Summary
Adobe reported record first-quarter fiscal 2021 revenue of $3.91 billion, up 26% from the prior-year quarter. GAAP gross profit was $3.46 billion, up 31%. GAAP operating income reached $1.45 billion, up 55%. GAAP net income was $1.26 billion, up 32%. GAAP diluted earnings per share was $2.61, up 33%. Gross margin was 88.6%, up 3.2 percentage points, and operating margin was 37.2%, up 6.9 percentage points. The quarter contained an extra week because fiscal 2021 is a 53-week year. Revenue growth was driven by strong demand across Digital Media offerings and growth in software-based subscription revenue in Digital Experience.
Cash generation remained strong. Operating cash flow was $1.77 billion, up 34% year over year. The increase was primarily due to higher net income adjusted for the net effect of non-cash items. Capital expenditures were $59 million, down 37%. Remaining performance obligations exiting the quarter were $11.61 billion, up 17% year over year. Deferred revenue was $4.29 billion. On a non-GAAP basis, operating income was $1.83 billion, net income was $1.52 billion, and diluted earnings per share was $3.14, up 38%. Adobe repurchased approximately 1.9 million shares during the quarter.
Digital Media ARR increased $435 million quarter over quarter to $10.69 billion. Creative ARR grew to $9.12 billion, and Document Cloud ARR grew to $1.57 billion. Digital Media ARR was up from $10.26 billion at the end of fiscal 2020. Creative ARR rose from $8.78 billion, and Document Cloud ARR rose from $1.47 billion. The growth was primarily due to new user adoption of Creative Cloud and Adobe Document Cloud offerings. The company reported record revenue across Creative Cloud, Document Cloud and Experience Cloud. The Workfront acquisition closed in December 2020 and began contributing to the Digital Experience segment.
For the second quarter of fiscal 2021, Adobe targets Digital Media segment revenue growth of 21% year over year, with $450 million of net new Digital Media ARR. Digital Experience segment revenue is targeted to grow 18%, and Digital Experience subscription revenue is targeted to grow 20%. The GAAP earnings per share target is $2.09, and the non-GAAP target is $2.81. The GAAP tax rate target is 19.5%, and the non-GAAP tax rate target is 16%. The company expects 482 million shares. The second-quarter targets factor in the strong first-quarter business performance.
For the full fiscal year 2021, Adobe raised its targets. Digital Media segment revenue is expected to grow 22%, with $1.8 billion of net new Digital Media ARR. Digital Experience segment revenue is expected to grow 20%, and Digital Experience subscription revenue is expected to grow 23%. The full-year GAAP earnings per share target is $9.13, and the non-GAAP target is $11.85. The full-year GAAP tax rate target is 17.5%, and the non-GAAP tax rate target is 16%. The company expects 481 million shares. The updated fiscal year targets factor in the strong first-quarter business performance and the momentum reflected in the second-quarter targets.
Risks remain. The COVID-19 pandemic continues to create uncertainty about the duration and the broader macroeconomic recovery. Adobe cites competition, information security and privacy, potential interruptions in hosted services, cyber-attacks, complex sales cycles, and the timing of revenue recognition. The company also flags risks related to integrating acquisitions such as Workfront and realizing their anticipated benefits. Forward-looking statements also mention failure to compete effectively, failure to develop, acquire, market and offer products and services that meet customer requirements, introduction of new technology, fluctuations in subscription renewal rates, changes in accounting principles and tax regulations, and uncertainty in financial markets. The effective tax rate rose by approximately 16 percentage points in the quarter, driven by lower tax benefits from stock-based compensation and a change in the geographic mix of international income. CFO John Murphy intends to retire in 2021, and Adobe is searching for a successor. Adobe expects to file its quarterly report for the period ended March 5, 2021 in late March or early April 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.09B | $3.42B | -9.7% | $3.09B | ±0.0% |
| Gross profit | $2.64B | $3.00B | -11.9% | $2.64B | ±0.0% |
| Gross margin | 85.4% | 87.5% | -2.1 pp | 85.4% | ±0.0 pp |
| Sales & marketing | $857.0M | $941.0M | -8.9% | $857.0M | ±0.0% |
| General & administrative | $271.0M | $243.0M | +11.5% | $271.0M | ±0.0% |
| Total operating expenses | $1.70B | $1.78B | -4.4% | $1.70B | ±0.0% |
| Operating income (loss) | $937.0M | $1.22B | -22.9% | $937.0M | ±0.0% |
| Operating margin | 30.3% | 35.5% | -5.2 pp | 30.3% | ±0.0 pp |
| Net income (loss) | $955.0M | $2.25B | -57.6% | $955.0M | ±0.0% |
| Net margin | 30.9% | 65.7% | -34.8 pp | 30.9% | ±0.0 pp |
| Diluted EPS | $1.96 | $4.64 | -$2.68 | $1.96 | ±$0.00 |
Risks
The pandemic has materially affected how Adobe and its customers operate, and the duration and extent of impact on future results remains uncertain. MD&A notes digital tailwinds benefited the business, but broader macroeconomic recovery and customer purchasing delays, extended payment terms, and reduced subscription value or duration could still harm future sales.
Adobe has previously disclosed unauthorized access to systems and software that exposed end users' authentication, payment, and personal information. Work-from-home arrangements compound phishing and other risks, and critical vulnerabilities could lead to liability, lost customers, and revenue or margin harm.
Adobe increasingly builds AI into offerings, and social or ethical issues related to AI may cause reputational harm, competitive harm, or legal liability. Potential government regulation of AI ethics could increase R&D burden and slow adoption.
Products or platforms used to create or disseminate misleading content such as DeepFakes may damage Adobe's brand and expose it to defamation, publicity, privacy, and personal injury claims. Failure to respond appropriately could cause users to lose confidence and harm financial results.
Adobe acquired Workfront in December 2020 and began integrating it into Digital Experience in Q1 FY2021; MD&A attributes part of the $181 million, or 24%, Digital Experience revenue increase to Workfront. Integration risks include failure to achieve strategic goals, loss of key personnel or customers, and disruption to ongoing business.
Enterprise offerings including Experience Cloud and ETLAs have extended, complex, multi-phased sales cycles, and COVID-19 restrictions have prevented in-person negotiation. A higher percentage of quarterly sales historically occurs in the final weeks, making it difficult to predict when a sales cycle will close.
Global data protection and privacy laws such as GDPR, CCPA/CPRA, and Virginia CDPA, plus the invalidation of Privacy Shield, create evolving compliance obligations and potential fines. These rules may affect Adobe's ability to transfer personal data, reach customers, and develop AI/ML offerings.
Adobe depends on senior management and highly skilled personnel, and competition is intense in locations where employees work. COVID-19 travel and immigration restrictions plus higher compensation costs may impair hiring and retention.
Uncertainty about economic and political conditions, including the pandemic, may cause customers to delay, decrease, or cancel software purchases and reduce advertising spending. Adobe has already experienced a global decline in advertising spend as the pandemic continues, and government spending cuts could reduce revenue.
Adobe's effective tax rate increased by approximately 16 percentage points in Q1 FY2021 vs year-ago quarter, mainly due to lower stock-based compensation tax benefits and a geographic mix change from its corporate tax trading structure. Changes in tax laws or OECD assertions could further adversely affect its effective tax rate.
Major Adobe sites in California, Utah, and India are vulnerable to climate change effects such as drought and wildfires. While assessed as low risk, power shutoffs and extreme weather could disrupt employees' ability to commute or work from home and add costs.
SaaS KPIs
All quarters →Creative ARR
Document Cloud ARR
Digital Media ARR
Remaining Performance Obligation (RPO)
Summary, forecast, risks and KPIs are extracted from ADOBE INC.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.