consult with your personal legal advisor with respect to your requirements.

**<u>Netherlands</u>**

There are no country-specific provisions.

**<u>New Zealand</u>**

<u>Securities Law Information</u>

WARNING: You are being offered Restricted Stock Units which allow you to acquire shares of Stock in accordance with the terms of the Plan and the Award Agreement. The shares of Stock, if issued, give you a stake in the ownership of the Company. You may receive a return if dividends are paid.

If the Company runs into financial difficulties and is wound up, you will be paid only after all creditors and holders of preferred shares have been paid.

New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision. The usual rules do not apply to this offer because it is made under an employee share purchase scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal

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protections for this investment. You understand that you should ask questions, read all documents carefully, and seek independent financial advice before participating in the Plan.

The shares of Stock are quoted and approved for trading on the Nasdaq Global Select Market in the United States of America. This means that, if you acquire shares of Stock under the Plan, you may be able to sell your investment on the Nasdaq if there are interested buyers. The price will depend on the demand for the shares of Stock.

For a copy of the Company's most recent financial statements (and, where applicable, a copy of the auditor's report on those financial statements), as well as information on risk factors impacting the Company's business that may affect the value of the shares of Stock, you should refer to the risk factors discussion in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are filed with the U.S. Securities and Exchange Commission and are available online at www.sec.gov, as well as on the Company's website at https://www.adobe.com/investor-relations/financial-documents.html. You are also entitled to receive a copy of these reports, free of charge, upon written request to the Company at 345 Park Ave. San Jose, CA 95110 Attention: Equity Administration.

**<u>Norway</u>**

There are no country-specific provisions.

**<u>Poland</u>**

<u>Exchange Control Information</u>

Polish residents holding foreign securities (including shares of Stock) and maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances regarding such securities and cash deposited into such accounts if the value of any transactions or balances exceeds certain thresholds. If required, the reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland.

Transfers of funds into and out of Poland in excess of €15,000 (or PLN 15,000 if such transfer of funds is connected with business activity of an entrepreneur) must be made via a bank account held at a bank in Poland. Additionally, Polish residents are required to store all documents connected with any foreign exchange transactions that Polish residents engaged in for a period of five (5) years, as measured from the end of the year in which such transaction occurred.

**<u>Romania</u>**

<u>Delivery of Shares</u>

This provision supplements Section 5 of the Award Agreement:

In order to comply with the conditions as set forth by the Romanian Fiscal Code in relation to equity awards which are eligible for tax preferential treatment, where a portion of your Restricted Stock Units vest prior to one (1) year from the Date of Grant, delivery of the shares of Stock will be delayed until following the one (1) year anniversary from the Date of Grant.

<u>Language Consent</u>

By accepting the grant of Restricted Stock Units, you acknowledge that you are proficient in reading and understanding English and fully understand the terms of the documents related to the grant (the Award Agreement and the Plan), which were provided in the English language. You accept the terms of those documents accordingly.

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*<u>Consimtamant cu Privire la Limba</u>*

*Acceptând acordarea unităților de Restricted Stock Unit-uri, recunoașteți că sunteți competenți în citirea și înțelegerea limbii engleze și înțelegeți pe deplin termenii documentelor legate de subvenție (Acordul de acordare și planul), care au fost furnizate în limba engleză. Acceptați termenii acestor documente în consecință.*

<u>Exchange Control Information</u>

If you deposit the proceeds from the sale of Shares acquired under the Plan in a bank account in Romania, you may be required to provide the Romanian bank with appropriate documentation explaining the source of the funds. You should consult with your personal legal advisor to ensure compliance with applicable requirements.

**<u>Singapore</u>**

<u>Securities Law Information</u>

The award of Restricted Stock Units is being made pursuant to the "Qualifying Person" exemption under Section 273(1)(f) of the Singapore Securities and Futures Act (Cap. 289, Rev Ed 2006) ("***SFA***"). The Plan has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. You should note that the Restricted Stock Units are subject to Section 257 of the SFA and you will not be able to make any subsequent sale of shares of Stock in Singapore, or any offer of such subsequent sale of the shares of Stock in Singapore unless such sale or offer is made (i) after six (6) months from the Date of Grant, or (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.

<u>Director Notification Requirement</u>

The directors of a Singapore Subsidiary Corporation are subject to certain notification requirements under the Singapore Companies Act (Cap. 50, Rev Ed 2006). The directors must notify the Singapore Subsidiary Corporation in writing of an interest (*e*.*g*., Restricted Stock Units, shares of Stock, etc.) in the Company or any related company within two (2) business days of (i) its acquisition or disposal, (ii) any change in a previously-disclosed interest(*e*.*g*., upon vesting of the Restricted Stock Units or shares of Stock acquired under the Plan are subsequently sold), or (iii) becoming a director. If you are the Chief Executive Officer of the Singapore Subsidiary Corporation, these requirements may also apply to you.

**<u>Spain</u>**

<u>Securities Law Information</u>

No "offer of securities to the public," as defined under Spanish law, has taken place or will take place in the Spanish territory in connection with the Award. The Award Agreement (including the Appendix) and any other document related to the Award have not been nor will they be registered with the *Comisión Nacional del Mercado de Valores*, and they do not constitute a public offering prospectus.

<u>Foreign Asset/Account Reporting Information</u>

To the extent you hold rights or assets (*e.g.*, cash or shares of Stock held in a bank or brokerage account) outside of Spain with a value in excess of €50,000 per type of right or asset as of December 31 each year (or at any time during the year in which you sell or dispose of such rights or assets), you are required to report information on such rights and assets on your tax return for such year. After such rights or assets are initially reported, the reporting obligation will only apply for subsequent years if the value of any previously reported rights or assets increases by more than €20,000. You should consult with your personal tax advisor to ensure compliance with applicable reporting requirements.

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<u>Exchange Control Information</u>

You may be required to electronically declare to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including shares of Stock acquired under the Plan), and any transactions with non-Spanish residents (including any payments of shares of Stock made pursuant to the Plan), depending on the balances in such accounts together with the value of such instruments as of December 31 of the relevant year, or the volume of transactions with non-Spanish residents during the relevant year.

<u>Labor Law Acknowledgment</u>

By accepting the Award, you consent to participation in the Plan and acknowledge that you have received a copy of the Plan document.

You understand that the Company has unilaterally, gratuitously, and in its sole discretion decided to grant Awards under the Plan to Employees, Directors and Consultants throughout the world. The decision is limited and entered into based upon the express assumption and condition that any Award will not economically or otherwise bind any Participating Company, including your employer, on an ongoing basis, other than as expressly set forth in the Award Agreement and the Plan. Consequently, you understand that the Award is given on the assumption and condition that the Award shall not become part of any employment contract (whether with any Participating Company, including your employer) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation), or any other right whatsoever. Furthermore, you understand and freely accept that there is no guarantee that any benefit whatsoever shall arise from the grant of the Award, which is gratuitous and discretionary, because the future value of the Award and the underlying shares of Stock is unknown and unpredictable.

You understand and agree that, as a condition of the grant of the Award, your termination of Service for any reason other than death or Disability (including for the reasons listed below) will automatically result in the cancellation and loss of any Award that may have been granted to you and that was not or did not become vested on the date of termination of Service. In particular, you understand and agree that, unless otherwise expressly provided by the Company in the Award Agreement, the Award will be cancelled without entitlement to the shares or to any amount as indemnification if you terminate Service by reason of, but not limited to, the following: resignation; disciplinary dismissal adjudged to be with cause; disciplinary dismissal adjudged or recognized to be without good cause (*i.e.*, subject to a "*despido improcedente*"); individual or collective layoff on objective grounds, whether adjudged to be with cause or adjudged or recognized to be without cause; material modification of the terms of employment under Article 41 of the Workers' Statute; relocation under Article 40 of the Workers' Statute; Article 50 of the Workers' Statute; unilateral withdrawal by your employer; and under Article 10.3 of Royal Decree 1382/1985.

You also understand that this grant of the Award would not be made but for the assumptions and conditions set forth above; thus, you understand, acknowledge and freely accept that, should any or all of the assumptions be mistaken or any of the conditions not be met for any reason, the grant, the Award and any right to the underlying shares of Stock shall be null and void.

**<u>Sweden</u>**

<u>Tax Obligations</u>

The following supplements Section 11 of the Award Agreement:

Without limiting the authority of any Participating Company to satisfy its withholding obligations for Tax- Related Items as set forth in Section 11 of the Award Agreement, in accepting your Award, you authorize the Company to sell or withhold vested shares of Stock otherwise deliverable to you pursuant to

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this Award Agreement to satisfy Tax-Related Items, regardless of whether any Participating Company has an obligation to withhold such Tax-Related Items.

**<u>Switzerland</u>**

<u>Securities Law Information</u>

Neither this Award Agreement nor any other materials relating to the Award (1) constitutes a prospectus according to articles 35 et seq. of the Swiss Federal Act on Financial Services ("***FinSA***"), (ii) may be publicly distributed or otherwise made available in Switzerland to any person other than an employee of a Participating Company, or (iii) has been or will be filed with, approved or supervised by any Swiss reviewing body according to article 51 of FinSA or any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority (FINMA).

**<u>Taiwan</u>**

<u>Securities Law Information</u>

The offer of participation in the Plan is available only to employees or service providers of a Participating Company. The offer of participation in the Plan is not a public offer of securities by a Taiwanese company.

<u>Exchange Control Information</u>

The acquisition or conversion of foreign currency and the remittance of such amounts (including proceeds from the sale of Shares) to Taiwan may trigger certain annual or periodic exchange control reporting. If the transaction amount is TWD500,000 or more in a single transaction, you may be required to submit a Foreign Exchange Transaction Form and provide supporting documentation to the satisfaction of the remitting bank. You should consult your personal legal advisor to ensure compliance with applicable exchange control laws in Taiwan.

**<u>Thailand</u>**

<u>Exchange Control Information</u>

If you receive funds in connection with the Plan (*e.g.*, proceeds from the sale of shares of Stock) having a value of USD 1,000,000 or more in a single transaction, you must immediately repatriate such funds to Thailand (or utilize such funds offshore for permissible purposes) and provide details of the transaction (i.e., identification information and purpose of the transaction) to the receiving bank. Further, you must convert such funds to Thai Baht within 360 days of repatriation or deposit the funds in an authorized foreign exchange account in Thailand. The inward remittance must also be reported to the Bank of Thailand on a foreign exchange transaction form.

In case you will not repatriate such funds but you will utilize them offshore for permissible purposes (i.e., purposes not listed in the negative list prescribed by the Bank of Thailand), you must obtain a waiver of the repatriation requirement from the commercial bank in Thailand by submitting an application and supporting documents evidencing that such funds will be utilized offshore for permissible purposes. You should consult with your personal legal advisor with respect to your requirements.

**<u>United Arab Emirates</u>**

<u>Securities Law Information</u>

Participation in the Plan is being offered only to selected Employees, Directors and Consultants and is in the nature of providing equity incentives to Employees, Directors and Consultants in the United Arab Emirates. The Plan, the Award Agreement and any other incidental communication materials are intended

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for distribution only to such Employees, Directors and Consultants and must not be delivered to, or relied on by, any other person.

The Dubai Creative Clusters Authority, Emirates Securities and Commodities Authority and/or the Central Bank of the United Arab Emirates have no responsibility for reviewing or verifying any documents in connection with the Restricted Stock Units. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development have approved this Award nor taken steps to verify the information set out in it, and have no responsibility for it. The securities to which this Award Agreement relate may be illiquid and/or subject to restrictions on their resale. Individuals should conduct their own due diligence on the securities.

Residents of the United Arab Emirates who do not understand or have questions regarding this Award Agreement (including the Appendix) or the Plan should consult an authorized financial adviser.

**<u>United Kingdom</u>**

<u>Delivery of Shares</u>

This provision supplements Section 5 of the Award Agreement:

Notwithstanding any discretion referred to in Section 3.3(e) of the Plan, the Restricted Stock Units granted to Participants in the United Kingdom do not represent the right to receive a cash payment equal to the value of the shares of Stock, or a combination of cash and shares of Stock; vested Restricted Stock Units will be paid to Participants in the United Kingdom in shares of Stock only.

<u>Tax Obligations</u>

The following supplements Section 11 of the Award Agreement:

Without limitation to Section 11 of the Award Agreement, you hereby agree that you are liable for all Tax- Related Items and hereby covenant to pay all such Tax-Related Items, as and when requested by the Company or (if different) your employer or by Her Majesty's Revenue & Customs ("***HMRC***") (or any other tax authority or any other relevant authority). You also hereby agree to indemnify and keep indemnified the Company and (if different) your employer against any Tax-Related Items that they are required to pay or withhold on your behalf or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on your behalf.

Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that you are an executive officer or director and the income tax is not collected from or paid by you within ninety (90) days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to you on which additional income tax and National Insurance contributions may be payable. You acknowledge that you will be responsible for reporting and paying any income tax due on this additional benefit directly to the HMRC under the self-assessment regime and for paying the Company or any other Participating Company, as applicable, for the value of any employee National Insurance contributions due on this additional benefit.

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**<u>EXHIBIT A-I</u>**

**(FOR PARTICIPANTS IN DENMARK)**

***EMPLOYER STATEMENT***

Pursuant to Section 3(1) of the Act on Stock Options in employment relations (the "Stock Option Act"), you are entitled to receive the following information regarding the Adobe Inc. (the "Company") 2019 Equity Incentive Plan (the "Plan") in a separate written statement.

This statement contains only the information mentioned in the Stock Option Act, while the other terms and conditions of your grant of restricted stock units are described in detail in the Plan, the Restricted Stock Unit Grant Notice and Award Agreement, which have been ma de available to you.

&nbsp;&nbsp;&nbsp;&nbsp;1. Date of grant of unfunded right to receive stock upon meeting certain conditions

The grant date of your restricted stock units is the date that the Board of Directors (the "Board") (or the appropriate committee of the Board) approved a grant for you and determined it would be effective.

&nbsp;&nbsp;&nbsp;&nbsp;2.Terms or conditions for grant of a right to future award of stock

The Plan is administered by a committee of the Board (the "Committee"). The Committee has broad powers to determine who will receive restricted stock units, when such persons will receive restricted stock units and to set the terms and conditions applicable to the restricted stock units. The Plan, the Restricted Stock Unit Grant Notice and Award Agreement set forth the terms and conditions applicable to your restricted stock units. The Company may decide, in its sole discretion, not to grant restricted stock units or other awards to you in the future. Under the terms of the Restricted Stock Unit Grant Notice and Award Agreement, you have no entitlement or claim to receive future grants of restricted stock units.

&nbsp;&nbsp;&nbsp;&nbsp;3.Vesting Date or Period

The restricted stock units will vest over time, provided that you continue as an employee of the Company or its affiliates. The vesting schedule is set forth in your Restricted Stock Unit Grant Notice.

&nbsp;&nbsp;&nbsp;&nbsp;4.Exercise Price

No exercise price is payable upon the conversion of your restricted stock units into Company shares in accordance with the vesting schedule described above.

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&nbsp;&nbsp;&nbsp;&nbsp;5.Your rights upon termination of employment

If the terms of the Stock Option Act are applicable to your restricted stock unit grant, the treatment of your restricted stock units upon termination of employment will be determined in accordance with the Plan, the Restricted Stock Unit Grant Notice and Award Agreement, as summarized below:

Upon your termination of employment, all vesting will cease. However, in the event of termination of your employment due to death or disability, you will be given credit for an additional twelve months of service, provided however, that the applicable vesting will not exceed 100% of the restricted stock units subject to your award.

&nbsp;&nbsp;&nbsp;&nbsp;6.Financial aspects of participating in the Plan

The grant of restricted stock units has no immediate financial consequences for you. The value of the restricted stock units is not taken into account when calculating holiday allowances, pension contributions or other statutory consideration calculated on the basis of salary.

Shares of stock are financial instruments. The future value of Company shares is unknown and cannot be predicted with certainty.

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***ARBEJDSGIVERERKLÆRING***

I henhold til § 3, stk. 1, i lov om brug af køberet eller tegningsret mv. i ansættelsesforhold ("Aktieoptionsloven") er du berettiget til i en særskilt skriftlig erklæring at modtage følgende oplysninger vedrørende Adobe Inc.'s ("Selskabets") aktieoptionsbaserede incitamentsordning 2019 (*2019 Equity Incentive Plan*) ("Ordningen").

Denne erklæring indeholder kun de oplysninger, der er nævnt i Aktieoptionsloven, medens de øvrige kriterier og betingelser for din tildeling af betingede aktier er beskrevet nærme re i Ordningen, i Tildelingsmeddelelsen (*Restricted Stock Unit Grant Notice*) og i Tildelingsaftalen (*Award Agreement*), hvilke dokumenter du har fået adgang til.

&nbsp;&nbsp;&nbsp;&nbsp;1. Tidspunkt for tildeling af vederlagsfri ret til at modtage aktier ved opfyldelse af visse betingelser

Tidspunktet for tildelingen af dine betingede aktier er den dato, hvor Selskabets bestyrelse ("Bestyrelsen") (eller det relevante Bestyrelsesudvalg) godkendte din tildeling og besluttede, at tildelingen skulle træde i kraft.

&nbsp;&nbsp;&nbsp;&nbsp;2.Kriterier eller betingelser for tildeling af retten til senere at modtage aktier

Ordningen administreres af et udvalg under Bestyrelsen ("Udvalget"). Udvalgte har vide beføjelser til at afgøre, hvem der skal tildeles betingede aktier, hvornår de pågældende personer skal modtage disse, og hvilke betingelser der skal være gældende for de betingede aktier. De vilkår, der er gældende for dine betingede aktier, fremgår af Ordningen, Tildelingsmeddelelsen samt Tildelingsaftalen. Selskabet kan frit vælge fremover ikke at give dig betingede aktier eller andre tildelinger. I henhold til Tildelingsmeddelelsen og Tildelingsaftalen har du hverken ret til eller krav på fremover at få tildelt betingede aktier.

&nbsp;&nbsp;&nbsp;&nbsp;3.Modningstidspunkt eller -periode

De betingede aktier modnes over tid, forudsat at du fortsat er ansat i Selskabet eller i en af Selskabets tilknyttede virksomheder. Modningstidsplanen fremgår af din Tildelingsmeddelelse.

&nbsp;&nbsp;&nbsp;&nbsp;4. &nbsp;&nbsp;&nbsp;&nbsp;Udnyttelseskurs

Der skal ikke betales nogen Udnyttelseskurs i forbindelse med konverteringen af dine betingede aktier til aktier i Selskabet i overensstemmelse med den ovenfor beskrevne modningstidsplan.

&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Din retsstilling i forbindelse med fratræden

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Såfremt din tildeling af betingede aktier er omfattet af Aktieoptionsloven, vil dine betingede aktier i tilfælde af din fratræden blive behandlet i overensstemmelse med Ordningen, Tildelingsmeddelelsen og Tildelingsaftalen, dvs. som opsummeret nedenfor:

Ved ophør af dit ansættelsesforhold, uanset årsagen hertil, ophører al modning. Såfremt dit ansættelsesforhold ophører som følge af død eller invaliditet, vil du dog blive krediteret yderligere tolv måneders anciennitet, idet den pågældende modning dog ikke kan overstige 100% af de betingede aktier omfattet af din tildeling.

&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;Økonomiske aspekter ved at deltage i Ordningen

Tildelingen af betingede aktier har ingen umiddelbare økonomiske konsekvenser for dig. Værdien af de betingede aktier indgår ikke i beregningen af feriepenge, pensionsbidrag eller øvrige lovpligtige vederlagsafhængige ydelser.

Aktier er finansielle instrumenter. Den fremtidige værdi af Selskabets aktier er ukendt og kan ikke forudsiges med sikkerhed.

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**<u>Exhibit B</u>**

**Country-Specific Terms and Conditions for** 

**Consultants Outside the United States**

**\*\*\***

Unless otherwise noted, there are no country-specific provisions for consultants receiving Awards outside the United States.

\*\*\*

**<u>Australia</u>**

<u>Securities Law Disclosure</u>

This offer is being made under Division 1A, Part 7.12 of the Corporations Act 2001 (Cth).

Please note that if you offer shares of Stock for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice on your disclosure obligations prior to making any such offer.

<u>Tax Information</u>

The Plan is a plan to which subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the "***Act***") applies (subject to conditions in that Act).

<u>Exchange Control Information</u>

Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers of any amount. If an Australian bank is assisting with the transaction, the bank will file the report on your behalf.

**<u>France</u>**

<u>Tax Considerations</u>

The Awards granted under this Award Agreement are not intended to be French tax-qualified Restricted Stock Units.

<u>Consent to Receive Information in English</u>

By accepting the Restricted Stock Units, you confirm having read and understood the documents related to the Restricted Stock Units (the Plan and the Award Agreement) which were provided in the English language. You accept the terms of these documents accordingly.

*<u>Consentement Relatif à l'Utilisation de l'Anglais</u>*

*En acceptant l'attribution («Restricted Stock Units»), vouz confirmez avoir lu et compris les documents relatifs à les Restricted Stock Units (le Plan et le Contrat d'Attribution) qui ont été remis en anglais. Vous acceptez les termes de ces documents en connaissance de cause.* 

<u>Foreign Asset/Account Reporting Information</u>

French residents holding cash or securities (including shares of Stock) outside of France or maintaining a foreign bank or brokerage account (including accounts opened or closed during the tax year) must declare such assets and accounts to the French tax authorities when filing an annual tax return.

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**<u>Germany</u>**

<u>Exchange Control Information</u>

Cross-border payments in excess of €12,500 in connection with the sale of securities (including shares of Stock acquired under the Plan) must be reported on a monthly basis to the German Federal Bank (*Bundesbank*). If you make or receive a payment in excess of this amount, you must report the payment to the Bundesbank electronically using the "General Statistics Reporting Portal" (*Allgemeine Meldeportal Statistik*) which can be accessed via the Bundesbank's website (www.bundesbank.de).

**<u>India</u>**

<u>Exchange Control Information</u>

You must repatriate all proceeds received from the sale of shares of Stock to India within ninety (90) days of receipt and any cash dividends paid on shares of Stock acquired under the Plan within one hundred eighty (180) days of receipt, or as prescribed under applicable Indian exchange control laws as may be amended from time to time. You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or any Participating Company requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.

<u>Foreign Asset/Account Reporting Information</u>

You are required to declare any foreign bank accounts and any foreign financial assets (including shares of Stock held outside India) in your annual tax return. You acknowledge that you are responsible for complying with this reporting obligation and you should confer with your personal tax advisor in this regard.

**<u>Japan</u>**

<u>Foreign Asset/Account Reporting Information</u>

You will be required to report details of any assets (including any shares of Stock acquired under the Plan) held outside of Japan as of December 31st of each year, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th of the following year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to report details of any outstanding Awards or shares of Stock held by you in the report.

<u>Exchange Control Information</u>

If the value of shares of Stock that may be acquired in any one transaction exceeds ¥100,000,000, you must notify the Ministry of Finance ("***MOF***") within twenty (20) days of acquisition.

**<u>Switzerland</u>**

<u>Securities Law Information</u>

This Award Agreement is not intended to constitute an offer or solicitation to purchase or invest in shares of Stock. The shares of Stock may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act ("***FinSA***") and no application has or will be made to admit the shares of Stock to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this Award Agreement nor any other offering or marketing material relating to the shares of Stock constitutes a prospectus or a similar communication pursuant to the FinSA or the former articles 652a, 752 or 1156 of the Code of Obligations, and neither this Award Agreement nor any other offering or marketing material relating to the shares of Stock may be publicly distributed or otherwise made publicly available in Switzerland.

## Exhibit 10.7

**EXHIBIT 10.7**

**ADOBE INC.**

**2019 EQUITY INCENTIVE PLAN RESTRICTED STOCK UNIT GRANT NOTICE**

**NON-EMPLOYEE DIRECTOR GRANT**

Adobe Inc. (the "***Company***"), pursuant to its 2019 Equity Incentive Plan (the "***Plan***"), hereby awards to you the Restricted Stock Unit Award (the "***Award***") covering the number of Restricted Stock Units set forth below. This Award is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Unit Award Agreement (the "***Award Agreement***") and the Plan, each of which are incorporated herein in their entirety. Unless otherwise defined herein, capitalized terms shall have the meanings set forth in the Plan.

---

| |
|:---|
| Participant:  |
| Date of Grant: |
| Vesting Commencement Date: |
| Number of Restricted Stock Units: |

---

**Vesting Schedule:** This Award shall vest 100% on the date of the next Annual Meeting of Stockholders; provided, however, that, except as otherwise set forth in Section 1 of the Award Agreement, your Service has not terminated prior to such vesting date.

In the event of a Change of Control, any unvested portions of this Award shall become immediately vested in full as of immediately prior to the effective date of the Change of Control, subject to the consummation of the Change of Control.

**Delivery of Shares:** Subject to the limitations contained herein and the provisions of the Plan, the Company shall settle vested Restricted Stock Units by delivering to you shares of Stock, as provided in Sections 3 and 5 of the Award Agreement.

**Additional Terms/Acknowledgements:** You acknowledge receipt of, and understand and agree to, this Restricted Stock Unit Grant Notice (the "***Grant Notice***"), the Award Agreement, and the Plan. You further acknowledge that as of the Date of Grant, this Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between you, the Company and any other applicable Participating Company regarding the Award and supersede all prior oral and written agreements on that subject, with the exception of any applicable change of control plan approved by the Board or a committee thereof and/or an applicable individual written retention agreement or severance provision between the Company, or a subsidiary of the Company, and you, to the extent applicable to you.

**ADOBE INC.**

**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**

---

| | |
|:---|:---|
| By: |  |
|  | Shantanu Narayen |
|  | Chief Executive Officer |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Address: 345 Park Avenue<br>San Jose, CA 95110-2704 USA |

---

------

**ADOBE INC.**

**2019 EQUITY INCENTIVE PLAN** 

**RESTRICTED STOCK UNIT AWARD AGREEMENT**

**NON-EMPLOYEE DIRECTOR GRANT**

Pursuant to the Restricted Stock Unit Grant Notice (the "***Grant Notice***") and this Restricted Stock Unit Award Agreement (the "***Award Agreement***"), Adobe Inc. (the "***Company***") has awarded you, pursuant to its 2019 Equity Incentive Plan (the "***Plan***"), a Restricted Stock Unit Award (the "***Award***") for the number of Restricted Stock Units as indicated in the Grant Notice. Unless otherwise defined herein or in the Grant Notice, capitalized terms shall have the meanings set forth in the Plan. Subject to adjustment and the terms and conditions as provided herein and in the Plan, each Restricted Stock Unit shall represent the right to receive one (1) share of Stock.

The details of your Award, in addition to those set forth in the Grant Notice, are as follows.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.VESTING.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**The Restricted Stock Units shall vest, if at all, as provided in the Vesting Schedule set forth in your Grant Notice, this Award Agreement and the Plan, provided that vesting shall cease upon the termination of your Service, except as otherwise set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**If your Service terminates due to your death or Disability, then you will be given credit for an additional twelve (12) months of continuous Service such that the number of Restricted Stock Units that otherwise would have vested had your Service continued for an additional twelve (12) months following your termination will accelerate and become vested as of the date of your Service termination; provided, however, that in no event shall such applicable vesting exceed 100% of the number of Restricted Stock Units subject to your Award. For purposes of this provision, "***Disability***" shall mean your permanent and total disability within the meaning of Section 22(e)(3) of the U.S. Internal Revenue Code of 1986, as amended (the "***Code***"), and any applicable regulations promulgated thereunder to the extent not inconsistent with the regulations under Code Section 409A. Except as set forth in this Section 1(b), any Restricted Stock Units subject to the Award that have not vested at the time of your termination of Service for any or no reason will be forfeited immediately and automatically transferred to and reacquired by the Company at no cost to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**The Committee, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Restricted Stock Units at any time, subject to the terms of the Plan. If so accelerated, such Restricted Stock Units will be considered as having vested as of the date specified by the Committee. Notwithstanding Section 5 and in accordance with Section 16, the payment of shares of Stock that vest pursuant to this Section 1 shall in all cases be paid at a time or in a manner that is exempt from, or complies with, Code Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.NUMBER OF RESTRICTED STOCK UNITS AND UNDERLYING SHARES OF STOCK.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**The Restricted Stock Units subject to your Award and the shares of Stock deliverable with respect to such Restricted Stock Units will be adjusted from time to time for capitalization adjustments, as provided in Section 4.2 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**Any additional Restricted Stock Units, shares of Stock, cash or other property that become subject to the Award pursuant to this Section 2 shall be subject, in a manner determined by the

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Committee, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Restricted Stock Units and shares of Stock covered by your Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.PAYMENT BY YOU.** Subject to Section 12 below, and except as otherwise provided in the Grant Notice, you will not be required to make any payment to the Company with respect to your receipt of the Award, the vesting of the Restricted Stock Units, or the delivery of the shares of Stock underlying the Restricted Stock Units; provided, however, that your continued Service is required for vesting of the Restricted Stock Units as set forth in the Grant Notice and this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.RIGHTS AS A STOCKHOLDER.** Neither you nor any person claiming under or through you will have any of the rights or privileges of a stockholder of the Company in respect of any shares of Stock hereunder unless and until certificates representing shares of Stock (or other evidence of ownership as so designated by the Company) (either, "***Certificates***") will have been issued to you pursuant to Section 5. After such issuance, you will have all the rights of a stockholder of the Company with respect to voting such shares of Stock and receipt of dividends and other distributions on such shares of Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.DELIVERY OF SHARES.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**&nbsp;&nbsp;&nbsp;&nbsp;<u>General</u>. Each Restricted Stock Unit represents the right to receive one (1) share of Stock on the date that such Restricted Stock Unit vests. Unless and until the Restricted Stock Units will have vested in the manner set forth in Section 1, you will have no right to payment of any such Restricted Stock Units. Except as provided in Section 6, any Restricted Stock Units that vest in accordance with Section 1 will be paid to you in whole shares of Stock (unless the issuance of fractional shares is permitted) as soon as practicable after vesting, but in each such case within the period thirty (30) days following the vesting date, subject to you satisfying any applicable tax withholding obligations as set forth in Section 12. In no event will you be permitted, directly or indirectly, to specify the taxable year of the payment of any Restricted Stock Units payable under this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)&nbsp;&nbsp;&nbsp;&nbsp;**<u>Deferred Shares</u>. If you are eligible and elect to defer delivery of the shares of Stock as provided in Section 6, such shares of Stock will be issued and delivered to you on the date or dates that you elect on your deferral election form. No shares of Stock shall be issued prior to vesting of the Restricted Stock Units.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**&nbsp;&nbsp;&nbsp;&nbsp;<u>Delivery Following Death</u>. If you are deceased at the time that shares of Stock pursuant to Restricted Stock Units, if any, are to be delivered to you, such delivery will be made to your designated beneficiary, or if no beneficiary has survived you or been designated, or if the beneficiary designation is not enforceable and/or is not valid under the inheritance or other laws in your country (as determined by the Company in its sole discretion), to the administrator or executor of your estate. Any such transferee must furnish the Company with (i) written notice of his or her status as a transferee, and

(ii) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer in the applicable country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.DEFERRAL ELECTION.** If permitted by the Company to do so, you may elect to defer receipt of the shares of Stock that otherwise would be issued pursuant to the vesting of your Award in

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accordance with the terms and conditions, including the applicable eligibility requirements, of the Company's Deferred Compensation Plan (or such other successor plan as may be adopted by the Company). The Committee will, in its sole discretion, establish the rules and procedures for such deferrals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.COMPLIANCE WITH LAW.** The grant of your Award and the issuance of any shares of Stock thereunder shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. You may not be issued any shares of Stock if such issuance of shares of Stock would constitute a violation of any applicable federal, state or foreign securities laws, any other governmental regulatory body, or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. You understand that the Company is under no obligation to register or qualify the shares with the U.S. Securities and Exchange Commission or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares of Stock.

In addition, you may not be issued any shares of Stock unless (i) a registration statement under the Securities Act shall at the time of issuance be in effect with respect to the shares of Stock or (ii) in the opinion of legal counsel to the Company, the shares of Stock may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. YOU ARE CAUTIONED THAT THE SHARES OF STOCK MAY NOT BE ISSUED UNLESS THE FOREGOING

CONDITIONS ARE SATISFIED. Where the Company determines that the delivery of any shares of Stock to settle this Award would violate federal securities laws or other applicable laws or rules or regulations promulgated by any governmental agency, the Company will defer delivery until the earliest date at which the Company reasonably anticipates that delivery of shares of Stock will no longer cause such violation. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares of Stock shall relieve the Company of any liability in respect of the failure to issue or sell such shares of Stock as to which such requisite authority shall not have been obtained. As a condition to the issuance of any shares of Stock pursuant to this Award, the Company may require you to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. Further, you agree that the Company shall have unilateral authority to amend the Plan and the Award Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares of Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.RESTRICTIVE LEGENDS.** The shares of Stock issued pursuant to this Award shall be endorsed with appropriate legends, if any, determined by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.TRANSFERABILITY.** Except to the limited extent permitted under Section 5(c), this Award and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this grant, or any right or privileged conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this Award and the rights and privileges hereby immediately will become null and void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.AWARD NOT A SERVICE CONTRACT.** Your Award is not an employment or service contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation on your part to continue in the Service of the Company, or on the part of the Company to continue such Service. In addition, nothing in your Award shall obligate the Company, its respective

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stockholders, boards of directors, Officers or Employees to continue any relationship that you might have as an Employee, Director or Consultant for the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.UNSECURED OBLIGATION.** Your Award is unfunded, and even as to any Restricted Stock Units that vest, you shall be considered an unsecured creditor of the Company with respect to the Company's obligation, if any, to issue shares of Stock pursuant to this Award Agreement. [You shall not have voting or any other rights as a stockholder of the Company with respect to the shares of Stock acquired pursuant to this Award Agreement until such shares of Stock are issued to you pursuant to this Award Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company with respect to the shares of Stock so issued.] Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.TAX OBLIGATIONS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**<u>General</u>. Regardless of any action taken by the Company or any other Participating Company with respect to any or all federal, state, local and foreign income, employment, social insurance, payroll taxes, payment on account or other taxes related to your participation in the Plan and legally applicable to you or deemed by the Company to be an appropriate charge to you even if technically due by the Company ("***Tax-Related Items***"), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company or any other Participating Company. You further acknowledge that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of your Award, including, but not limited to, the grant, vesting or settlement of this Award, subsequent sale of Stock acquired pursuant to this Award, or the receipt of any dividends and/or Dividend Equivalents and (ii) does not commit to and is under no obligation to structure the terms of the grant or any other aspect of your Award to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you have become subject to tax in more than one jurisdiction, as applicable, you acknowledge that the Company or any other Participating Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**<u>Withholding Arrangements</u>. Prior to any relevant taxable or tax withholding event, as applicable, you will pay or make adequate arrangements satisfactory to the Company to satisfy all Tax- Related Items. In this regard, you hereby authorize the Company, or its agents, in its sole discretion and subject to any limitations under applicable law, to satisfy any applicable withholding obligations with regard to all Tax-Related Items by one or a combination of the following means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i.withholding of that number of whole vested shares of Stock otherwise deliverable to you pursuant to this Award Agreement having a Fair Market Value not in excess of the amount of the withholding obligation for Tax-Related Items determined by the Company after considering required withholding rates; to the extent permitted under the Plan, the Company may determine such amount by considering other applicable withholding rates up to the maximum rate applicable in your jurisdiction. For tax purposes, you are deemed to have been issued the full number of shares of Stock subject to the vested Award, notwithstanding that a number of the shares of Stock are held back solely for the purpose of paying the Tax-Related Items;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ii.withholding from proceeds of the sale of shares of Stock acquired upon vesting/settlement of the Award either through a voluntary sale or through a mandatory

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sale arranged by the Company (on your behalf pursuant to this authorization, without further consent);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iii.tender by you of a payment in cash or check to the Company of any amount of the Tax-Related Items;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;iv.withholding by the Company of any amount of the Tax-Related Items from the cash compensation owed to you by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;v.in the event this Award is settled in whole or in part in cash, withholding from the cash to be distributed to you in settlement of this Award; and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vi.any other method approved by the Company, to the extent permitted by applicable law and under the terms of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other withholding rates, including maximum withholding rates in your jurisdiction(s). In the event of over-withholding, you may receive a refund of any over-withheld amount in cash (with no entitlement to the equivalent in shares of Stock) or, if not refunded, you may seek a refund from the applicable tax authorities. In the event of under-withholding, you may be required to pay additional Tax-Related Items directly to the applicable tax authorities or to the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**You shall pay to the Company any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company shall have no obligation to issue or deliver shares of Stock, cash, or the proceeds of the sale of Stock until you have satisfied the obligations in connection with the Tax-Related Items as described in this Section 12.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)**Notwithstanding the foregoing, if you are subject to Section 16 of the Exchange Act, the Company will withhold using the method described under Section 12(b)(i) above unless the use of such withholding method is problematic under applicable laws or has materially adverse accounting consequences, in which case the Committee (as constituted to satisfy the requirements of Exchange Act Rule 16b-3) shall determine which of the other methods described in Section 12(b) above shall be used to satisfy the withholding obligation for Tax-Related Items.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.NATURE OF AWARD.** In accepting your Award, you acknowledge, understand and agree that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**the Plan is established voluntarily by the Company; it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan, in accordance with Section 14 of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**the grant of your Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of Awards, even if Awards have been granted in the past;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**all decisions with respect to future Awards or other grants, if any, will be at the sole discretion of the Company;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)**the Award and your participation in the Plan shall not be interpreted as forming an employment or service contract with the Company and shall not interfere with any ability of the Company to terminate your service relationship (if any);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)**you are voluntarily participating in the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)**the future value of the underlying shares of Stock subject to your Award is unknown, indeterminable and cannot be predicted with certainty;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)**no claim or entitlement to compensation or damages shall arise from forfeiture of the Award resulting from the termination of your Service with the Company for any reason whatsoever;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)**unless otherwise provided in the Plan or by the Company in its discretion, the Award and the benefits evidenced by this Award Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)**the Participating Company Group shall not be liable for any foreign exchange rate fluctuation between the United States Dollar and your local currency (if different) that may affect the value of the Award or of any amounts due to you pursuant to the settlement of the Award or the subsequent sale of any shares of Stock acquired upon settlement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.DELIVERY OF DOCUMENTS AND NOTICES.** Any document relating to this Award, participating in the Plan and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Award Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery, or upon deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, or with a nationally recognized courier designating express or expedited service with evidence of delivery, addressed to the other party at the address, including email address, if any, provided for you by the Company, or at such other address as such party may designate in writing from time to time to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**&nbsp;&nbsp;&nbsp;&nbsp;<u>Description of Electronic Delivery</u>*.* The Plan and the Award documents, which may include but do not necessarily include the Plan prospectus, the Grant Notice, this Award Agreement, Certificates, and U.S. financial reports of the Company, may be delivered to you electronically by the Company or a third party designated by the Company. Such means of delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via email or such other delivery determined at the Committee's discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)&nbsp;&nbsp;&nbsp;&nbsp;**<u>Consent to Electronic Delivery</u>. You acknowledge that you have read Section 14 and consent to the electronic delivery of the Plan and Award documents by the Company or a third party designated by the Company and agree to participate in the Plan through any online or electronic system established and maintained by the Company or a third party designated by the Company, as described in Section 14. You acknowledge that you may receive from the Company a paper copy of any documents delivered electronically at no cost if you contact the Company by telephone, through a postal service or electronic mail at equity@adobe.com. You further acknowledge that you will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, you understand that you must provide the Company or any designated third party with a paper copy of any documents delivered electronically if electronic delivery fails. Also, you understand that your consent may be

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revoked or changed, including any change in the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service or electronic mail at equity@adobe.com. Finally, you understand that you are not required to consent to electronic delivery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.DATA PRIVACY NOTICE. *The Company collects, uses, processes, shares, transfers, and stores (collectively, "processes") certain personal information about you, including, but not limited to, your name, home address, email address and telephone number, date of birth, social insurance number (to the extent permitted under applicable law), passport or other identification number, details regarding compensation, nationality, job title, any shares of Stock or directorships held in the Company, details of all Awards or any other entitlement to shares of Stock awarded, canceled, exercised, vested, unvested or outstanding in your favor (all "Data"), for the exclusive purpose of implementing, administering and managing the Plan. Adobe processes such Data in accordance with the Adobe Employee Privacy Policy.***

***The Data will be transferred to E\*TRADE Financial Corporate Services, Inc. and/or E\*TRADE Securities, LLC ("E\*TRADE"), or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Data may also be transferred to another brokerage firm, if you are permitted to and decide to transfer the shares of Stock received under the Plan to such other brokerage firm. You understand that the recipients of Data may be located in the United States or elsewhere, and that the recipients' country (e.g., the United States) may have different data privacy and data protection laws and protections than your country. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.***

***By accepting this Award, you explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your Data by and among the Company and E\*TRADE, any other company selected by the Company to assist it in administering the Plan and any brokerage firm to which you may transfer shares of Stock received under the Plan, for the purpose of implementing, administering and managing your participation in the Plan. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your compensation from or Service relationship with the Company will not be affected: however, refusing or withdrawing your consent will prohibit the Company would from granting Restricted Stock Units or other equity awards to you or administer or maintain such awards. Access to and management of previously awarded grants may also be impacted. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information about how Adobe processes the Data for the purposes described in this document, you may contact AskPrivacy@adobe.com*.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.APPLICATION OF SECTION 409A (ONLY APPLICABLE TO U.S. TAXPAYERS).** Absent a proper deferral election, it is intended that all of the benefits and payments provided under this Award satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under the "short-term deferral" rule set forth in Treasury Regulation Section 1.409A-1(b)(4), and this Award will be construed to the greatest extent possible as consistent with those provisions. To the extent not so exempt, this Award and the payments and benefits to be provided hereunder are intended to, and will be construed and implemented so as to, comply in all respects with the applicable provisions of Code Section 409A, and any provisions calling for payments on a termination of employment or other service shall be read to mean a "separation from service" (as defined under Treasury Regulation Section 1.409-1(h) without reference to alternative definitions thereunder). For purposes of Code Section 409A, each payment, installment and benefit under this Award is intended to constitute a separate payment for

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purposes of Treasury Regulation Section 1.409A-2(b)(2). Notwithstanding any other provision of this Award Agreement, to the extent that (a) one or more of the payments or benefits received or to be received by you upon "separation from service" pursuant to this Award would constitute deferred compensation subject to the requirements of Code Section 409A, and (b) you are a "specified employee" within the meaning of Code Section 409A at the time of separation from service, then to the extent delayed commencement of any portion of such payments or benefits is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Code Section 409A, such payments and benefits shall not be provided to you prior to the earliest of (i) the expiration of the six (6)-month period measured from the date of separation from service, (ii) the date of your death or (iii) such earlier date as permitted under Code Section 409A without the imposition of adverse taxation on you. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments and benefits deferred pursuant to this paragraph shall be paid in a lump sum to you, and any remaining payments and benefits due shall be paid as otherwise provided herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.BINDING AGREEMENT.** Subject to the limitation on the transferability of this Award contained herein, the Award Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.COMMITTEE AUTHORITY.** The Committee will have the power to interpret the Plan, the Grant Notice and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Restricted Stock Units have vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon you, the Company and all other interested persons. No member of the Committee will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.HEADINGS.** The headings of the Sections in this Award Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Award Agreement or to affect the meaning of this Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.MISCELLANEOUS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)**The rights and obligations of the Company under your Award shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company's successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)**You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)**You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award and fully understand all provisions of your Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.AGREEMENT SEVERABLE.** The provisions of this Award Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.GOVERNING PLAN DOCUMENT**. Your Award is subject to all the provisions of the Plan, which are hereby made a part of your Award, and is further subject to all interpretations,

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amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between one or more provisions of your Award Agreement and one or more provisions of the Plan, the provisions of the Plan shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.APPLICABLE LAW AND VENUE.** The Award and the provisions of this Award Agreement shall be governed by, and subject to, the laws of the State of California, United States of America. For purposes of any action, lawsuit or other proceedings brought to enforce this Award Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of Santa Clara County, California, or the federal courts of the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.NO ADVICE REGARDING GRANT.** The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Stock. You understand and agree that you should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**25.LANGUAGE.** You acknowledge that you are sufficiently proficient in the English language, or have consulted with an advisor who is sufficiently proficient in English, so as to allow you to understand the provisions of this Award Agreement and the Plan. If you received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different from the English version, the English version will control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**26.IMPOSITION OF OTHER REQUIREMENTS.** The Company reserves the right to impose other requirements on your participation in the Plan, on the Award and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Without limitation to the foregoing, if you relocate to another country, the Company may impose other requirements on your participation in the Plan, on the Award and on any shares of Stock acquired under the Plan, to the extent the Company determines that the application of such requirements is necessary or advisable for legal or administrative reasons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**27.WAIVER.** You acknowledge that a waiver by the Company of a breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any other provision of this Award Agreement, or of any subsequent breach by you or another Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**28.INSIDER TRADING RESTRICTIONS/MARKET ABUSE LAWS.** You acknowledge that you may be subject to insider-trading restrictions and/or market abuse laws in applicable jurisdictions, including the United States, which may affect your ability to acquire, sell or attempt to sell or otherwise dispose of shares of Stock or rights to shares of Stock (*e.g.*, the Award) during such times as you are considered to have "inside information" regarding the Company as defined in the laws or regulations in applicable jurisdictions, including the United States. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You should consult your personal legal advisor for further details regarding any insider trading restrictions and/or market-abuse laws in your country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.FOREIGN ASSET/ACCOUNT REPORTING REQUIREMENTS AND EXCHANGE CONTROLS.** Certain foreign asset and/or account reporting requirements and exchange controls may affect your ability to acquire or hold shares of Stock under the Plan or cash received from participating in the Plan (including from any dividends received or sale proceeds arising from the sale of shares of Stock) in a brokerage or bank account outside your country. You may be required to report such

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accounts, assets or transactions to the tax or other authorities in your country. You acknowledge that it is your responsibility to be compliant with such regulations and you should consult your personal legal advisor for any details.

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATIONS**

I, Shantanu Narayen, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this quarterly report on Form 10-Q of Adobe Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Dated: March 29, 2023 | /s/ SHANTANU NARAYEN |
| | Shantanu Narayen |
| | Chairman and Chief Executive Officer |

---

## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATIONS**

I, Daniel Durn, certify that:

&nbsp;&nbsp;&nbsp;&nbsp;1.I have reviewed this quarterly report on Form 10-Q of Adobe Inc.;

&nbsp;&nbsp;&nbsp;&nbsp;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

&nbsp;&nbsp;&nbsp;&nbsp;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

&nbsp;&nbsp;&nbsp;&nbsp;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

&nbsp;&nbsp;&nbsp;&nbsp;5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Dated: March 29, 2023 | /s/ DANIEL DURN |
| | Daniel Durn |
| | Executive Vice President and |
| | Chief Financial Officer |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATIONS PURSUANT TO**

**RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934**

**AND 18 U.S.C. SECTION 1350**

In connection with the Quarterly Report of Adobe Inc. (the "Registrant") on Form 10-Q for the quarterly period ended March 3, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Shantanu Narayen, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report, to which this certification is attached as Exhibit 32.1, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

---

| | |
|:---|:---|
| Dated: March 29, 2023 | /s/ SHANTANU NARAYEN |
| | Shantanu Narayen |
| | Chairman and Chief Executive Officer |

---

*A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.*

*This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.*

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATIONS PURSUANT TO**

**RULE 13a-14(b) OF THE SECURITIES EXCHANGE ACT OF 1934**

**AND 18 U.S.C. SECTION 1350**

In connection with the Quarterly Report of Adobe Inc. (the "Registrant") on Form 10-Q for the quarterly period ended March 3, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel Durn, certify, in accordance with Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that to the best of my knowledge:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The Report, to which this certification is attached as Exhibit 32.2, fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

---

| | |
|:---|:---|
| Dated: March 29, 2023 | /s/ DANIEL DURN |
| | Daniel Durn |
| | Executive Vice President and |
| | Chief Financial Officer |

---

*A signed original of this written statement required by Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.*

*This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.*

### Attached PDF Documents

**Attachment 1:** `adbe10qq123unofficialpdfa.pdf`

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 3, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-15175

# ADOBE INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

77-0019522

(I.R.S. Employer
Identification No.)

345 Park Avenue, San Jose, California 95110-2704

(Address of principal executive offices and zip code)

(408) 536-6000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

| Title of each class | Trading Symbol | Name of each exchange on which registered |
| --- | --- | --- |
| Common Stock, $0.0001 par value per share | ADBE | NASDAQ |

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of March 24, 2023, 458.7 million shares of the registrant’s common stock, $0.0001 par value per share, were issued and outstanding.

# **ADOBE INC.**
**FORM 10-Q**

# **TABLE OF CONTENTS**

Page No.

# **PART I-FINANCIAL INFORMATION**

| Item 1. | Condensed Consolidated Financial Statements: | 3 |
| --- | --- | --- |
|  | Condensed Consolidated Balance Sheets March 3, 2023 and December 2, 2022 | 3 |
|  | Condensed Consolidated Statements of Income Three Months Ended March 3, 2023 and March 4, 2022 | 4 |
|  | Condensed Consolidated Statements of Comprehensive Income Three Months Ended March 3, 2023 and March 4, 2022 | 5 |
|  | Condensed Consolidated Statements of Stockholders' Equity Three Months Ended March 3, 2023 and March 4, 2022 | 6 |
|  | Condensed Consolidated Statements of Cash Flows Three Months Ended March 3, 2023 and March 4, 2022 | 7 |
|  | Notes to Condensed Consolidated Financial Statements | 8 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 36 |
| Item 4. | Controls and Procedures | 36 |

# **PART II-OTHER INFORMATION**

| Item 1. | Legal Proceedings | 37 |
| --- | --- | --- |
| Item 1A. | Risk Factors | 37 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 51 |
| Item 4. | Mine Safety Disclosures | 51 |
| Item 5. | Other Information | 51 |
| Item 6. | Exhibits | 52 |
|  | Signature | 54 |
|  | Summary of Trademarks | 55 |

2

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# **PART I-FINANCIAL INFORMATION**

# **ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

# **ADOBE INC.**

# **CONDENSED CONSOLIDATED BALANCE SHEETS**

(In millions, except par value)

|  | March 3, 2023 (Unaudited) | December 2, 2022 (*) |
| --- | --- | --- |
| ASSETS |  |  |
| Current assets: |  |  |
| Cash and cash equivalents | $4,072 | $4,236 |
| Short-term investments | 1,581 | 1,860 |
| Trade receivables, net of allowances for doubtful accounts of $17 and $23, respectively | 1,801 | 2,065 |
| Prepaid expenses and other current assets | 888 | 835 |
| Total current assets | 8,342 | 8,996 |
| Property and equipment, net | 1,967 | 1,908 |
| Operating lease right-of-use assets, net | 402 | 407 |
| Goodwill | 12,792 | 12,787 |
| Other intangibles, net | 1,354 | 1,449 |
| Deferred income taxes | 826 | 777 |
| Other assets | 984 | 841 |
| Total assets | $26,667 | $27,165 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
| Current liabilities: |  |  |
| Trade payables | $308 | $379 |
| Accrued expenses | 1,469 | 1,790 |
| Debt | - | 500 |
| Deferred revenue | 5,357 | 5,297 |
| Income taxes payable | 222 | 75 |
| Operating lease liabilities | 81 | 87 |
| Total current liabilities | 7,437 | 8,128 |
| Long-term liabilities: |  |  |
| Debt | 3,630 | 3,629 |
| Deferred revenue | 120 | 117 |
| Income taxes payable | 536 | 530 |
| Operating lease liabilities | 415 | 417 |
| Other liabilities | 323 | 293 |
| Total liabilities | 12,461 | 13,114 |
| 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; 459 and 462 shares outstanding, respectively | - | - |
| Additional paid-in-capital | 10,284 | 9,868 |
| Retained earnings | 29,435 | 28,319 |
| Accumulated other comprehensive income (loss) | (307) | (293) |
| Treasury stock, at cost (142 and 139 shares, respectively) | (25,206) | (23,843) |
| Total stockholders' equity | 14,206 | 14,051 |
| Total liabilities and stockholders' equity | $26,667 | $27,165 |

(*) The condensed consolidated balance sheet as of December 2, 2022 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.*

3

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# **ADOBE INC.**  
 **CONDENSED CONSOLIDATED STATEMENTS OF INCOME**  
 (In millions, except per share data)  
 (Unaudited)

|  | Three Months Ended |  |
| --- | --- | --- |
|  | March 3, 2023 | March 4, 2022 |
| Revenue: |  |  |
| Subscription | $4,373 | $3,958 |
| Product | 120 | 145 |
| Services and other | 162 | 159 |
| Total revenue | 4,655 | 4,262 |
| Cost of revenue: |  |  |
| Subscription | 434 | 393 |
| Product | 8 | 10 |
| Services and other | 126 | 109 |
| Total cost of revenue | 568 | 512 |
| Gross profit | 4,087 | 3,750 |
| Operating expenses: |  |  |
| Research and development | 827 | 701 |
| Sales and marketing | 1,301 | 1,158 |
| General and administrative | 331 | 269 |
| Amortization of intangibles | 42 | 42 |
| Total operating expenses | 2,501 | 2,170 |
| Operating income | 1,586 | 1,580 |
| Non-operating income (expense): |  |  |
| Interest expense | (32) | (28) |
| Investment gains (losses), net | 1 | (9) |
| Other income (expense), net | 43 | - |
| Total non-operating income (expense), net | 12 | (37) |
| Income before income taxes | 1,598 | 1,543 |
| Provision for income taxes | 351 | 277 |
| Net income | $1,247 | $1,266 |
| Basic net income per share | $2.72 | $2.68 |
| Shares used to compute basic net income per share | 459 | 473 |
| Diluted net income per share | $2.71 | $2.66 |
| Shares used to compute diluted net income per share | 460 | 475 |

*See accompanying notes to condensed consolidated financial statements.*

4

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# ADOBE INC.

# CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

|  | Three Months Ended |  |
| --- | --- | --- |
|  | March 3, 2023 | March 4, 2022 |
|  | Increase/(Decrease) |  |
| Net income | $1,247 | $1,266 |
| Other comprehensive income (loss), net of taxes: |  |  |
| Available-for-sale securities: |  |  |
| Unrealized gains / losses on available-for-sale securities | 7 | (14) |
| Derivatives designated as hedging instruments: |  |  |
| Unrealized gains / losses on derivative instruments | (9) | 23 |
| Reclassification adjustment for realized gains / losses on derivative instruments | (16) | (15) |
| Net increase (decrease) from derivatives designated as hedging instruments | (25) | 8 |
| Foreign currency translation adjustments | 4 | (34) |
| Other comprehensive income (loss), net of taxes | (14) | (40) |
| Total comprehensive income, net of taxes | $1,233 | $1,226 |

*See accompanying notes to condensed consolidated financial statements.*

5

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# ADOBE INC.

# CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In millions)

(Unaudited)

Three Months Ended March 3, 2023

|  | Common Stock |  | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Amount |  |  |  | Shares | Amount |  |
| Balances at December 2, 2022 | 601 | $ - | $9,868 | $28,319 | $(293) | (139) | $(23,843) | $14,051 |
| Net income | - | - | - | 1,247 | - | - | - | 1,247 |
| Other comprehensive income (loss), net of taxes | - | - | - | - | (14) | - | - | (14) |
| Re-issuance of treasury stock under stock compensation plans | - | - | - | (131) | - | 2 | 36 | (95) |
| Repurchases of common stock | - | - | - | - | - | (5) | (1,400) | (1,400) |
| Stock-based compensation | - | - | 416 | - | - | - | - | 416 |
| Value of shares in deferred compensation plan | - | - | - | - | - | - | 1 | 1 |
| Balances at March 3, 2023 | 601 | $ - | $10,284 | $29,435 | $(307) | (142) | $(25,206) | $14,206 |

Three Months Ended March 4, 2022

|  | Common Stock |  | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock |  | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Amount |  |  |  | Shares | Amount |  |
| Balances at December 3, 2021 | 601 | $ - | $8,428 | $23,905 | $(137) | (126) | $(17,399) | $14,797 |
| Net income | - | - | - | 1,266 | - | - | - | 1,266 |
| Other comprehensive income (loss), net of taxes | - | - | - | - | (40) | - | - | (40) |
| Re-issuance of treasury stock under stock compensation plans | - | - | - | (210) | - | 1 | 35 | (175) |
| Repurchases of common stock | - | - | - | - | - | (4) | (2,400) | (2,400) |
| Stock-based compensation | - | - | 322 | - | - | - | - | 322 |
| Value of shares in deferred compensation plan | - | - | - | - | - | - | 5 | 5 |
| Balances at March 4, 2022 | 601 | $ - | $8,750 | $24,961 | $(177) | (129) | $(19,759) | $13,775 |

See accompanying notes to condensed consolidated financial statements.

6

Table of Contents

# ADOBE INC.

# CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

|  | Three Months Ended |  |
| --- | --- | --- |
|  | March 3, 2023 | March 4, 2022 |
| Cash flows from operating activities: |  |  |
| Net income | $1,247 | $1,266 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| Depreciation, amortization and accretion | 212 | 213 |
| Stock-based compensation | 416 | 322 |
| Reduction of operating lease right-of-use assets | 21 | 22 |
| Deferred income taxes | (49) | 129 |
| Unrealized losses (gains) on investments, net | 3 | 17 |
| Other non-cash items | (5) | 2 |
| Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: |  |  |
| Trade receivables, net | 269 | 191 |
| Prepaid expenses and other assets | (258) | (187) |
| Trade payables | (55) | 6 |
| Accrued expenses and other liabilities | (323) | (389) |
| Income taxes payable | 152 | 36 |
| Deferred revenue | 63 | 141 |
| Net cash provided by operating activities | 1,693 | 1,769 |
| Cash flows from investing activities: |  |  |
| Purchases of short-term investments | - | (288) |
| Maturities of short-term investments | 254 | 208 |
| Proceeds from sales of short-term investments | 33 | 54 |
| Acquisitions, net of cash acquired | - | (106) |
| Purchases of property and equipment | (101) | (100) |
| Purchases of long-term investments, intangibles and other assets | (30) | (28) |
| Net cash provided by (used for) investing activities | 156 | (260) |
| Cash flows from financing activities: |  |  |
| Repurchases of common stock | (1,400) | (2,400) |
| Proceeds from re-issuance of treasury stock | 69 | 91 |
| Taxes paid related to net share settlement of equity awards | (164) | (266) |
| Repayment of debt | (500) | - |
| Other financing activities, net | (19) | (29) |
| Net cash used for financing activities | (2,014) | (2,604) |
| Effect of foreign currency exchange rates on cash and cash equivalents | 1 | (10) |
| Net change in cash and cash equivalents | (164) | (1,105) |
| Cash and cash equivalents at beginning of period | 4,236 | 3,844 |
| Cash and cash equivalents at end of period | $4,072 | $2,739 |
| Supplemental disclosures: |  |  |
| Cash paid for income taxes, net of refunds | $214 | $59 |
| Cash paid for interest | $55 | $50 |

*See accompanying notes to condensed consolidated financial statements.*

7

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# 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 accounting principles generally accepted in the United States of America (“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 December 2, 2022 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.

# *Adopted Accounting Guidance and Accounting Pronouncements Not Yet Effective*

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the three months ended March 3, 2023 that are of significance or potential significance to us.

# NOTE 2. REVENUE

# *Segment Information*

Our segment results for the three months ended March 3, 2023 and March 4, 2022 were as follows:

| (dollars in millions) | Digital Media | Digital Experience | Publishing and Advertising | Total |
| --- | --- | --- | --- | --- |
| Three months ended March 3, 2023 |  |  |  |  |
| Revenue | $3,395 | $1,176 | $84 | $4,655 |
| Cost of revenue | 142 | 404 | 22 | 568 |
| Gross profit | $3,253 | $772 | $62 | $4,087 |
| Gross profit as a percentage of revenue | 96% | 66% | 74% | 88% |
| Three months ended March 4, 2022 |  |  |  |  |
| Revenue | $3,110 | $1,057 | $95 | $4,262 |
| Cost of revenue | 134 | 352 | 26 | 512 |
| Gross profit | $2,976 | $705 | $69 | $3,750 |
| Gross profit as a percentage of revenue | 96% | 67% | 73% | 88% |

8

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# ADOBE INC.

# NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

# (Unaudited)

Revenue by geographic area for the three months ended March 3, 2023 and March 4, 2022 were as follows:

| (in millions) | 2023 | 2022 |
| --- | --- | --- |
| Americas | $2,779 | $2,446 |
| EMEA | 1,173 | 1,136 |
| APAC | 703 | 680 |
| Total | $4,655 | $4,262 |

Revenue by major offerings in our Digital Media reportable segment for the three months ended March 3, 2023 and March 4, 2022 were as follows:

| (in millions) | 2023 | 2022 |
| --- | --- | --- |
| Creative Cloud | $2,761 | $2,548 |
| Document Cloud | 634 | 562 |
| Total Digital Media revenue | $3,395 | $3,110 |

Subscription revenue by segment for the three months ended March 3, 2023 and March 4, 2022 were as follows:

| (in millions) | 2023 | 2022 |
| --- | --- | --- |
| Digital Media | $3,301 | $2,995 |
| Digital Experience | 1,042 | 932 |
| Publishing and Advertising | 30 | 31 |
| Total subscription revenue | $4,373 | $3,958 |

# *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 typically related to license revenue or services which are delivered prior to invoicing. As of March 3, 2023, the balance of trade receivables, net of allowances for doubtful accounts, was $1.80 billion, inclusive of unbilled receivables of $101 million. As of December 2, 2022, the balance of trade receivables, net of allowances for doubtful accounts, was $2.07 billion, inclusive of unbilled receivables of $93 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 $17 million and $23 million as of March 3, 2023 and December 2, 2022, 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 three months ended March 3, 2023. Contract assets were $82 million and $97 million as of March 3, 2023 and December 2, 2022, 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 March 3, 2023, the balance of deferred revenue was $5.48 billion, which includes $79 million of refundable customer deposits. Arrangements with some of our enterprise customers with non-cancellable and non-refundable committed funds provide options to either renew monthly on-premise term-based licenses or use some or all funds to purchase other Adobe products or services. Non-

9

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# **ADOBE INC.**

# **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# **(Unaudited)**

cancellable and non-refundable committed funds related to these agreements comprised approximately 5% of the total deferred revenue.

As of December 2, 2022, the balance of deferred revenue was $5.41 billion. During the three months ended March 3, 2023, approximately $2.31 billion of revenue was recognized that was included in the balance of deferred revenue as of December 2, 2022.

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 March 3, 2023, remaining performance obligations were approximately $15.21 billion. Non-cancellable and non-refundable funds related to some of our enterprise customer agreements referred to in the paragraph above comprised approximately 5% of the total remaining performance obligations. Approximately 73% 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 $656 million and $629 million as of March 3, 2023 and December 2, 2022, respectively.

We record refund liabilities for amounts that may be subject to future refunds, which include sales returns reserves and customer rebates and credits. Refund liabilities are included in accrued expenses on the condensed consolidated balance sheets. Refund liabilities were $103 million and $106 million as of March 3, 2023 and December 2, 2022, respectively.

# **NOTE 3. ACQUISITIONS**

# *Figma*

On September 15, 2022, we entered into a definitive agreement under which we intend to acquire Figma, Inc. (“Figma”) for approximately $20 billion, comprised of approximately half cash and half stock, subject to customary purchase price adjustments. Approximately 6 million additional restricted stock units will be granted to Figma’s Chief Executive Officer and employees that will vest over four years subsequent to closing. The transaction is subject to regulatory approvals and customary closing conditions, and is expected to close in 2023. We will be required to pay Figma a reverse termination fee of $1 billion if the transaction fails to receive regulatory clearance, assuming all other closing conditions have been satisfied or waived, or if it fails to close within 18 months from September 15, 2022.

Figma is a privately held company that provides a web-first collaborative product design platform. Following the closing, we intend to integrate Figma into our Digital Media reportable segment for financial reporting purposes.

# **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, 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.

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# ADOBE INC.

# NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

# (Unaudited)

Cash, cash equivalents and short-term investments consisted of the following as of March 3, 2023:

| (in millions) | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value |
| --- | --- | --- | --- | --- |
| Current assets: |  |  |  |  |
| Cash | $607 | $ - | $ - | $607 |
| Cash equivalents: |  |  |  |  |
| Money market funds | 3,440 | - | - | 3,440 |
| Time deposits | 25 | - | - | 25 |
| Total cash equivalents | 3,465 | - | - | 3,465 |
| Total cash and cash equivalents | 4,072 | - | - | 4,072 |
| Short-term fixed income securities: |  |  |  |  |
| Asset-backed securities | 65 | - | (1) | 64 |
| Corporate debt securities | 1,073 | - | (17) | 1,056 |
| Municipal securities | 19 | - | - | 19 |
| U.S. agency securities | 36 | - | (1) | 35 |
| U.S. Treasury securities | 422 | - | (15) | 407 |
| Total short-term investments | 1,615 | - | (34) | 1,581 |
| Total cash, cash equivalents and short-term investments | $5,687 | $ - | $(34) | $5,653 |

Cash, cash equivalents and short-term investments consisted of the following as of December 2, 2022:

| (in millions) | Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value |
| --- | --- | --- | --- | --- |
| Current assets: |  |  |  |  |
| Cash | $657 | $ - | $ - | $657 |
| Cash equivalents: |  |  |  |  |
| Corporate debt securities | 39 | - | - | 39 |
| Money market funds | 3,479 | - | - | 3,479 |
| Time deposits | 61 | - | - | 61 |
| Total cash equivalents | 3,579 | - | - | 3,579 |
| Total cash and cash equivalents | 4,236 | - | - | 4,236 |
| Short-term fixed income securities: |  |  |  |  |
| Asset-backed securities | 98 | - | (1) | 97 |
| Corporate debt securities | 1,290 | - | (24) | 1,266 |
| Foreign government securities | 5 | - | - | 5 |
| Municipal securities | 24 | - | - | 24 |
| U.S. agency securities | 34 | - | - | 34 |
| U.S. Treasury securities | 450 | - | (16) | 434 |
| Total short-term investments | 1,901 | - | (41) | 1,860 |
| Total cash, cash equivalents and short-term investments | $6,137 | $ - | $(41) | $6,096 |

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

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# (Unaudited)

The following table summarizes the estimated fair value of short-term fixed income debt securities classified as short-term investments based on stated effective maturities as of March 3, 2023:

| (in millions) | Estimated Fair Value |
| --- | --- |
| Due within one year | $906 |
| Due between one and two years | 528 |
| Due between two and three years | 145 |
| Due after three years | 2 |
| Total | $1,581 |

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 three months ended March 3, 2023 and March 4, 2022, 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 March 3, 2023 was determined using the following inputs:

| (in millions) | Fair Value Measurements at Reporting Date Using |  |  |  |
| --- | --- | --- | --- | --- |
|  | Total | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs |
|  |  | (Level 1) | (Level 2) | (Level 3) |
| Assets: |  |  |  |  |
| Cash equivalents: |  |  |  |  |
| Money market funds | $3,440 | $3,440 | $ - | $ - |
| Time deposits | 25 | 25 | - | - |
| Short-term investments: |  |  |  |  |
| Asset-backed securities | 64 | - | 64 | - |
| Corporate debt securities | 1,056 | - | 1,056 | - |
| Municipal securities | 19 | - | 19 | - |
| U.S. agency securities | 35 | - | 35 | - |
| U.S. Treasury securities | 407 | - | 407 | - |
| Prepaid expenses and other current assets: |  |  |  |  |
| Foreign currency derivatives | 46 | - | 46 | - |
| Other assets: |  |  |  |  |
| Deferred compensation plan assets | 186 | 186 | - | - |
| Total assets | $5,278 | $3,651 | $1,627 | $ - |
| Liabilities: |  |  |  |  |
| Accrued expenses: |  |  |  |  |
| Foreign currency derivatives | $7 | $ - | $7 | $ - |

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The fair value of our financial assets and liabilities at December 2, 2022 was determined using the following inputs:

(in millions)

|  | Fair Value Measurements at Reporting Date Using |  |  |  |
| --- | --- | --- | --- | --- |
|  | Total | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs |
|  |  | (Level 1) | (Level 2) | (Level 3) |
| Assets: |  |  |  |  |
| Cash equivalents: |  |  |  |  |
| Corporate debt securities | $39 | $ - | $39 | $ - |
| Money market funds | 3,479 | 3,479 | - | - |
| Time deposits | 61 | 61 | - | - |
| Short-term investments: |  |  |  |  |
| Asset-backed securities | 97 | - | 97 | - |
| Corporate debt securities | 1,266 | - | 1,266 | - |
| Foreign government securities | 5 | - | 5 | - |
| Municipal securities | 24 | - | 24 | - |
| U.S. agency securities | 34 | - | 34 | - |
| U.S. Treasury securities | 434 | - | 434 | - |
| Prepaid expenses and other current assets: |  |  |  |  |
| Foreign currency derivatives | 51 | - | 51 | - |
| Other assets: |  |  |  |  |
| Deferred compensation plan assets | 160 | 160 | - | - |
| Total assets | $5,650 | $3,700 | $1,950 | $ - |
| Liabilities: |  |  |  |  |
| Accrued expenses: |  |  |  |  |
| Foreign currency derivatives | $15 | $ - | $15 | $ - |

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 with a weighted average credit rating of AA-. 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 classify 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 derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date.

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

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# *Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis*

The fair value of our senior notes was $3.33 billion as of March 3, 2023, 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.

# *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 option contracts and forward 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 12 months.

In June 2019, we entered into Treasury lock agreements with large financial institutions which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $1 billion of our future debt issuance. These derivative instruments hedged the impact of changes in the benchmark interest rate to future interest payments and were settled upon debt issuance in the first quarter of fiscal 2020. We incurred a loss related to the settlement of the instruments which is amortized to interest expense over the term of our debt due February 1, 2030. *See Note 14 for further details regarding our debt.*

As of March 3, 2023, we had net derivative gains on our foreign exchange option contracts expected to be recognized within the next 18 months, of which $15 million of gains are expected to be recognized into revenue within the next 12 months. In addition, we had net derivative losses on our foreign exchange forward contracts, of which $1 million of losses are expected to be recognized into operating expenses within the next 12 months, and net derivative losses on our Treasury lock agreements, of which $5 million is expected to be recognized into interest expense within the next 12 months.

# *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.

Fair value asset derivatives are included in prepaid expenses and other current assets and fair value liability derivatives are included in accrued expenses on our condensed consolidated balance sheets. The fair value of derivative instruments as of March 3, 2023 and December 2, 2022 were as follows:

(in millions)

|  | 2023 |  | 2022 |  |
| --- | --- | --- | --- | --- |
|  | Fair Value Asset Derivatives | Fair Value Liability Derivatives | Fair Value Asset Derivatives | Fair Value Liability Derivatives |
| Derivatives designated as hedging instruments: |  |  |  |  |
| Foreign exchange option contracts | $41 | $ - | $36 | $ - |
| Foreign exchange forward contracts | - | 1 | - | 7 |
| Derivatives not designated as hedging instruments: |  |  |  |  |
| Foreign exchange forward contracts | 5 | 6 | 15 | 8 |
| Total derivatives | $46 | $7 | $51 | $15 |

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# (Unaudited)

Gains and losses on derivative instruments, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three months ended March 3, 2023 and March 4, 2022 were primarily associated with our foreign exchange option contracts. For the three months ended March 3, 2023 and March 4, 2022, we recognized $13 million of net losses and $23 million of net gains, respectively, in our condensed consolidated statements of comprehensive income from our foreign exchange option contracts.

The effects of derivative instruments on our condensed consolidated statements of income for the three months ended March 3, 2023 and March 4, 2022 were primarily associated with foreign exchange option contracts. For the three months ended March 3, 2023 and March 4, 2022, we reclassified $18 million and $16 million of net gains, respectively, from accumulated other comprehensive income into revenue resulting from our foreign exchange option contracts.

# NOTE 7. GOODWILL AND OTHER INTANGIBLES

Goodwill as of March 3, 2023 and December 2, 2022 was $12.79 billion for both periods presented.

Other intangible assets subject to amortization as of March 3, 2023 and December 2, 2022 were as follows:

| (in millions) | 2023 |  |  | 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net |
| Customer contracts and relationships | $1,203 | $(526) | $677 | $1,204 | $(495) | $709 |
| Purchased technology | 1,060 | (583) | 477 | 1,060 | (530) | 530 |
| Trademarks | 376 | (183) | 193 | 375 | (172) | 203 |
| Other | 20 | (13) | 7 | 61 | (54) | 7 |
| Other intangibles, net | $2,659 | $(1,305) | $1,354 | $2,700 | $(1,251) | $1,449 |

Amortization expense related to other intangibles was $96 million and $101 million for the three months ended March 3, 2023 and March 4, 2022, respectively. Of these amounts, $54 million and $59 million were included in cost of revenue for the three months ended March 3, 2023 and March 4, 2022, respectively.

As of March 3, 2023, the estimated aggregate amortization expense in future periods was as follows:

| (in millions) | Other Intangibles (1) |
| --- | --- |
| Fiscal Year |  |
| Remainder of 2023 | $281 |
| 2024 | 331 |
| 2025 | 295 |
| 2026 | 142 |
| 2027 | 104 |
| Thereafter | 182 |
| Total expected amortization expense | $1,335 |

$^{(1)}$ Excludes capitalized in-process research and development which is considered indefinite lived until the completion or abandonment of the associated research and development efforts.

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# NOTE 8. ACCRUED EXPENSES

Accrued expenses as of March 3, 2023 and December 2, 2022 consisted of the following:

| (in millions) | 2023 | 2022 |
| --- | --- | --- |
| Accrued compensation and benefits | $525 | $485 |
| Accrued bonuses | 158 | 489 |
| Accrued corporate marketing | 134 | 154 |
| Taxes payable | 111 | 117 |
| Refund liabilities | 103 | 106 |
| Other | 438 | 439 |
| Accrued expenses | $1,469 | $1,790 |

Other primarily includes general corporate accruals for local and regional expenses, derivative collateral liabilities, accrued hosting fees and royalties payable.

# NOTE 9. STOCK-BASED COMPENSATION

# *Restricted Stock Units*

Restricted stock unit activity for the three months ended March 3, 2023 was as follows:

|  | Number of Shares (in millions) | Weighted Average Grant Date Fair Value | Aggregate Fair Value (1) (in millions) |
| --- | --- | --- | --- |
| Beginning outstanding balance | 7.4 | $449.94 |  |
| Awarded | 4.1 | $360.54 |  |
| Released | (1.2) | $445.73 |  |
| Forfeited | (0.1) | $461.85 |  |
| Ending outstanding balance | 10.2 | $413.87 | $3,506 |
| Expected to vest | 9.0 | $414.72 | $3,081 |

$^{(1)}$ The aggregate fair value is calculated using the closing stock price as of March 3, 2023 of $344.04.

The total fair value of restricted stock units vested during the three months ended March 3, 2023 was $423 million.

# *Performance Shares*

In the first quarter of fiscal 2023, the Executive Compensation Committee of our Board of Directors (the “ECC”) approved the 2023 Performance Share Program, the terms of which are similar to the 2022 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 December 2, 2022.

As of March 3, 2023, the shares awarded under our 2023, 2022 and 2021 Performance Share Programs remained outstanding and were yet to be earned. For information regarding our outstanding 2022 and 2021 Performance Share Programs, including the terms, see “Note 12. Stock-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended December 2, 2022.

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Performance share activity for the three months ended March 3, 2023 was as follows:

|  | Number of Shares (in millions) | Weighted Average Grant Date Fair Value | Aggregate Fair Value (1) (in millions) |
| --- | --- | --- | --- |
| Beginning outstanding balance | 0.4 | $495.23 |  |
| Awarded | 0.2 | $437.52 |  |
| Released | (0.1) | $498.74 |  |
| Forfeited | - | $497.45 |  |
| Ending outstanding balance | 0.5 | $466.29 | $169 |
| Expected to vest | 0.4 | $466.54 | $143 |

$^{(1)}$ The aggregate fair value is calculated using the closing stock price as of March 3, 2023 of $344.04.

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 three months ended March 3, 2023 resulted from 63% achievement of target for the 2020 Performance Share Program, as certified by the ECC in the first quarter of fiscal 2023.

The total fair value of performance shares vested during the three months ended March 3, 2023 was $39 million.

# *Employee Stock Purchase Plan Shares*

Employees purchased 0.2 million shares at an average price of $286.05 and 0.2 million shares at an average price of $393.30 for the three months ended March 3, 2023 and March 4, 2022, respectively. The intrinsic value of shares purchased during the three months ended March 3, 2023 and March 4, 2022 was $12 million and $40 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 March 3, 2023, there was $3.85 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards and purchase rights which will be recognized over a weighted average period of 2.68 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 months ended March 3, 2023 and March 4, 2022 were as follows:

| (in millions) | 2023 | 2022 |
| --- | --- | --- |
| Cost of revenue | $29 | $21 |
| Research and development | 209 | 161 |
| Sales and marketing | 122 | 93 |
| General and administrative | 56 | 47 |
| Total | $416 | $322 |

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# 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) | December 2, 2022 | Increase / Decrease | Reclassification Adjustments | March 3, 2023 |
| --- | --- | --- | --- | --- |
| Net unrealized gains / losses on available-for-sale securities | $(41) | $7 | $ - (1) | $(34) |
| Net unrealized gains / losses on derivative instruments designated as hedging instruments | 17 | (9) | (16) (2) | (8) |
| Cumulative foreign currency translation adjustments | (269) | 4 | - | (265) |
| Total accumulated other comprehensive income (loss), net of taxes | $(293) | $2 | $(16) | $(307) |

$^{(1)}$ Reclassification adjustments for gains / losses on available-for-sale securities are classified in other income (expense), net.

$^{(2)}$ Reclassification adjustments for gains / losses on foreign currency hedges are classified in revenue or operating expenses, depending on the nature of the underlying transaction, 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 months ended March 3, 2023 and March 4, 2022 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 December 2020, our Board of Directors granted authority to repurchase up to $15 billion in our common stock through the end of fiscal 2024.

During the three months ended March 3, 2023 and March 4, 2022, we entered into accelerated share repurchase agreements (“ASRs”) with large financial institutions whereupon we provided them with prepayments of $1.4 billion and $2.4 billion, respectively. Under the terms of our ASRs, the financial institutions agree to deliver a portion of shares to us at contract inception and the remaining shares at settlement. The total number of shares delivered and average purchase price paid per share are determined upon settlement based on the Volume Weighted Average Price (“VWAP”) over the term of the ASR, less an agreed upon discount. At settlement, the financial institution may be required to deliver additional shares of our common stock to us or, under certain circumstances, we may be required to make a cash payment or deliver shares of our common stock to the financial institution, with the method of settlement at our election.

We also enter into structured stock repurchase agreements in which financial institutions agree to deliver shares to us at monthly intervals during the respective contract terms, and the number of shares delivered each month are determined based on the total notional amount of the contracts, the number of trading days in the intervals and the VWAP during the intervals, less an agreed upon discount.

During the three months ended March 3, 2023, we repurchased a total of 5.0 million shares, including approximately 1.8 million shares at an average price of $330.52 through a structured repurchase agreement entered into during fiscal 2022, as well as 3.2 million shares from the initial delivery of the ASR entered into during the three months ended March 3, 2023. During the three months ended March 4, 2022, we repurchased a total of 3.8 million shares, including approximately 0.6 million shares at an average price of $635.15 through a structured repurchase agreement entered into during fiscal 2021, as well as 3.2 million shares from the initial delivery of the ASR entered into during the three months ended March 4, 2022.

For the three months ended March 3, 2023, the prepayments were 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 March 3, 2023 were excluded from the computation of net income per share. As of March 3, 2023, a portion of the $1.4 billion prepayment under our outstanding ASR was evaluated as an unsettled forward contract indexed to our own

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stock, classified within stockholders’ equity. Subsequent to March 3, 2023, the outstanding ASR was settled which resulted in total repurchases of 4.0 million shares at an average purchase price of $348.46.

Subsequent to March 3, 2023, as part of the December 2020 stock repurchase authority, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1 billion. Upon completion of the $1 billion stock repurchase agreement, $4.15 billion remains under our December 2020 authority.

# **NOTE 12. NET INCOME PER SHARE**

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 3, 2023 and March 4, 2022:

| (in millions, except per share data) | 2023 | 2022 |
| --- | --- | --- |
| Net income | $1,247 | $1,266 |
| Shares used to compute basic net income per share | 459.0 | 472.6 |
| Dilutive potential common shares from stock plans and programs | 0.5 | 2.8 |
| Shares used to compute diluted net income per share | 459.5 | 475.4 |
| Basic net income per share | $2.72 | $2.68 |
| Diluted net income per share | $2.71 | $2.66 |
| Anti-dilutive potential common shares | 6.2 | 0.9 |

# **NOTE 13. COMMITMENTS AND CONTINGENCIES**

# *Indemnifications*

In the ordinary course of business, we provide indemnifications of varying scope to 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*

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.

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In addition to intellectual property disputes, we are subject to legal proceedings, claims, including claims relating to commercial, employment and other matters, and investigations, including government investigations. 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.

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. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor 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.

In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-claims; however, it is possible that our consolidated financial position, results of operations or cash flows could be negatively affected in any particular period by the resolution of one or more of these counter-claims.

# NOTE 14. DEBT

The carrying value of our borrowings as of March 3, 2023 and December 2, 2022 were as follows:

| (dollars in millions) | Issuance Date | Due Date | Effective Interest Rate | 2023 | 2022 |
| --- | --- | --- | --- | --- | --- |
| 1.70% 2023 Notes | February 2020 | February 2023 | 1.92% | $ - | $500 |
| 1.90% 2025 Notes | February 2020 | February 2025 | 2.07% | 500 | 500 |
| 3.25% 2025 Notes | January 2015 | February 2025 | 3.67% | 1,000 | 1,000 |
| 2.15% 2027 Notes | February 2020 | February 2027 | 2.26% | 850 | 850 |
| 2.30% 2030 Notes | February 2020 | February 2030 | 2.69% | 1,300 | 1,300 |
| Total debt outstanding, at par |  |  |  | $3,650 | $4,150 |
| Current portion of debt, at par |  |  |  | - | (500) |
| Unamortized discount and debt issuance costs |  |  |  | (20) | (21) |
| Carrying value of long-term debt |  |  |  | $3,630 | $3,629 |
| Carrying value of current debt, net of unamortized discount and debt issuance costs |  |  |  | $ - | $500 |

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# *Senior Notes*

In January 2015, we issued $1 billion of senior notes due February 1, 2025. The related discount and issuance costs are amortized to interest expense over the term of the notes using the effective interest method. Interest is payable semi-annually, in arrears, on February 1 and August 1.

In February 2020, we issued $500 million of senior notes due February 1, 2023, $500 million of senior notes due February 1, 2025, $850 million of senior notes due February 1, 2027 and $1.30 billion of senior notes due February 1, 2030. Our total proceeds of approximately $3.14 billion, net of issuance discount, were used for general corporate purposes including repayment of debt instruments due in fiscal 2020. The related discount and issuance costs are amortized to interest expense over the respective terms of the notes using the effective interest method. Interest is payable semi-annually, in arrears, on February 1 and August 1.

During the first quarter of fiscal 2023, the $500 million of senior notes due February 1, 2023 became due and were repaid.

Our senior notes rank equally with our other unsecured and unsubordinated indebtedness. We may redeem the notes at any time, subject to a make-whole premium. In addition, 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. The notes do not contain financial covenants but include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances.

# *Term Loan Credit Agreement*

In January 2023, we entered into a delayed draw term loan credit agreement (the “Term Loan Credit Agreement”), providing for a senior unsecured term loan (the “Term Loan”) of up to $3.5 billion for the purpose of partially funding the purchase price for our acquisition of Figma and the related fees and expenses incurred in connection with the acquisition. The Term Loan is available for funding in a single drawing upon the closing of the Figma acquisition at any time prior to March 15, 2024. The Term Loan will mature two years following the initial funding date and requires no scheduled principal amortization payments prior to maturity. The Term Loan may be prepaid and terminated at our election at any time without premium or penalty. At our election, the Term Loan will bear interest at either (i) term Secured Overnight Financing Rate (“SOFR”), plus a margin, (ii) adjusted daily SOFR, plus a margin, or (iii) base rate, plus a margin. Base rate is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the agent’s prime rate, or (c) term SOFR plus 1.00%. The margin for term SOFR and adjusted daily SOFR loans is based on our debt ratings, and ranges from 0.750% to 1.250%. The margin for base rate loans is based on our debt ratings, and ranges from 0.000% to 0.250%. In addition, commitment fees determined according to our debt ratings are payable quarterly in an amount ranging from 0.040% to 0.100% per annum until the funding of the Term Loan.

The Term Loan Credit Agreement contains customary representations, warranties, affirmative and negative covenants, events of default and indemnification provisions in favor of the lenders similar to those contained in the Revolving Credit Agreement. As of March 3, 2023, there were no outstanding borrowings under the Term Loan.

# *Revolving Credit Agreement*

In June 2022, we entered into a credit agreement (“Revolving Credit Agreement”), providing for a five-year $1.5 billion senior unsecured revolving credit facility, which replaced our previous five-year $1 billion senior unsecured revolving credit agreement entered into in October 2018 (the “Prior Revolving Credit Agreement”). 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. At our election, loans under the Revolving Credit Agreement will bear interest at either (i) term SOFR, plus a margin, (ii) adjusted daily SOFR, plus a margin, (iii) alternative currency rate, plus a margin, or (iv) base rate, which is defined as the highest of (a) the federal funds rate plus 0.50%, (b) the agent’s prime rate, or (c) term SOFR plus 1.00%. The margin for term SOFR, adjusted daily SOFR and alternative currency rate loans is based on our debt ratings, and ranges from 0.460% to 0.900%. In addition, facility fees determined according to our debt ratings are payable on the aggregate commitments, regardless of usage, quarterly in an amount ranging from 0.040% to 0.100% per annum. We are permitted to permanently reduce the aggregate commitment under

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# **ADOBE INC.**

# **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# **(Unaudited)**

the Revolving Credit Agreement at any time. Subject to certain conditions stated in the Revolving Credit Agreement, Adobe and any of its subsidiaries designated as additional borrowers may borrow, prepay and re-borrow amounts at any time during the term of the Revolving Credit Agreement.

The Revolving Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including events of default and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger transactions, dispositions and other matters, all subject to certain exceptions.

The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless (a) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (b) the maturity date is further extended upon our request, subject to the agreement of the lenders.

As of March 3, 2023, there were no outstanding borrowings under this Revolving Credit Agreement.

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## ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

*The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto.*

*In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, including statements regarding product plans, future growth, market opportunities, fluctuations in foreign currency exchange rates, strategic investments, industry positioning, customer acquisition and retention, the amount of annualized recurring revenue, revenue growth and anticipated impacts on our business of the ongoing COVID-19 pandemic and related public health measures. In addition, when used in this report, the words 'will,' 'expects,' 'could,' 'would,' 'may,' 'anticipates,' 'intends,' 'plans,' 'believes,' 'seeks,' 'targets,' 'estimates,' 'looks for,' 'looks to,' 'continues' and similar expressions, as well as statements regarding our focus for the future, are generally intended to identify forward-looking statements. Each of the forward-looking statements we make in this report involves risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled 'Risk Factors' in Part II, Item 1A of this report. The risks described herein and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the 'SEC'), including our Annual Report on Form 10-K for fiscal 2022, should be carefully reviewed. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document, except as required by law.*

### BUSINESS OVERVIEW

Founded in 1982, Adobe is one of the largest and most diversified software companies in the world. We offer a line of products and services used by creative professionals, including photographers, video editors, graphic and experience designers and game developers; communicators, including content creators, students, marketers and knowledge workers; businesses of all sizes; and consumers for creating, managing, delivering, measuring, optimizing, engaging and transacting with compelling content and experiences across personal computers, smartphones, other electronic devices and digital media formats.

We market our products and services directly to enterprise customers through our sales force and local field offices. We license our products to end users through app stores and our own website at www.adobe.com. We offer many of our products via a Software-as-a-Service ('SaaS') model or a managed services model (both of which are referred to as hosted or cloud-based) as well as through term subscription and pay-per-use models. We also distribute certain products and services through a network of distributors, value-added resellers, systems integrators, independent software vendors, retailers, software developers and original equipment manufacturers ('OEMs'). In addition, we license our technology to hardware manufacturers, software developers and service providers for use in their products and solutions. Our products run on desktop and laptop computers, smartphones, tablets, other devices and the web, depending on the product. We have operations in the Americas; Europe, Middle East and Africa ('EMEA'); and Asia-Pacific ('APAC').

Adobe was originally incorporated in California in October 1983 and was reincorporated in Delaware in May 1997. Our executive offices and principal facilities are located at 345 Park Avenue, San Jose, California 95110-2704. Our telephone number is 408-536-6000 and our website is www.adobe.com. Investors can obtain copies of our SEC filings from our website free of charge, as well as from the SEC website at www.sec.gov. The information posted to our website is not incorporated into this Quarterly Report on Form 10-Q.

### OPERATIONS OVERVIEW

For our first quarter of fiscal 2023, we experienced strong demand across our Digital Media and Digital Experience offerings, driven by the ongoing shift towards a digital-first world. As we execute on our long-term growth initiatives, we have continued to experience growth in software-based subscription revenue across our portfolio of offerings.

#### *Digital Media*

In our Digital Media segment, we are a market leader with Creative Cloud, our subscription-based offering which provides desktop tools, mobile apps and cloud-based services for designing, creating and publishing rich content and immersive 3D experiences. Creative Cloud includes Adobe Express, a web and mobile application designed to enable a broad spectrum of users, including novice content creators, communicators and creative professionals, to create, edit and customize content quickly and easily with content-first, task-based solutions. Creative Cloud delivers value with deep, cross-product integration, frequent product updates and feature enhancements, cloud-enabled services including storage and syncing of files across users' devices, machine learning and artificial intelligence, access to marketplace, social and community-based features with our

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Adobe Stock and Behance services, app creation capabilities, tools which assist with enterprise deployments and team collaboration, and affordable pricing for cost-sensitive customers.

We offer Creative Cloud for individuals, students, teams and enterprises. We expect Creative Cloud will drive sustained long-term revenue growth through a continued expansion of our customer base by attracting new users with new features and products like Adobe Express that make creative tools accessible to first-time creators and communicators, and delivering new features and technologies to existing customers with our latest releases such as share for review. We have also built out a marketplace for Creative Cloud subscribers to enable the delivery and purchase of stock content in our Adobe Stock service. Overall, our strategy with Creative Cloud is designed to enable us to increase our revenue with existing users, continue to attract new customers, and grow our recurring and predictable revenue stream that is recognized ratably.

We continue to implement strategies that are designed to accelerate awareness, consideration and purchase of subscriptions to our Creative Cloud offerings. These strategies include increasing the value Creative Cloud users receive, such as offering new desktop, web and mobile applications, as well as targeted promotions and offers that attract past customers and potential users to experience and ultimately subscribe to Creative Cloud. Because of the shift towards Creative Cloud subscriptions and Enterprise Term License Agreements (“ETLAs”), revenue from perpetual licensing of our Creative products has been immaterial to our business.

We are also a market leader with our Document Cloud offerings built around our Adobe Acrobat family of products, with a set of integrated mobile apps and cloud-based document services which enable users to create, review, approve, sign and track documents regardless of platform or application source type. Document Cloud, which enhances the way people manage critical documents at home, in the office and across devices, includes Adobe Acrobat, Adobe Acrobat Sign and Adobe Scan. Adobe Acrobat is offered both through subscription and perpetual licenses, and is also included in our Creative Cloud all apps subscription offering.

As part of our Creative Cloud and Document Cloud strategies, we utilize a data-driven operating model (“DDOM”) and our Adobe Experience Cloud solutions to raise awareness of our products, drive new customer acquisition, engagement and retention, and optimize customer journeys, and it continues to contribute strong growth in the business.

Annualized Recurring Revenue (“ARR”) is currently the key performance metric our management uses to assess the health and trajectory of our overall Digital Media segment. ARR should be viewed independently of revenue, deferred revenue and remaining performance obligations as ARR is a performance metric and is not intended to be combined with any of these items. We adjust our reported ARR on an annual basis to reflect any exchange rate changes. Our reported ARR results in the current fiscal year are based on currency rates set at the beginning of the year and held constant throughout the year for measurement purposes. We calculate ARR as follows:

| Creative ARR | Annual Value of Creative Cloud Subscriptions and Services + Annual Creative ETLA Contract Value |
| --- | --- |
| Document Cloud ARR | Annual Value of Document Cloud Subscriptions and Services + Annual Document Cloud ETLA Contract Value |
| Digital Media ARR | Creative ARR + Document Cloud ARR |

Creative ARR exiting the first quarter of fiscal 2023 was $11.28 billion, up from $10.98 billion at the end of fiscal 2022. Document Cloud ARR exiting the first quarter of fiscal 2023 was $2.39 billion, up from $2.28 billion at the end of fiscal 2022. Total Digital Media ARR grew to $13.67 billion at the end of the first quarter of fiscal 2023, up from $13.26 billion at the end of fiscal 2022.

Our success in driving growth in ARR has positively affected our revenue growth. Creative revenue in the first quarter of fiscal 2023 was $2.76 billion, up from $2.55 billion in the first quarter of fiscal 2022, representing 8% year-over-year growth. Document Cloud revenue in the first quarter of fiscal 2023 was $634 million, up from $562 million in the first quarter of fiscal 2022, representing 13% year-over-year growth. Total Digital Media segment revenue grew to $3.40 billion in the first quarter of fiscal 2023, up from $3.11 billion in the first quarter of fiscal 2022, representing 9% year-over-year growth driven by strong net new user growth.

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# Digital Experience

We are a market leader in the fast-growing category addressed by our Digital Experience segment. The Adobe Experience Cloud applications, services and platform are designed to manage customer journeys, enable personalized experiences at scale and deliver intelligence for businesses of any size in any industry. Our differentiation and competitive advantage are strengthened by our ability to use the Adobe Experience Platform to integrate our comprehensive set of solutions.

Adobe Experience Cloud delivers solutions for our customers across the following strategic growth pillars:

- *Data insights and activation.* Our solutions, including Adobe Analytics, Adobe Experience Platform, Customer Journey Analytics, Adobe Audience Manager and our Real-time Customer Data Platform, deliver robust customer profiles and AI-powered analytics across the customer journey to provide timely, relevant experiences across platforms.
- *Content and commerce.* Our solutions help customers manage, deliver and optimize content delivery through Adobe Experience Manager, and enable shopping experiences that scale from mid-market to enterprise businesses with Adobe Commerce.
- *Customer journeys.* Our solutions help businesses manage, test, target, personalize and orchestrate campaigns and customer journeys across B2E use cases, including through Marketo Engage, Adobe Campaign, Adobe Target and Journey Optimizer.
- *Marketing planning and workflow.* We offer Adobe Workfront, a work management platform directed toward marketers to orchestrate campaign workflows.

In addition to chief marketing officers, chief revenue officers and digital marketers, users of our Digital Experience solutions include advertisers, campaign managers, publishers, data analysts, content managers, social marketers, marketing executives and information management and technology executives. These customers often are involved in workflows that utilize other Adobe products, such as our Digital Media offerings. By combining the creativity of our Digital Media business with the science of our Digital Experience business, we help our customers to more efficiently and effectively make, manage, measure and monetize their content across every channel with an end-to-end workflow and feedback loop.

We utilize a direct sales force to market and license our Digital Experience solutions, as well as an extensive ecosystem of partners, including marketing agencies, systems integrators and independent software vendors that help license and deploy our solutions to their customers. We have made significant investments to broaden the scale and size of all of these routes to market, and our recent financial results reflect the success of these investments.

Digital Experience revenue was $1.18 billion in the first quarter of fiscal 2023, up from $1.06 billion in the first quarter of fiscal 2022, representing 11% year-over-year growth. Driving this increase was the increase in subscription revenue, which grew to $1.04 billion in the first quarter of fiscal 2023 from $932 million in the first quarter of fiscal 2022, representing 12% year-over-year growth.

# Macroeconomic Conditions

As a corporation with an extensive global footprint, we are subject to risks and exposures from the evolving macroeconomic environment, including the effects of increased global inflationary pressures and interest rates, fluctuations in foreign currency exchange rates, potential economic slowdowns or recessions, the COVID-19 pandemic and geopolitical pressures, including the unknown impacts of current and future trade regulations and the Russia-Ukraine war. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results. For example, foreign currency exchange rate fluctuations have negatively impacted our revenue and earnings during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022, and may continue to negatively impact our financial results for the remainder of fiscal 2023.

While our revenue and earnings are relatively predictable as a result of our subscription-based business model, the broader implications of these macroeconomic events on our business, results of operations and overall financial position, particularly in the long term, remain uncertain. See Risk Factors for further discussion of the possible impact of these macroeconomic issues on our business.

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# CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We evaluate our assumptions, judgments and estimates on a regular basis. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.

We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, business combinations and income taxes have the greatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates, and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 3, 2023, as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 2, 2022.

# Recent Accounting Pronouncements

See Note 1 of our notes to condensed consolidated financial statements for information regarding recent accounting pronouncements that are of significance or potential significance to us.

# RESULTS OF OPERATIONS

# Financial Performance Summary

- Total Digital Media ARR of approximately $13.67 billion as of March 3, 2023 increased by $410 million, or 3%, from $13.26 billion as of December 2, 2022. The change in our Digital Media ARR is primarily due to new user adoption of our Creative Cloud and Document Cloud offerings.
- Creative revenue during the three months ended March 3, 2023 of $2.76 billion increased by $213 million, or 8%, compared to the year-ago period. Document Cloud revenue during the three months ended March 3, 2023 of $634 million increased by $72 million, or 13%, compared to the year-ago period. The increases were primarily due to subscription revenue growth associated with our Creative Cloud and Document Cloud offerings.
- Digital Experience revenue of $1.18 billion during the three months ended March 3, 2023 increased by $119 million, or 11%, compared to the year-ago period. The increase was primarily due to subscription revenue growth across our offerings.
- Remaining performance obligations of $15.21 billion as of March 3, 2023 remained relatively flat compared to December 2, 2022.
- Cost of revenue of $568 million during the three months ended March 3, 2023 increased by $56 million, or 11%, compared to the year-ago period primarily due to increases in base and incentive compensation and related benefits costs, as well as increases in hosting services and data center costs.
- Operating expenses of $2.50 billion during the three months ended March 3, 2023 increased by $331 million, or 15%, compared to the year-ago period primarily due to increases in base and incentive compensation and related benefits costs, as well as professional fees including costs associated with our planned acquisition of Figma.
- Cash flows from operations of $1.69 billion during the three months ended March 3, 2023 decreased by $76 million, or 4%, compared to the year-ago period primarily due to higher cash payments for income taxes.

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# **Revenue for the Three Months Ended March 3, 2023 and March 4, 2022**

| (dollars in millions) | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Subscription | $4,373 | $3,958 | 10% |
| Percentage of total revenue | 94% | 93% |  |
| Product | 120 | 145 | (17)% |
| Percentage of total revenue | 3% | 3% |  |
| Services and other | 162 | 159 | 2% |
| Percentage of total revenue | 3% | 4% |  |
| Total revenue | $4,655 | $4,262 | 9% |

# *Subscription*

Our subscription revenue is comprised primarily of fees we charge for our subscription and hosted service offerings, and related support, including Creative Cloud and certain of our Adobe Experience Cloud and Document Cloud services. We primarily recognize subscription revenue ratably over the term of agreements with our customers, beginning with commencement of service. Subscription revenue related to certain offerings, where fees are based on a number of transactions and invoicing is aligned to the pattern of performance, customer benefit and consumption, are recognized on a usage basis.

We have the following reportable segments: Digital Media, Digital Experience, and Publishing and Advertising. Subscription revenue by reportable segment for the three months ended March 3, 2023 and March 4, 2022 is as follows:

| (dollars in millions) | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Digital Media | $3,301 | $2,995 | 10% |
| Digital Experience | 1,042 | 932 | 12% |
| Publishing and Advertising | 30 | 31 | (3)% |
| Total subscription revenue | $4,373 | $3,958 | 10% |

# *Product*

Our product revenue is comprised primarily of fees related to licenses for on-premise software purchased on a perpetual basis, for a fixed period of time or based on usage for certain of our OEM and royalty agreements. We primarily recognize product revenue at the point in time the software is available to the customer, provided all other revenue recognition criteria are met.

# *Services and Other*

Our services and other revenue is comprised primarily of fees related to consulting, training, maintenance and support for certain on-premise licenses that are recognized at a point in time and our advertising offerings. We typically sell our consulting contracts on a time-and-materials or fixed-fee basis. These revenues are recognized as the services are performed for time-and-materials contracts and on a relative performance basis for fixed-fee contracts. Training revenues are recognized as the services are performed. Our maintenance and support offerings, which entitle customers, partners and developers to receive desktop product upgrades and enhancements or technical support, depending on the offering, are generally recognized ratably over the term of the arrangement. Transaction-based advertising revenue is recognized on a usage basis as we satisfy the performance obligations to our customers.

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# *Segment Information*

*(dollars in millions)*

|  | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Digital Media | $3,395 | $3,110 | 9% |
| Percentage of total revenue | 73% | 73% |  |
| Digital Experience | 1,176 | 1,057 | 11% |
| Percentage of total revenue | 25% | 25% |  |
| Publishing and Advertising | 84 | 95 | (12)% |
| Percentage of total revenue | 2% | 2% |  |
| Total revenue | $4,655 | $4,262 | 9% |

# *Digital Media*

Revenue by major offerings in our Digital Media reportable segment for the three months ended March 3, 2023 and March 4, 2022 were as follows:

*(dollars in millions)*

|  | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Creative Cloud | $2,761 | $2,548 | 8% |
| Document Cloud | 634 | 562 | 13% |
| Total Digital Media revenue | $3,395 | $3,110 | 9% |

Revenue from Digital Media increased $285 million during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 driven by increases in revenue associated with our Creative and Document Cloud subscription offerings due to continued demand amid an increasingly digital environment and strong customer acquisition and engagement, partially offset by the impact of foreign currency exchange rate fluctuations.

# *Digital Experience*

Revenue from Digital Experience increased $119 million during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to net new additions across our subscription offerings and strong demand for services, partially offset by the impact of foreign currency exchange rate fluctuations.

# *Geographical Information*

*(dollars in millions)*

|  | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Americas | $2,779 | $2,446 | 14% |
| Percentage of total revenue | 60% | 57% |  |
| EMEA | 1,173 | 1,136 | 3% |
| Percentage of total revenue | 25% | 27% |  |
| APAC | 703 | 680 | 3% |
| Percentage of total revenue | 15% | 16% |  |
| Total revenue | $4,655 | $4,262 | 9% |

Overall revenue during the three months ended March 3, 2023 increased in all geographic regions as compared to the three months ended March 4, 2022 primarily due to increases in Digital Media and Digital Experience revenue. Within each geographic region, the fluctuations in revenue by reportable segment were attributable to the factors noted in the segment information above.

Included in the overall change in revenue for the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 were impacts associated with foreign currency which were mitigated in part by our foreign currency hedging program. During the three months ended March 3, 2023 as compared to the year-ago period, the U.S. Dollar strengthened against foreign currencies, including the Euro, Japanese Yen and British Pound, which decreased revenue in U.S. Dollar equivalents by $169 million. For the three months ended March 3, 2023, the foreign currency impacts to revenue were offset in part by net hedging gains from our cash flow hedging program of $21 million.

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# **Cost of Revenue for the Three Months Ended March 3, 2023 and March 4, 2022**

*(dollars in millions)*

|  | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Subscription | $434 | $393 | 10% |
| Percentage of total revenue | 9% | 9% |  |
| Product | 8 | 10 | (20)% |
| Percentage of total revenue | * | * |  |
| Services and other | 126 | 109 | 16% |
| Percentage of total revenue | 3% | 3% |  |
| Total cost of revenue | $568 | $512 | 11% |

(*) Percentage is less than 1%.

# *Subscription*

Cost of subscription revenue consists of third-party hosting services and data center costs, including expenses related to operating our network infrastructure. Cost of subscription revenue also includes compensation costs associated with network operations, implementation, account management and technical support personnel, royalty fees, software costs and amortization of certain intangible assets.

Cost of subscription revenue increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

|  | Components of % Change |
| --- | --- |
| Hosting services and data center costs | 7% |
| Incentive compensation, cash and stock-based | 2 |
| Base compensation and related benefits | 1 |
| Total change | 10% |

# *Product*

Cost of product revenue is primarily comprised of third-party royalties, localization costs and the costs associated with the manufacturing of our products.

# *Services and Other*

Cost of services and other revenue is primarily comprised of compensation and contracted costs incurred to provide consulting services, training and product support, and hosting services and data center costs.

Cost of services and other revenue increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to increases in compensation costs.

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# **Operating Expenses for the Three Months Ended March 3, 2023 and March 4, 2022**

(dollars in millions)

|  | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Research and development | $827 | $701 | 18% |
| Percentage of total revenue | 18% | 16% |  |
| Sales and marketing | 1,301 | 1,158 | 12% |
| Percentage of total revenue | 28% | 27% |  |
| General and administrative | 331 | 269 | 23% |
| Percentage of total revenue | 7% | 6% |  |
| Amortization of intangibles | 42 | 42 | - % |
| Percentage of total revenue | 1% | 1% |  |
| Total operating expenses | $2,501 | $2,170 | 15% |

# *Research and Development*

Research and development expenses consist primarily of compensation and contracted costs associated with software development, third-party hosting services and data center costs, related facilities costs and expenses associated with computer equipment and software used in development activities.

Research and development expenses increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

|  | Components of % Change |
| --- | --- |
| Incentive compensation, cash and stock-based | 9% |
| Base compensation and related benefits | 7 |
| Various individually insignificant items | 2 |
| Total change | 18% |

Investments in research and development, including the recruiting and hiring of software developers, are critical to remain competitive in the marketplace and are directly related to continued timely development of new and enhanced offerings and solutions. We will continue to focus on long-term opportunities available in our end markets and make significant investments in the development of our subscription and service offerings, applications and tools.

# *Sales and Marketing*

Sales and marketing expenses consist primarily of compensation costs, amortization of contract acquisition costs, including sales commissions, travel expenses and related facilities costs for our sales, marketing, order management and global supply chain management personnel. Sales and marketing expenses also include the costs of programs aimed at increasing revenue, such as advertising, trade shows and events, public relations and other market development programs.

Sales and marketing expenses increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

|  | Components of % Change |
| --- | --- |
| Base compensation and related benefits | 4% |
| Incentive compensation, cash and stock-based | 4 |
| Professional and consulting fees | 2 |
| Various individually insignificant items | 2 |
| Total change | 12% |

# *General and Administrative*

General and administrative expenses consist primarily of compensation and contracted costs, travel expenses and related facilities costs for our finance, facilities, human resources, legal, information services and executive personnel. General and administrative expenses also include outside legal and accounting fees, provision for bad debts, expenses associated with

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computer equipment and software used in the administration of the business, charitable contributions and various forms of insurance.

General and administrative expenses increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 due to the following:

|  | Components of % Change |
| --- | --- |
| Professional and consulting fees | 15% |
| Base compensation and related benefits | 7 |
| Incentive compensation, cash and stock-based | 3 |
| Events | 3 |
| Bad debt expense | (3) |
| Various individually insignificant items | (2) |
| Total change | 23% |

Professional and consulting fees increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to incurred transaction costs associated with our planned acquisition of Figma.

### Non-Operating Income (Expense), Net for the Three Months Ended March 3, 2023 and March 4, 2022

| (dollars in millions) | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Interest expense | $(32) | $(28) | 14% |
| Percentage of total revenue | (1)% | (1)% |  |
| Investment gains (losses), net | 1 | (9) | ** |
| Percentage of total revenue | * | * |  |
| Other income (expense), net | 43 | - | ** |
| Percentage of total revenue | 1% | * |  |
| Total non-operating income (expense), net | $12 | $(37) | ** |

(*) Percentage is less than 1%.

(**) Percentage is not meaningful.

#### *Interest Expense*

Interest expense represents interest associated with our debt instruments. Interest on our senior notes is payable semi-annually, in arrears, on February 1 and August 1.

#### *Investment Gains (Losses), Net*

Investment gains (losses), net consists principally of unrealized holding gains and losses associated with our deferred compensation plan assets, and gains and losses associated with our direct and indirect investments in privately held companies.

#### *Other Income (Expense), Net*

Other income (expense), net consists primarily of interest earned on cash, cash equivalents and short-term fixed income investments. Other income (expense), net also includes realized gains and losses on fixed income investments and foreign exchange gains and losses.

Other income (expense), net increased during the three months ended March 3, 2023 as compared to the three months ended March 4, 2022 primarily due to increases in interest income driven by higher average interest rates.

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# **Provision for Income Taxes for the Three Months Ended March 3, 2023 and March 4, 2022**

(dollars in millions)

|  | Three Months |  | % Change |
| --- | --- | --- | --- |
|  | 2023 | 2022 |  |
| Provision for income taxes | $351 | $277 | 27% |
| Percentage of total revenue | 8% | 6% |  |
| Effective tax rate | 22% | 18% |  |

Our effective tax rate increased by approximately four percentage points primarily due to a net tax expense related to stock-based compensation recorded during the three months ended March 3, 2023, as compared to a net tax benefit related to stock-based compensation recorded during the three months ended March 4, 2022.

Our effective tax rate for the three months ended March 3, 2023 was higher than the U.S. federal statutory tax rate of 21% primarily due to a net tax expense related to stock-based compensation and state taxes, partially offset by the U.S. federal research tax credit.

We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized based on evaluation of all available positive and negative evidence. On the basis of this evaluation, we continue to maintain a valuation allowance to reduce our deferred tax assets to the amount realizable. The total valuation allowance was $418 million as of March 3, 2023, primarily related to certain state credits.

We are a United States-based multinational company subject to tax in multiple domestic and foreign tax jurisdictions. The current U.S. tax law subjects the earnings of certain foreign subsidiaries to U.S. tax and generally allows an exemption from taxation for distributions from foreign subsidiaries.

In the current global tax policy environment, the domestic and foreign governing bodies continue to consider, and in some cases introduce, changes in regulations applicable to corporate multinationals such as Adobe. As regulations are issued, we account for finalized regulations in the period of enactment.

Beginning in 2023, under the provisions introduced by the U.S. Tax Act, we are required to capitalize and amortize research and development costs. If the rule is not modified, there will continue to be an adverse impact on our effective rates for income taxes paid, which is partially offset by a benefit to our effective tax rates from the increase in the foreign-derived intangible income deduction, in fiscal 2023 and beyond.

# *Accounting for Uncertainty in Income Taxes*

The gross liabilities for unrecognized tax benefits excluding interest and penalties were $330 million and $298 million as of March 3, 2023 and March 4, 2022, respectively. If the total unrecognized tax benefits as of March 3, 2023 and March 4, 2022 were recognized, $214 million and $203 million would decrease the respective effective tax rates.

As of March 3, 2023 and March 4, 2022, the combined amounts of accrued interest and penalties related to tax positions taken on our tax returns were approximately $19 million and $22 million, respectively. These amounts were included in long-term income taxes payable in their respective years.

The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of our tax assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Although the timing of resolution, settlement and closing of audits is not certain, it is reasonably possible that the underlying unrecognized tax benefits may decrease by up to $15 million over the next 12 months.

Our future effective tax rates may be materially affected by changes in the tax rates in jurisdictions where our income is earned, changes in jurisdictions in which our profits are determined to be earned and taxed, changes in the valuation of our deferred tax assets and liabilities, changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business, or unexpected changes in business and market conditions that could reduce certain tax benefits.

In addition, the United States and other countries and jurisdictions in which we conduct business, including those covered by governing bodies that enact tax laws applicable to us, such as the European Commission of the European Union, could make changes to relevant tax, accounting or other laws and interpretations thereof that have a material impact to us. These countries, governmental bodies and intergovernmental economic organizations such as the Organization for Economic Cooperation and Development, have or could make unprecedented assertions about how taxation is determined and, in some

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cases, have proposed or enacted new laws that are contrary to the way in which rules and regulations have historically been interpreted and applied. In the current global tax policy environment, any changes in laws, regulations and interpretations could adversely affect our effective tax rates, cause us to respond by making changes to our business structure, or result in other costs to us which could adversely affect our operations and financial results.

Moreover, we are subject to the examination of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. Our policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. We believe our tax estimates to be reasonable; however, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our financial position and results of operations.

## LIQUIDITY AND CAPITAL RESOURCES

### Cash Flows

This data should be read in conjunction with our condensed consolidated statements of cash flows.

| (in millions) | As of |  |
| --- | --- | --- |
|  | March 3, 2023 | December 2, 2022 |
| Cash and cash equivalents | $4,072 | $4,236 |
| Short-term investments | $1,581 | $1,860 |
| Working capital | $905 | $868 |
| Stockholders’ equity | $14,206 | $14,051 |

A summary of our cash flows is as follows:

| (in millions) | Three Months Ended |  |
| --- | --- | --- |
|  | March 3, 2023 | March 4, 2022 |
| Net cash provided by operating activities | $1,693 | $1,769 |
| Net cash provided by (used for) investing activities | 156 | (260) |
| Net cash used for financing activities | (2,014) | (2,604) |
| Effect of foreign currency exchange rates on cash and cash equivalents | 1 | (10) |
| Net change in cash and cash equivalents | $(164) | $(1,105) |

Our primary source of cash is receipts from revenue. Our primary uses of cash are our stock repurchase program as described below and general business expenses including payroll, income taxes, marketing and third-party hosting services. Other sources of cash include proceeds from maturing short-term investments. Other uses of cash include repayment of maturing senior notes, purchases of property and equipment and payments for taxes related to net share settlement of equity awards.

#### *Cash Flows from Operating Activities*

Net cash provided by operating activities of $1.69 billion for the three months ended March 3, 2023 was primarily comprised of net income adjusted for the net effect of non-cash items and changes in operating assets and liabilities. The primary working capital uses of cash were the payment of accrued bonuses, partially offset by increases in deferred revenue driven by Digital Media and Digital Experience offerings.

#### *Cash Flows from Investing Activities*

Net cash provided by investing activities of $156 million for the three months ended March 3, 2023 was primarily due to maturities of short-term investments during the quarter partially offset by ongoing capital expenditures.

#### *Cash Flows from Financing Activities*

Net cash used for financing activities of $2.01 billion for the three months ended March 3, 2023 was primarily due to payments for our common stock repurchases, the repayment of our 2023 Notes and taxes paid related to the net share settlement of equity awards. The above uses of cash were offset in part by proceeds from re-issuance of treasury stock mainly for our employee stock purchase plan. *See the section titled “Stock Repurchase Program” below.*

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## Liquidity and Capital Resources Considerations

Our existing cash, cash equivalents and investment balances may fluctuate during fiscal 2023 due to changes in our planned cash outlay.

Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, risks detailed in the section titled “Risk Factors” in titled Part II, Item 1A of this report. Based on our current business plan and revenue prospects, we believe that our existing cash, cash equivalents and investment balances, our anticipated cash flows from operations and our available revolving credit facility will be sufficient to meet our working capital, operating resource expenditure and capital expenditure requirements for the next twelve months.

Our cash equivalent and short-term investment portfolio as of March 3, 2023 consisted of asset-backed securities, corporate debt securities, money market funds, municipal securities, time deposits, U.S. agency securities and U.S. Treasury securities. We use professional investment management firms to manage a large portion of our invested cash.

We expect to continue our investing activities, including short-term and long-term investments, purchases of computer systems for research and development, sales and marketing, product support and administrative staff, and facilities expansion. Furthermore, cash reserves may be used to repurchase stock under our stock repurchase program and to strategically acquire companies, products or technologies that are complementary to our business.

On September 15, 2022, we entered into a definitive agreement under which we intend to acquire Figma, Inc. (“Figma”) for approximately $20 billion, comprised of approximately half cash and half stock, subject to customary purchase price adjustments. Approximately 6 million additional restricted stock units will be granted to Figma’s Chief Executive Officer and employees that will vest over four years subsequent to closing. The transaction is subject to regulatory approvals and customary closing conditions, and is expected to close in 2023. We will be required to pay Figma a reverse termination fee of $1 billion if the transaction fails to receive regulatory clearance, assuming all other closing conditions have been satisfied or waived, or if it fails to close within 18 months from September 15, 2022. We expect to finance the cash portion of the consideration using cash on hand and debt instruments. While the transaction is pending, at a minimum we expect to maintain share repurchases sufficient to offset the dilution of equity issuances to our employees.

### *Term Loan Credit Agreement*

In January 2023, we entered into a delayed draw credit agreement, providing for a senior unsecured term loan (the “Term Loan”) of up to $3.5 billion for the purpose of partially funding the purchase price and related fees for our acquisition of Figma. The Term Loan is available for funding in a single drawing upon the closing of the Figma acquisition at any time prior to March 15, 2024 and will mature two years following the initial funding date. As of March 3, 2023, there were no outstanding borrowings under the Term Loan.

### *Revolving Credit Agreement*

We have a $1.5 billion senior unsecured revolving credit agreement (the “Revolving Credit Agreement”) with a syndicate of lenders, providing for loans to us and certain of our subsidiaries through June 30, 2027. Subject to the agreement of lenders, we may obtain up to an additional $500 million in commitments, for a maximum aggregate commitment of $2 billion. As of March 3, 2023, there were no outstanding borrowings under the Revolving Credit Agreement and the entire $1.5 billion credit line remains available for borrowing. Under the terms of our Revolving Credit Agreement, we are not prohibited from paying cash dividends unless payment would trigger an event of default or if one currently exists. We do not anticipate paying any cash dividends in the foreseeable future.

### *Senior Notes*

We have $3.65 billion senior notes outstanding, which rank equally with our other unsecured and unsubordinated indebtedness. As of March 3, 2023, the carrying value of our senior notes was $3.63 billion and our maximum commitment for interest payments was $366 million for the remaining duration of our outstanding senior notes. Interest is payable semi-annually, in arrears, on February 1 and August 1. Our senior notes do not contain any financial covenants. *See Note 14 of our notes to condensed consolidated financial statements for further details regarding our debt.*

### *Contractual Obligations*

Our principal commitments as of March 3, 2023 consisted of purchase obligations resulting from agreements to purchase goods and services in the ordinary course of business and obligations under operating lease arrangements. There have been no material changes in those obligations during the three months ended March 3, 2023.

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### *Other*

Beginning in 2023, under the provisions introduced by the U.S. Tax Act, we are required to capitalize and amortize research and development costs. If the rule is not modified, there will continue to be an adverse impact on our effective rates for income taxes paid, which is partially offset by a benefit from the increase in the foreign-derived intangible income deduction, in fiscal 2023 and beyond.

The Inflation Reduction Act enacted in 2022 introduced new provisions including a corporate book minimum tax effective for us beginning in fiscal 2024 and an excise tax on net stock repurchases made after December 31, 2022. We continue to monitor developments and evaluate impacts, if any, of these provisions on our results of operations and cash flows.

### **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 December 2020, our Board of Directors granted authority to repurchase up to $15 billion in our common stock through the end of fiscal 2024.

During the three months ended March 3, 2023, we entered into an accelerated share repurchase agreement (“ASR”) with a large financial institution whereupon we provided them with a prepayment of $1.4 billion and received an initial delivery of 3.2 million shares of our common stock. Subsequent to March 3, 2023, the ASR was settled, which resulted in total repurchases of 4.0 million shares at an average purchase price of $348.46.

During the three months ended March 3, 2023, we repurchased a total of 5.0 million shares, including approximately 1.8 million shares at an average price of $330.52 through a structured repurchase agreement entered into during fiscal 2022, as well as 3.2 million shares from the initial delivery of the ASR.

Subsequent to March 3, 2023, as part of the December 2020 stock repurchase authority, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1 billion. Upon completion of the $1 billion stock repurchase agreement, $4.15 billion remains under our December 2020 authority.

*See Note 11 of our notes to condensed consolidated financial statements for further details regarding our stock repurchase program.*

### **Indemnifications**

In the ordinary course of business, we provide indemnifications of varying scope to 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.

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### **ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

There have been no material changes in our market risk exposures for the three months ended March 3, 2023, as compared to those discussed in our Annual Report on Form 10-K for the fiscal year ended December 2, 2022.

### **ITEM 4. CONTROLS AND PROCEDURES**

Based on their evaluation as of March 3, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting during the quarter ended March 3, 2023 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Adobe have been detected.

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## PART II-OTHER INFORMATION

### ITEM 1. LEGAL PROCEEDINGS

*See Note 13 of our notes to condensed consolidated financial statements for information regarding our legal proceedings.*

### ITEM 1A. RISK FACTORS

As previously discussed, our actual results could differ materially from our forward-looking statements. Below we discuss some of the factors that could cause these differences. These and many other factors described in this report could adversely affect our operations, performance and financial condition.

#### Risks Related to Our Ability to Grow Our Business

*The markets in which we participate are intensely competitive, and if we cannot continue to develop, acquire, market and offer new products and services or enhancements to existing products and services that meet customer requirements, our operating results could suffer.*

The markets for our products and services are characterized by intense competition, new industry standards, evolving distribution models, limited barriers to entry, new technology developments, short product life cycles, customer price sensitivity, global market conditions and frequent product introductions (including alternatives with limited functionality available at lower costs or free of charge). Any of these factors could create downward pressure on pricing and gross margins and could adversely affect our renewal and upsell and cross-sell rates, as well as our ability to attract new customers.

Our future success will depend on our continued ability to enhance and integrate our existing products and services, introduce new products and services in a timely and cost-effective manner, meet changing customer expectations and needs, extend our core technology into new applications, and anticipate emerging standards, business models, software delivery methods and other technological developments. For example, consumers continue to migrate from personal computers to tablet and mobile devices and from desktop to the web. While we offer our products on a variety of platforms, if we cannot continue adapting our products to tablet and mobile devices or the web, or if our competitors can adapt their products more quickly than us, our business could be harmed. In addition, releases of new devices or operating systems may make it more difficult for our products to perform or may require significant cost to adapt our solutions. The potential costs and delays incurred as a result could harm our business. If we fail to anticipate or misjudge customers’ rapidly changing needs and expectations or adapt to emerging technological trends, our market share and results of operations could suffer.

Furthermore, some of our competitors and potential competitors enjoy competitive advantages such as greater financial, technical, sales, marketing and other resources, broader brand awareness and access to larger customer bases. As a result of these advantages, potential and current customers might select the products and services of our competitors, causing a loss of our market share. Our competitors, including large enterprises, may develop products, features or services that are similar to ours or that achieve greater acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies.

*For additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section titled “Competition” contained in Part I, Item 1 of our Annual Report on Form 10-K.*

#### Introduction of new technology could harm our business and results of operations.

The expectations and needs of technology consumers are constantly evolving. As new technology is developed, integration of our products and services with one another and other companies’ offerings creates an increasingly complex ecosystem that is also partly reliant on third parties. If any disruptive technology, or competing products, services or operating systems that are not compatible with our solutions, achieve widespread acceptance, our operating results could suffer and our business could be harmed.

The introduction of, or limitations on, certain technologies may reduce the effectiveness of our products and our business operations. For example, some of our products and services, including those marketed or licensed through adobe.com, rely on tracking, third-party cookies or other identifiers to help our customers more effectively advertise and detect and prevent fraudulent activity. However, consumers can, with increasing ease, implement technologies to limit the ability to collect and use data to deliver or advertise services. Increased use of methods to control the use of these technologies through customers’ browsers, operating systems, device settings or “ad-blocking” software or applications may harm our business.

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*We may not realize the anticipated benefits of past or future investments or acquisitions, and integration of acquisitions may disrupt our business and management.*

We may not realize the anticipated benefits of an investment or acquisition of a company, division, product or technology, each of which involves numerous risks. These risks include:

- • inability to achieve the financial and strategic goals for the acquired and combined businesses;
- • difficulty in, and the cost of, effectively integrating the operations, technologies, products or services, and personnel of the acquired business;
- • potential identified or unknown security vulnerabilities in acquired products that expose us to additional security risks or delay our ability to integrate the product into our offerings;
- • entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions;
- • disruption of our ongoing business and distraction of our management and other employees from other opportunities and challenges;
- • inability to retain personnel of the acquired business;
- • inability to retain key customers, distributors, vendors and other business partners of the acquired business;
- • inability to take advantage of anticipated tax benefits;
- • incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;
- • elevated delinquency or bad debt write-offs related to receivables of the acquired business we assume;
- • additional costs of bringing acquired companies into compliance with laws and regulations applicable to a multinational corporation;
- • difficulty in maintaining controls, procedures and policies during the transition and integration;
- • impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;
- • failure of our due diligence processes to identify significant problems, liabilities or other challenges of an acquired company or technology;
- • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, such as claims from terminated employees, customers, former stockholders or other third parties;
- • incurring significant exit charges if products or services acquired in business combinations are unsuccessful;
- • inability to conclude that our internal controls over financial reporting are effective;
- • inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent or impose conditions on such acquisitions;
- • the failure of strategic investments to perform as expected or to meet financial projections;
- • delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings;
- • additional stock-based compensation issued or assumed in connection with an acquisition, including the impact on stockholder dilution and our results of operations;
- • increased accounts receivables collection times and working capital requirements associated with acquired business models; and
- • incompatibility of business cultures.

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Mergers and acquisitions of technology companies are inherently risky. If we do not complete an announced acquisition transaction, including the pending acquisition of Figma, Inc., or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated, and in certain circumstances an acquisition could harm our financial position.

Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may also be impaired by adverse economic and political events, including trade tensions and increased global scrutiny of or restrictions on foreign investments. For example, a number of countries, including the United States and countries in Europe and the Asia-Pacific region, are considering or have adopted restrictions on foreign investments. Governments may continue to adopt or tighten restrictions of this nature, and such restrictions could negatively impact our business and financial results.

*The success of some of our product and service offerings depends on our ability to continue to attract and retain customers of and contributors to our online marketplaces for creative content.*

The success of some of our product and service offerings, such as Adobe Stock, depends on our ability to continue to retain existing and attract new customers and contributors to these online marketplaces for creative content. An increase in paying customers has generally resulted in more content from contributors, which increases the size of our collection and in turn attracts new paying customers. We rely on the functionality and features of our online marketplaces, the size and content of our collection and the effectiveness of our marketing efforts to attract new customers and contributors and retain existing ones. New technologies may render the features of our online marketplaces obsolete, our collection may fail to grow as anticipated or our marketing efforts may be unsuccessful, any of which may adversely affect our results of operations.

*If our products or platforms are used to create or disseminate objectionable content, particularly misleading content intended to manipulate public opinion, our brand reputation may be damaged, and our business and financial results may be harmed.*

We believe that our brands have significantly contributed to the success of our business. Maintaining and enhancing the brands within Adobe increases our ability to enter new categories, launch new and innovative products to better serve our customers and expand our customer base. Our brands may be negatively affected by the use of our products or services to create or disseminate newsworthy content that is deemed to be misleading, deceptive or intended to manipulate public opinion (e.g., “DeepFakes”), by the use of our products or services for illicit, objectionable or illegal ends, or by our failure to respond appropriately and expeditiously to such uses of our products and services. Such uses of our products and services may also cause us to face claims related to defamation, rights of publicity and privacy, illegal content, misinformation and personal injury torts. Maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful. If we fail to appropriately respond to objectionable content created using our products or services or shared on our platforms, our users may lose confidence in our brands and our business and financial results may be adversely affected. In addition, government regulation designed to address DeepFakes could adversely impact our product offerings.

*Social and ethical issues relating to the use of new and evolving technologies, such as AI, in our offerings may result in reputational harm and liability.*

Social and ethical issues relating to the use of new and evolving technologies such as artificial intelligence (“AI”) in our offerings, may result in reputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues. We are increasingly building AI into many of our offerings, including our recent announcement of Adobe Firefly. As with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. If we enable or offer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm or legal liability. Potential government regulation related to AI use and ethics may also increase the burden and cost of research and development in this area, and failure to properly remediate AI usage or ethics issues may cause public confidence in AI to be undermined, which could slow adoption of AI in our products and services. The rapid evolution of AI will require the application of resources to develop, test and maintain our products and services to help ensure that AI is implemented ethically in order to minimize unintended, harmful impact. Uncertainty around new and emerging AI applications such as generative AI content creation may require additional investment in the development of proprietary datasets and machine learning models, development of new approaches and processes to provide attribution or remuneration to content creators and building systems that enable creatives to have greater control over the use of their work in the development of AI, which may be costly and could impact our profit margin if we decide to expand generative AI into all our product offerings. Developing, testing and deploying AI systems may also increase the cost profile of our offerings due to the nature of the computing costs involved in such systems.

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## Risks Related to the Operation of Our Business

*Security breaches in data centers we manage, or third parties manage on our behalf, may compromise the confidentiality, integrity or availability of employee and customer data, which could expose us to liability and adversely affect our reputation and business.*

We process and store significant amounts of employee and customer data, a large volume of which is hosted by third-party service providers. A security incident impacting our own data centers or those controlled by our service providers may compromise the confidentiality, integrity or availability of this data. Unauthorized access to or loss or disclosure of data stored by Adobe or our service providers may occur through physical break-ins, breaches of a secure network by an unauthorized party, software vulnerabilities or coding errors, employee mistakes, theft or misuse or other misconduct. It is also possible that unauthorized access to or disclosure of employee or customer data may occur through inadequate use of security controls by customers, service providers or employees. The compromise of personal, confidential or proprietary information could cause a loss of data, disrupt our operations, damage our reputation, give rise to remediation or other expenses and subject us to claims or other liabilities, regulatory investigations or fines. Adobe maintains insurance to cover operational risks, such as cyber risk and technology outages, but this insurance may not cover all costs associated with the consequences of personal, confidential or proprietary information being compromised. Further, such perceived or actual unauthorized loss or disclosure of the information we collect, process or store, or breach of our security could damage our reputation, result in the loss of customers and harm our business.

*We rely on data centers managed both by Adobe and third parties to host and deliver our services, as well as access, collect, process, use, transmit and store data, and any interruptions or delays in these hosted services, or failures in data collection or transmission could expose us to liability and harm our business and reputation.*

Much of our business relies on hardware and services that are hosted, managed and controlled directly by Adobe or third-party service providers, including our online store at adobe.com and our Creative Cloud, Document Cloud and Experience Cloud solutions. We do not have redundancy for all of our systems, many of our critical applications reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities. If our business relationship with a third-party provider of hosting or content delivery services is negatively affected, or if one of our content delivery suppliers were to terminate its agreement with us without adequate notice, we might not be able to deliver the corresponding hosted offerings to our customers, which could disrupt our business operations and those of our customers, subject us to reputational harm, costly and time-intensive notification requirements, and cause us to lose customers and future business. The COVID-19 pandemic has disrupted and may continue to disrupt the supply chain of hardware needed to maintain these third-party systems and services or to run our business. In addition, supply chain disruptions stemming from the Russia-Ukraine war may harm our customers and suppliers and further complicate existing supply chain constraints. Occasionally, we migrate data among data centers and to third-party hosted environments. If a transition among data centers or to third-party service providers encounters unexpected interruptions, unforeseen complexity or unplanned disruptions despite precautions undertaken during the process, this may impair our delivery of products and services to customers and result in increased costs and liabilities, which may harm our operating results, reputation and our business.

It is also possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption, cause the information that we collect or maintain to be incomplete or contain inaccuracies that our customers regard as significant, or cause us to fail to meet committed service levels or comply with applicable notification requirements. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors, including access to the internet, the failure of our network or software systems, security breaches or significant variability in visitor traffic on customer websites. In addition, the loss of data resulting from computer viruses, worms, ransomware or other malware may harm our systems could expose us to litigation or regulatory investigation, and costly and time-intensive notification requirements.

We may also find, on occasion, that we cannot deliver data and reports to our customers in near real time due to factors such as significant spikes in customer activity on their websites or failures of our network or software (or that of a third-party service provider). If we fail to plan infrastructure capacity appropriately and expand it proportionally with the needs of our customer base, and we experience a rapid and significant demand on the capacity of our data centers or those of third parties, service outages or performance issues could occur, which would impact our customers. Such a strain on our infrastructure capacity could subject us to regulatory and customer notification requirements, violations of service level agreement commitments or financial liabilities and result in customer dissatisfaction or harm our business. If we supply materially inaccurate information or experience significant interruptions in our systems, our reputation could be harmed, we could lose customers and we could be found liable for damages or incur other losses.

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# ***Security vulnerabilities in our products and systems, or in our supply chain, could lead to reduced revenue or to liability claims.***

Maintaining the security of our products and services is a critical issue for us and our customers. Cyberthreats are constantly evolving and becoming increasingly sophisticated and complex, making it increasingly difficult to detect and successfully defend against them. Certain unauthorized parties have in the past managed, and may again in the future manage, to gain access to and misuse some of our systems and software, or that of our third-party service providers, in order to access the authentication, payment and personal information of our end users and employees. In addition, cyber-attackers (which may include individuals or groups, as well as sophisticated groups with significant resources, such as nation-state and state-sponsored attackers) also develop and deploy viruses, worms, credential stuffing attack tools and other malicious software programs, some of which may be specifically designed to attack our products, services, information systems or networks. The frequency and sophistication of such threats continues to increase and often becomes further heightened in connection with geopolitical tensions. Hardware, software and operating system applications that we develop or procure from third parties have contained and may contain defects in design or manufacture, including bugs, vulnerabilities and other problems that could unexpectedly compromise the security of the system or impair a customer's ability to operate or use our products. Like other global companies, we face an increasingly difficult challenge to attract and retain highly qualified security personnel to assist us in combating these security threats. The costs to prevent, eliminate, mitigate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities are significant, and our efforts to address these problems, including notifying affected parties, may not be successful or may be delayed and could result in interruptions, delays, cessation of service and loss of existing or potential customers. It is impossible to predict the extent, frequency or impact these problems may have on us.

Outside parties have in the past and may in the future attempt to fraudulently induce our employees or users of our products or services to disclose sensitive, personal or confidential information via illegal electronic spamming, phishing or other tactics. This existing risk is compounded given the current hybrid model work environment, where a large portion of our workforce spends a portion of their time working in our offices and a portion of their time working from home. Unauthorized parties may also attempt to gain physical access to our facilities in order to infiltrate our information systems or attempt to gain logical access to our products, services or information systems for the purpose of exfiltrating content and data. These actual and potential breaches of our security measures and the accidental loss, inadvertent disclosure or unauthorized dissemination of proprietary information or sensitive, personal or confidential data about us, our employees, our customers or their end users, including the potential loss or disclosure of such information or data could expose us, our employees, our customers or other individuals affected to a risk of loss or misuse of this information. This may result in litigation and liability or fines, costly and time-intensive notice requirements, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business or damage our brand and reputation, thereby requiring time and resources to mitigate these impacts. These risks will likely increase as we expand our hosted offerings, integrate our products and services and store and process more data.

These issues affect our products and services in particular because cyber-attackers tend to focus their efforts on popular offerings with a large user base, and we expect them to continue to do so. From time to time we have identified, and in the future we may identify other, vulnerabilities in some of our applications and services and those of our third-party service providers. In some cases, such vulnerabilities may not be immediately detected, which may make it difficult to recover critical services and lead to damaged assets. We continuously monitor and develop our information technology networks and infrastructure in an effort to prevent, detect, address and mitigate the risk of threats to our data, systems and networks, including malware and computer virus attacks, ransomware, unauthorized access, business email compromise, misuse, denial-of-service attacks, system failures and disruptions. These continued enhancements and changes, as well as changes designed to update and enhance our protective measures to address new threats, may increase the risk of a system or process failure or the creation of a gap in the associated security measures. Any such failure or gap could materially and adversely affect our business, results of operations and financial results. We devote significant resources to address security vulnerabilities through engineering more secure products, enhancing security and reliability features in our products and systems, code hardening, conducting rigorous penetration tests, deploying updates to address security vulnerabilities, regularly reviewing our service providers' security controls, reviewing and auditing our hosted services against independent security control frameworks (such as ISO 27001, SOC 2 and PCI), providing resources, such as mandatory security training, for our workforce and improving our incident response time, but security vulnerabilities cannot be totally eliminated. The cost of undertaking these efforts could reduce our operating margins, and we may be unable to implement these measures quickly enough to prevent unauthorized access into our systems and products in all circumstances. Despite our preventative efforts, there is no assurance that our security measures will provide full effective protection from such events, and actual or perceived security vulnerabilities in our products and systems may harm our reputation or lead to claims against us (and have in the past led to such claims) and could lead some customers to stop using certain products or services or to reduce or delay future purchases. If we do not make the appropriate level of investment in our technology systems and we are not able to deliver the quality of data security and privacy our customers require or that

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meet our independent security control certification requirements, our business could be adversely affected. Customers may also adopt security measures designed to protect their existing computer systems from attack, which could delay adoption of new technologies. Moreover, delayed sales, lower margins or lost customers resulting from disruptions caused by cyber-attacks, overly burdensome preventative security measures or failure to fully meet independent security control certification requirements could adversely affect our financial results, stock price and reputation.

*Some of our enterprise offerings have extended and complex sales cycles, which can make our sales cycles unpredictable.*

Sales cycles for some of our enterprise offerings, including our Adobe Experience Cloud and Adobe Experience Platform solutions and Enterprise Term License Agreements (“ETLAs”) in our Digital Media business, are multi-phased and complex, which also makes it difficult to predict when a given sales cycle will close. The complexity in these sales cycles is due to several factors, including:

- the need for our sales representatives to educate customers about the use and benefit of large-scale deployments of our products and services;
- the desire of organizations to undertake significant evaluation processes to determine their technology requirements prior to making information technology expenditures and the need for our representatives to spend a significant amount of time assisting with such evaluations;
- intensifying competition within the industry;
- the negotiation of large, complex, enterprise-wide contracts;
- the need for our customers to obtain requisition approvals from various decision makers within their organizations due to the complexity of our solutions touching multiple departments; and
- customer budget constraints, economic conditions and unplanned administrative delays.

We spend substantial time and expense on our sales efforts without assurance that potential customers will ultimately purchase our solutions. As we target our sales efforts at larger enterprise customers, these trends are expected to continue and could have a greater impact on our results of operations. Additionally, our enterprise sales pattern has historically been uneven, where a higher percentage of a quarter’s total sales occur during the final weeks of each quarter, which is common in our industry.

*Our business could be harmed if we fail to effectively manage critical strategic third-party business relationships.*

As our offerings expand and our customer base grows, our relationships with strategic partners become increasingly valuable. If our contractual relationships with these third parties were to terminate, or if we were unable to renew on favorable terms, our business could be harmed. This is especially the case when the third party’s offerings are integrated with our products and services, or where the third party’s offerings are difficult to substitute or replace. Alternative arrangements for such products and services may not be available to us on commercially reasonable terms, and we may experience business interruptions upon a transition to an alternative partner. The failure of third parties to provide acceptable products and services or to update their technology may result in a disruption to our business operations and those of our customers, which may reduce our revenues and profits, cause us to lose customers and damage our reputation.

We increasingly utilize third-party distribution platforms, such as Apple’s App Store and Google’s Play Store, for the distribution of certain of our product offerings. Although we benefit from the strong brand recognition and large user base of these distribution platforms to attract new customers, the platform owners have wide discretion to change the pricing structure, terms of service and other policies with respect to us and other developers, and may offer or promote products that compete with our product offerings. Adverse changes by these third parties could adversely affect our financial results.

*Failure of our third-party customer service and technical support providers to adequately address customers’ requests could harm our business and adversely affect our financial results.*

Our customers rely on our customer service support organization to resolve issues with our products and services. We depend heavily, and expect to continue to rely heavily, on third-party customer service and technical support representatives to provide such services. This strategy presents risks to our business since we may not be able to influence the quality of support as directly as if our own employees performed these activities. Our customers may react negatively to providing information to, and receiving support from, third-party organizations, especially if these third-party organizations are based overseas. If we encounter problems with our third-party customer service and technical support providers, our reputation may be harmed, our ability to sell our offerings could be adversely affected, and we could lose customers and associated revenue.

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*If we are unable to recruit and retain key personnel, our business may be harmed, and our attempts to operate under a hybrid work model may not be successful and adversely impact our business.*

Much of our future success depends on the continued service, availability and performance of our senior management and highly-skilled personnel across all levels of our organization. Our senior management has acquired specialized knowledge and skills with respect to our business, and the loss of any of these individuals could harm our business, especially if we are not successful in developing adequate succession plans. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel, immigration or the availability of work visas. Competition for experienced personnel in the information technology industry is intense and has recently intensified further due to industry trends in many areas where our employees are located. Further, the increased availability of hybrid or remote working arrangements has expanded the pool of companies that can compete for our employees and employment candidates. We may experience higher compensation costs to retain senior management and experienced personnel that may not be offset by improved productivity or increased sales. A hybrid work environment may also present operational, cybersecurity and workplace culture challenges. If we are unable to continue to successfully attract and retain highly skilled personnel and maintain our corporate culture in a hybrid work environment, our business may be harmed.

We continue to hire personnel in countries where exceptional technical knowledge and other expertise are offered at lower costs, which increases the efficiency of our global workforce structure and reduces our personnel related expenditures. Nonetheless, as globalization continues, competition for employees in these countries has increased, which may impact our ability to retain these employees and increase our compensation-related expenses. We may continue to expand our international operations and international sales and marketing activities, which would require significant management attention and resources. We may be unable to scale our infrastructure effectively or as quickly as our competitors in these markets, and our revenue may not increase sufficiently to offset these expected increases in costs, causing our results to suffer.

We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster innovation, teamwork and employee satisfaction. As we grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

*Failure to manage our sales, partner and distribution channels effectively could result in a loss of revenue and harm our business.*

We contract with a number of software distributors and other strategic partners, none of which are individually responsible for a material amount of our total net revenue in any recent period. Nonetheless, if an agreement with one of our distributors were terminated, any prolonged delay in securing a replacement distributor could have a negative impact on our results of operations.

Successfully managing our indirect distribution channel efforts to reach various customer segments for our products and services is a complex process across the broad range of geographies where we do business or plan to do business. Our distributors and other channel partners are independent businesses that we do not control. Notwithstanding the independence of our channel partners, we face legal risk and potential reputational harm from the activities of these third parties including, but not limited to, export control violations, workplace conditions, corruption and anti-competitive behavior.

We cannot be certain that our distribution channel will continue to market or sell our products and services effectively. If our partner and distribution channels are not successful, we may lose sales opportunities, customers and revenue. If our distributors favor our competitors' products or services for any reason, they may fail to market our products or services effectively, which would cause our results to suffer. If our OEMs through which we distribute products and services decide not to bundle our applications on their devices, our results could suffer. Further, the financial health of our distributors and partners and our continuing relationships with them are important to our success. Some of these distributors and partners may be unable to withstand adverse changes in economic conditions, which could result in insolvency, the inability of such distributors and partners to obtain credit to finance access to or purchases of our products and services, or a delay in paying their obligations to us.

We also sell some of our products and services through our direct sales force. Risks associated with this sales channel include more extended sales and collection cycles, challenges related to hiring, retaining and motivating our direct sales force, and substantial amounts of ongoing training for sales representatives. Moreover, recent hires may not be as productive as we would like, as in most cases it takes significant time for them to achieve full productivity. Our business could be seriously harmed if our expansion efforts of our direct sales do not generate a corresponding significant increase in revenue and we are unable to achieve the efficiencies we anticipate. In addition, the loss of key sales employees could impact our customer relationships and future ability to sell to certain accounts covered by such employees.

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# ***We face various risks associated with our operating as a multinational corporation.***

As a global business that generates approximately 40% of our total revenue from sales to customers outside of the Americas, we are subject to a number of risks, including:

- • inflation and actions taken by central banks to counter inflation;
- • foreign currency fluctuations and controls;
- • international and regional economic, political and labor conditions, including any instability or security concerns abroad, such as uncertainty caused by economic sanctions, trade disputes, armed conflicts and wars;
- • tax laws (including U.S. taxes on foreign subsidiaries);
- • increased financial accounting and reporting burdens and complexities;
- • changes in, or impositions of, legislative or regulatory requirements;
- • changes in laws governing the free flow of data across international borders;
- • failure of laws to protect our intellectual property rights adequately;
- • inadequate local infrastructure and difficulties in managing and staffing international operations;
- • delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers;
- • the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand our business;
- • costs and delays associated with developing products in multiple languages;
- • operating in locations with a higher incidence of corruption and fraudulent business practices; and
- • other factors beyond our control, such as terrorism, war, natural disasters, climate change and pandemics, including the COVID-19 pandemic.

Some of our third-party business partners have international operations and are also subject to these risks, and our business may be harmed if such partners are unable to appropriately manage these risks. If sales to any of our customers outside of the Americas are reduced, delayed or canceled because of any of the above factors, our revenue may decline.

# **Risks Related to Laws and Regulations**

# ***We are subject to risks associated with compliance with laws and regulations globally, which may harm our business.***

We are a global company subject to varied and complex laws, regulations and customs, both domestically and internationally. These laws and regulations relate to a number of aspects of our business, including trade protection, import and export control, anti-boycott, sanctions and embargoes, data and transaction processing security, payment card industry data security standards, records management, user-generated content hosted on websites we operate, privacy practices, data residency, corporate governance, anti-trust and competition, employee and third-party complaints, anti-corruption, gift policies, conflicts of interest, securities regulations and other regulatory requirements affecting trade and investment. The application of these laws and regulations to our business is often unclear and may at times conflict. For example, in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by U.S. regulations applicable to us, including the Foreign Corrupt Practices Act. We cannot provide assurance that our employees, contractors, agents and business partners will not take actions in violation of our internal policies or U.S. laws. Compliance with these laws and regulations may involve significant costs or require changes in our business practices that result in reduced revenue and profitability. Non-compliance could also result in fines, damages, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.

In addition, approximately 50% of our employees are located outside the United States. Accordingly, we are exposed to changes in laws governing our employee relationships in various U.S. and foreign jurisdictions, including laws and regulations regarding wage and hour requirements, fair labor standards, employee data privacy, unemployment tax rates, workers' compensation rates, citizenship requirements and payroll and other taxes, which likely would have a direct impact on our operating costs.

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# ***Increasing regulatory focus on privacy and security issues and expanding laws could impact our business models and expose us to increased liability.***

As a global company, Adobe is subject to global data protection, privacy and security laws, regulations and codes of conduct that apply to our various business units and data processing activities. These laws, regulations and codes are inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. Government officials and regulators, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. This increased scrutiny may result in new interpretations of existing laws, thereby further impacting Adobe’s business. Globally, laws such as the General Data Protection Regulation (“GDPR”) in Europe and the Personal Information Protection Law (“PIPL”) in China, and new and emerging state laws in the United States on privacy, data and related technologies, such as the California Consumer Privacy Act, the California Privacy Rights Act and the Virginia Consumer Data Protection Act, as well as industry self-regulatory codes, create new compliance obligations and expand the scope of potential liability, either jointly or severally with our customers and suppliers. While we have invested in readiness to comply with applicable requirements, the dynamic and evolving nature of these laws, regulations and codes, as well as their interpretation by regulators and courts, may affect our ability (and our enterprise customers’ ability) to reach current and prospective customers, to respond to both enterprise and individual customer requests under the laws (such as individual rights of access, correction and deletion of their personal information) and to implement our business models effectively. These laws, regulations and codes may also impact our innovation and business drivers in developing new and emerging technologies (e.g., artificial intelligence and machine learning). These requirements, among others, may impact demand for our offerings and force us to bear the burden of more onerous obligations in our contracts. Perception of our practices, products or services, even if unfounded, as a violation of individual privacy or data protection rights subjects us to public criticism, lawsuits, investigations, claims and other proceedings by regulators, industry groups or other third parties, all of which could disrupt or adversely impact our business and reputation and expose us to increased liability. Additionally, we collect and store information on behalf of our business customers and if our customers fail to comply with contractual obligations or applicable laws, it could result in litigation or reputational harm to us.

Transferring personal information across international borders is complex and subject to legal and regulatory requirements as well as active litigation and enforcement in a number of jurisdictions around the world, each of which could have an adverse impact on our ability to process and transfer personal data as part of our business operations. For example, European data transfers outside the European Economic Area are highly regulated and litigated. The mechanisms that we and many other companies rely upon for European data transfers (e.g., Standard Contractual Clauses) are the subject of regulatory interpretation and judicial decisions by the Court of Justice of the European Union. We are closely monitoring for developments related to valid transfer mechanisms available for transferring personal data outside the European Economic Area (including the Trans-Atlantic Data Privacy Framework) and other countries that have similar trans-border data flow requirements and adjusting our practices accordingly. The open judicial questions and regulatory interpretations related to the validity of transfers using Standard Contractual Clauses have resulted in some changes in the obligations required to provide our services in the European Union and could expose us to potential sanctions and fines for non-compliance. Several other countries, including China, Australia, New Zealand, Brazil, Hong Kong and Japan, have also established specific legal requirements for cross-border transfers of personal information and for data localization (i.e., where personal data must remain stored in the country). If other countries implement more restrictive regulations for cross-border data transfers or do not permit data to leave the country of origin, such developments could adversely impact our business and our enterprise customers’ business, our financial condition and our results of operations in those jurisdictions.

# ***Our intellectual property portfolio is a valuable asset and we may not be able to protect our intellectual property rights, including our source code, from infringement or unauthorized copying, use or disclosure.***

Our intellectual property portfolio is a valuable asset. Infringement or misappropriation of our patents, trademarks, trade secrets, copyrights and other intellectual property rights could result in lost revenues and ultimately reduce their value. Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. We actively combat software piracy as we enforce our intellectual property rights, but we nonetheless lose significant revenue due to illegal use of our software. If piracy activities continue at historical levels or increase, they may further harm our business. We apply for patents in the United States and internationally to protect our newly created technology and if we are unable to obtain patent protection for the technology described in our pending patent, or if the patent is not obtained timely, this could result in revenue loss, or have other adverse effects on operations and harm our business. We offer our products and services in foreign countries and we may seek intellectual property protection from those foreign legal systems. Some of those foreign countries may not have as robust or comprehensive of intellectual property protection laws and schemes as those offered in the United States, and the mechanisms to enforce intellectual property rights may be inadequate to protect our technology, which could harm our business. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements with our customers, contractors, vendors and partners. However, there is a risk that our confidential information and trade

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secrets may be disclosed or published without our authorization, and in these situations, enforcing our rights may be difficult or costly.

If unauthorized disclosure of our source code occurs through security breach, cyber-attack or otherwise, we could lose future trade secret protection for that source code. Such loss could make it easier for third parties to compete with our products by copying functionality, which could cause us to lose customers and could adversely affect our revenue and operating margins.

# ***We may incur substantial costs defending against third parties alleging that we infringe their proprietary rights.***

We have been, are currently and may in the future be subject to claims, negotiations and complex, protracted litigation relating to disputes regarding the validity or alleged infringement of third-party intellectual property rights, including patent rights. Intellectual property disputes and litigation are typically costly and can be disruptive to our business operations by diverting the attention of management and key personnel. We may not prevail in every lawsuit or dispute. Third-party intellectual property disputes, including those initiated by patent assertion entities, could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from offering certain products or services, subject us to injunctions restricting our sales, 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. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products, in some cases to fulfill contractual obligations with our customers. Any of these occurrences could significantly harm our business.

# ***Changes in accounting principles, or interpretations thereof, could have a significant impact on our financial position and results of operations.***

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles, how the principles are interpreted, or the adoption of new accounting standards can have a significant effect on our reported results, could retroactively affect previously reported transactions, and may require that we make significant changes to our systems, processes and controls.

Changes resulting from these new standards may result in materially different financial results and may require that we change how we process, analyze and report financial information and that we change financial reporting controls. *For additional information regarding new standards that may have significant impact to our condensed consolidated financial statements, see the section titled “Adopted Accounting Guidance and Accounting Pronouncements Not Yet Effective” in Note 1 of our notes to condensed consolidated financial statements.*

Such changes in accounting principles may have an adverse effect on our business, financial position and results of operations, or cause an adverse deviation from our revenue and profitability targets, which may negatively impact our financial results.

# ***Changes in tax rules and regulations or interpretations thereof may adversely affect our effective tax rates.***

We are a United States-based multinational company subject to tax in multiple domestic and foreign tax jurisdictions. Significant judgment is required in determining our current provision for income taxes and deferred tax assets or liabilities. Tax laws in the United States and in foreign tax jurisdictions are dynamic and subject to change as new laws are passed and new interpretations are issued. The applicability and impact of changes in tax laws and interpretations thereof could adversely affect our effective income tax rate and cash flows in future years.

Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates are likely to be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, changes in jurisdictions in which our profits are determined to be earned and taxed, changes in the valuation of our deferred tax assets and liabilities, changes in or interpretation of tax rules and regulations in the jurisdictions in which we do business, or unexpected negative changes in business and market conditions that could reduce certain tax benefits.

In addition, the United States and other countries and jurisdictions in which we conduct business, including those covered by governing bodies that enact tax laws applicable to us, such as the European Commission of the European Union, could make changes to relevant tax, accounting or other laws and interpretations thereof that have a material impact to us. These countries, governmental bodies and intergovernmental economic organizations such as the Organization for Economic Cooperation and Development, have or could make unprecedented assertions about how taxation is determined and, in some cases, have proposed or enacted new laws that are contrary to the way in which rules and regulations have historically been interpreted and applied. In the current global tax policy environment, any changes in laws, regulations and interpretations could

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adversely affect our effective tax rates, cause us to respond by making changes to our business structure, or result in other costs to us which could adversely affect our operations and financial results.

Moreover, we are subject to the examination of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from these examinations. We believe our tax estimates to be reasonable; however, we cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our financial position and results of operations.

# ***Contracting with government entities exposes us to additional risks inherent in the government procurement process.***

We provide products and services, directly and indirectly, to a variety of domestic and foreign government entities, which introduces certain risks, including extended sales and collection cycles, varying governmental budgeting processes and adherence to complex procurement regulations and other government-specific contractual requirements. We have been, are currently and may in the future be subject to audits and investigations relating to our government contracts and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.

# **Risks Related to Financial Performance**

# ***If our customers fail to renew subscriptions in accordance with our expectations, our future revenue and operating results could suffer, and our subscription offerings may create additional risk related to the timing of revenue recognition.***

Our offerings are typically subscription-based, pursuant to product and service agreements. Since our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period, which typically ranges from 1 to 36 months, our customers may not renew their subscriptions at the same or a higher level of service, for the same number of seats or for the same duration of time, if at all. Our varied customer base and flexible duration complicates our ability to precisely forecast renewal rates. Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our services, our ability to continue enhancing features and functionality, the reliability (including uptime) of our subscription offerings, the prices of offerings and competitors' offerings, the actual or perceived information security of our systems and services, decreases in the size of our customer base, reductions in our customers' spending levels or declines in customer activity as a result of general economic conditions or uncertainty in financial markets, including as a result of a global health crisis and geopolitical conflict, which has affected and may continue to affect certain sectors of the economy disproportionately. If our customers do not renew their subscriptions or if they renew on terms less favorable to us, our revenue may decline.

We generally recognize revenue from our subscription offerings ratably over the terms of their subscription agreements. As a result, most of the subscription revenue we report in each quarter is the result of subscription agreements entered into during previous quarters. Any reduction in new or renewed subscriptions in a quarter may not be reflected in our revenue results until a later quarter and may decrease our revenue in future quarters. Lower sales, reduced demand for our products and services, and increases in our attrition rate may not be fully reflected in our results of operations until future periods. Our subscription model could also make it difficult for us to rapidly increase our revenue from subscription-based or hosted services through additional sales in any period, as revenue from new customers will be recognized over the applicable subscription term.

Additionally, in connection with our sales efforts to enterprise customers, a number of factors could affect our revenue, including longer-than-expected sales and implementation cycles, potential deferral of revenue and alternative licensing arrangements. If any of our assumptions about revenue from our subscription-based offerings prove incorrect, our actual results may vary materially from those anticipated.

# ***We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.***

Our operating results are subject to fluctuations in foreign currency exchange rates due to the global scope of our business. Geopolitical and economic events, including war, trade disputes, economic sanctions and emerging market volatility, and associated uncertainty have caused, and may in the future cause currencies to fluctuate. We attempt to mitigate a portion of these risks through foreign currency hedging based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We regularly review our hedging program and make adjustments that we believe are appropriate. Our hedging activities have not and may not in the future offset more than a portion of the adverse financial impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely affect our financial condition or results of operations.

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*If our goodwill or amortizable intangible assets become impaired, then we could be required to record a significant charge to earnings.*

GAAP requires us to test for goodwill impairment at least annually. In addition, we review our goodwill and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable, including declines in stock price, market capitalization or cash flows, and slower growth rates in our industry. Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets was determined, negatively impacting our results of operations.

*We have issued $3.65 billion of notes in debt offerings and may incur other debt in the future, which may adversely affect our financial condition and future financial results.*

We have $3.65 billion in senior unsecured notes outstanding. We also have a $1.5 billion senior unsecured revolving credit agreement and a $3.5 billion delayed draw term loan agreement (together, “Credit Agreements”), both of which are currently undrawn. This debt may adversely affect our financial condition and future financial results by, among other things:

- increasing our vulnerability to adverse changes in general economic and industry conditions;
- requiring the dedication of a portion of our expected cash flows from operations to service our debt, thereby reducing the amount of expected cash flows available for other purposes, including capital expenditures and acquisitions; and
- limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

Our senior unsecured notes and our Credit Agreements impose restrictions on us and require us to maintain compliance with specified covenants. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the noteholders or lenders, then, subject to applicable cure periods, any outstanding debt may be declared immediately due and payable.

In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our debt and equity securities, as well as the potential costs associated with a refinancing of our debt. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our Credit Agreements could increase. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and affect the terms of any such financing.

*Our investment portfolio may become impaired by deterioration of the financial markets.*

Our cash equivalent and short-term investment portfolio as of March 3, 2023 consisted of asset-backed securities, corporate debt securities, money market funds, municipal securities, time deposits, U.S. agency securities and U.S. Treasury securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

Should financial market conditions worsen in the future, including from impacts of inflationary pressures and rising interest rates or as a result of other geopolitical pressures, such as the Russia-Ukraine war, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of March 3, 2023, we had no material impairment charges associated with our short-term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions, market liquidity or credit availability, and we can provide no assurance that our investment portfolio will remain materially unimpaired.

## **General Risk Factors**

*Catastrophic events, including global pandemics such as the COVID-19 pandemic, may disrupt our business and adversely affect our financial condition and results of operations.*

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and website for our development, marketing, operations, support, hosted services and sales activities. In addition, some of our businesses rely on third-party hosted services, and we do not control the operation of third-party data center facilities serving our customers from around the world, which increases our vulnerability. A disruption, infiltration or failure of these systems or third-party hosted services in the event of a major earthquake, fire, flood, tsunami or other weather

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event, power loss, telecommunications failure, software or hardware malfunctions, pandemics (including the COVID-19 pandemic), cyber-attack, war, terrorist attack or other catastrophic event that our disaster recovery plans do not adequately address, could cause system interruptions, reputational harm, loss of intellectual property, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data. Any of these events could prevent us from providing our products and services or could negatively impact a country or region in which we sell our products, which could in turn decrease that country's or region's demand for our products and services. Our corporate headquarters, a significant portion of our research and development activities, certain of our data centers and certain other critical business operations are located in the San Francisco Bay Area, and additional facilities where we conduct significant operations are located in the Salt Lake Valley Area, both of which are near major earthquake faults. A catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event, such as the COVID-19 pandemic.

The occurrence of regional epidemics or a global pandemic, such as the COVID-19 pandemic, have had and may continue to have an adverse effect on how we and our customers are operating our businesses and our operating results. Our operations have also been and may in the future be negatively affected by a range of external factors related to the pandemic that are not within our control, including the emergence and spread of more transmissible variants. The extent to which global pandemics, such as the COVID-19 pandemic, impact our financial condition or results of operations will depend on factors such as the duration and scope of the pandemic, as well as whether there is a material impact on the businesses or productivity of our customers, partners, employee, suppliers and other partners. To the extent that an epidemic or pandemic harms our business and results of operations, many of the other risks described in this Part II, Item 1A of this report may be heightened.

#### ***Climate change may have a long-term impact on our business.***

While we seek to partner with organizations that mitigate their business risks associated with climate change, we recognize that there are inherent risks wherever business is conducted. Access to clean water and reliable energy in the communities where we conduct our business, whether for our offices or for our vendors, is a priority. Our major sites in California, Utah and India are vulnerable to climate change effects. While this danger has a low-assessed risk of disrupting normal business operations, it has the potential impact on employees' abilities to commute to work or to work from home and stay connected effectively. Climate-related events, including the increasing frequency of extreme weather events and their impact on U.S., India and other major regions' critical infrastructure, have the potential to disrupt our business, our third-party suppliers, and/or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. To inform our disclosures and take potential action as appropriate, Adobe is aligned with the guidelines of the Financial Stability Board's Task Force on Climate-related Financial Disclosures recommendations and the Sustainability Accounting Standards Board and the Global Reporting Initiative environmental metrics. Regulatory developments, changing market dynamics and stakeholder expectations regarding climate change may impact our business, financial condition and results of operations.

#### ***Uncertainty about current and future economic conditions and other adverse changes in general political conditions in any of the major countries in which we do business could adversely affect our operating results.***

As our business has grown, we have become increasingly subject to the risks arising from adverse changes in economic and political conditions, both domestically and globally, including trends toward protectionism and nationalism, other unfavorable changes in economic conditions, such as inflation, rising interest rates, fluctuations in foreign currency exchange rates or a recession, and other events beyond our control, such as economic sanctions, natural disasters, pandemics, including the COVID-19 pandemic, epidemics, political instability, armed conflicts and wars, including the Russia-Ukraine war. Worsening economic conditions have had and may continue to have an adverse impact on the businesses and financial health of many of our customers and hurt their creditworthiness. As a result, current or potential customers may be unable to fund software purchases, which could cause them to delay, decrease or cancel purchases of our products and services. Uncertainty about the effects of current and future economic and political conditions on us, our customers, suppliers and partners makes it difficult for us to forecast operating results and to make decisions about future investments. If economic growth in countries where we do business slows, customers may delay or reduce technology purchases, advertising spending or marketing spending. This could result in reductions in sales of our products and services, more extended sales cycles, slower adoption of new technologies and increased price competition. Among our customers are government entities, including the U.S. federal government, and our revenue could decline if spending cuts impact the government's ability to purchase our products and services. Deterioration in economic conditions in any of the countries in which we do business could also cause slower or impaired collections on accounts receivable, which may adversely impact our liquidity and financial condition. A disruption in financial markets could impair our banking partners, on which we rely for operating cash management and derivative programs. Furthermore, if our customers are negatively impacted by these disruptions, such as being unable to access their existing cash to

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fulfill their payment obligations to us, our business may be negatively impacted. The occurrence of any of these events could harm our business, financial condition and results of operations.

# ***Revenue, margin or earnings shortfalls or the volatility of the market generally may cause the market price of our stock to decline.***

In the past, the market price for our common stock experienced significant fluctuations and it may do so in the future. A number of factors may affect the market price for our common stock, such as:

- • shortfalls in, or changes in expectations about, our revenue, margins, earnings, Annualized Recurring Revenue ('ARR'), sales of our Digital Experience offerings, or other key performance metrics;
- • changes in estimates or recommendations by securities analysts;
- • whether our results meet analysts' expectations;
- • compression or expansion of multiples used by investors and analysts to value high technology SaaS companies;
- • the announcement of new products or services, product enhancements, service introductions, strategic alliances or significant agreements by us or our competitors;
- • the loss of large customers or our inability to increase sales to existing customers, retain customers or attract new customers;
- • recruitment or departure of key personnel;
- • variations in our or our competitors' results of operations, changes in the competitive landscape generally and developments in our industry;
- • general socio-economic, political or market conditions;
- • macroeconomic conditions and the economic impact of the COVID-19 pandemic, inflation and rising interest rates and global conflicts, including the Russia-Ukraine war; and
- • unusual events such as significant acquisitions by us or our competitors, divestitures, litigation, regulatory actions and other factors, including factors unrelated to our operating performance.

In addition, the market for technology stocks or the stock market in general may experience uneven investor confidence, which may cause the market price for our common stock to decline for reasons unrelated to our operating performance. Volatility in the market price of a company’s securities for a period of time may increase the company’s susceptibility to securities class action litigation. Oftentimes, this type of litigation is expensive and diverts management’s attention and resources which may adversely affect our business.

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# **ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

Below is a summary of stock repurchases for the three months ended March 3, 2023. *See Note 11 of our notes to condensed consolidated financial statements for information regarding our stock repurchase program.*

| Period | Total Number of Shares Repurchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Approximate Dollar Value that May Yet be Purchased Under the Plans (1) |
| --- | --- | --- | --- | --- |
| (in millions, except average price per share) |  |  |  |  |
| Beginning repurchase authority |  |  |  | $7,133 |
| December 3, 2022-December 30, 2022 |  |  |  |  |
| Accelerated share repurchase | 3.2 | $ - | 3.2 | $(1,400) (2) |
| Other shares repurchased | 1.8 | $330.52 | 1.8 | $(583) |
| December 31, 2022-January 27, 2023 |  |  |  |  |
| Shares repurchased | - | $ - | - | $ - |
| January 28, 2023-March 3, 2023 |  |  |  |  |
| Shares repurchased | - | $ - | - | $ - |
| Total | 5.0 |  | 5.0 | $5,150 |

$^{(1)}$ In December 2020, the Board of Directors granted authority to repurchase up to $15 billion in our common stock through the end of fiscal 2024.

$^{(2)}$ In December 2022, we entered into an accelerated share repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1.4 billion and received an initial delivery of 3.2 million shares of our common stock. Subsequent to March 3, 2023, the accelerated share repurchase agreement was settled, which resulted in total repurchases of 4.0 million shares at an average purchase price of $348.46.

# **ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

# **ITEM 5. OTHER INFORMATION**

None.

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# **ITEM 6. EXHIBITS**

# **INDEX TO EXHIBITS**

| Exhibit Number | Exhibit Description | Incorporated by Reference |  |  | SEC File No. | Filed Herewith |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | Form | Filing Date | Exhibit Number |  |  |
| 3.1 | Restated Certificate of Incorporation of Adobe | 8-K | 4/26/11 | 3.3 | 000-15175 |  |
| 3.2 | Certificate of Amendment to Restated Certificate of Adobe | 8-K | 10/9/18 | 3.1 | 000-15175 |  |
| 3.3 | Amended and Restated Bylaws | 8-K | 1/18/22 | 3.1 | 000-15175 |  |
| 10.1 | Term Loan Credit Agreement, dated as of January 19, 2023, among Adobe Inc., Bank of America, N.A., as administrative agent, and the other lenders party thereto | 8-K | 1/19/23 | 10.1 | 000-15175 |  |
| 10.2 | 2023 Performance Share Program pursuant to 2019 Equity Incentive Plan* | 8-K | 1/26/23 | 10.2 | 000-15175 |  |
| 10.3 | Form of 2023 Performance Share Award Grant Notice and Award Agreement pursuant to 2023 Performance Share Program and 2019 Equity Incentive Plan* | 8-K | 1/26/23 | 10.3 | 000-15175 |  |
| 10.4 | 2022 Performance Share Program, as amended and restated* | 8-K | 1/26/23 | 10.4 | 000-15175 |  |
| 10.5 | 2023 Executive Annual Incentive Plan* | 8-K | 1/26/23 | 10.5 | 000-15175 |  |
| 10.6 | Form of Restricted Stock Unit Grant Notice and Award Agreement pursuant to 2019 Equity Incentive Plan (for awards granted on or after January 24, 2023)* |  |  |  |  | X |
| 10.7 | Form of Director Grant Restricted Stock Unit Grant Notice and Award Agreement pursuant to 2019 Equity Incentive Plan* |  |  |  |  | X |
| 31.1 | Certification of Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934 |  |  |  |  | X |
| 31.2 | Certification of Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934 |  |  |  |  | X |
| 32.1 | Certification of Chief Executive Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934† |  |  |  |  | X |
| 32.2 | Certification of Chief Financial Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934† |  |  |  |  | X |
| 101.INS | Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |  |  |  |  | X |
| 101.SCH | Inline XBRL Taxonomy Extension Schema |  |  |  |  | X |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation |  |  |  |  | X |
| 101.LAB | Inline XBRL Taxonomy Extension Labels |  |  |  |  | X |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation |  |  |  |  | X |

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| Exhibit Number | Exhibit Description | Incorporated by Reference |  |  | SEC File No. | Filed Herewith |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | Form | Filing Date | Exhibit Number |  |  |
| 101.DEF | Inline XBRL Taxonomy Extension Definition |  |  |  |  | X |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |  |  |  |  |  |

* Compensatory plan or arrangement.

† The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Adobe Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

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# **SIGNATURE**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ADOBE INC.

By: /s/ DANIEL DURN  
Daniel Durn  
Executive Vice President and  
Chief Financial Officer  
(Principal Financial Officer)

Date: March 29, 2023

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## SUMMARY OF TRADEMARKS

The following trademarks of Adobe Inc. or its subsidiaries, which may be registered in the United States and/or other countries, are referenced in this Form 10-Q:

- Acrobat
- Acrobat Scan
- Acrobat Sign
- Adobe
- Adobe Analytics
- Adobe Audience Manager
- Adobe Campaign
- Adobe Commerce
- Adobe Experience Cloud
- Adobe Express
- Adobe Firefly
- Adobe Stock
- Adobe Target
- Behance
- Creative Cloud
- Document Cloud
- Journey Optimizer
- Marketo
- Workfront

All other trademarks are the property of their respective owners.

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