Summary
Adobe's FY2010 second quarter revenue was $943.04 million, up 33.8% from the prior-year quarter. The company reported record revenue for the quarter. Gross profit rose 32.0% to $835.20 million. Gross margin slipped 1.2 percentage points to 88.6%. Operating income climbed 40.9% to $227.28 million, and operating margin improved 1.2 percentage points to 24.1%. Net income increased 17.9% to $148.61 million. Diluted EPS was $0.28, up $0.04. The quarter included the first full quarter of Omniture, which Adobe acquired in October 2009.
For the first six months of fiscal 2010, revenue was $1.80 billion, up 20.8% year over year. Gross profit was $1.60 billion, up 19.6%. Gross margin was 89.1%, down 0.9 percentage points. Operating income was $404.12 million, up 9.4%. Operating margin was 22.4%, down 2.3 percentage points. Net income was $275.76 million, down 2.4%. Diluted EPS was $0.52, down $0.01. Operating cash flow for the six months was $510.89 million, down 18.6%. Capital expenditures for the six months were $75.18 million, up 186.6%. Deferred revenue at the end of the quarter was $362.57 million, up 95.8% from the prior-year quarter. The six-month period benefited from an extra week in the first quarter of fiscal 2010 due to Adobe's 53-week fiscal year.
The quarter featured the launch of Creative Suite 5 at the end of April 2010. Management said CS5 revenue has grown approximately 15% product cycle-to-date compared with CS4. CS4 revenue lagged CS3 by approximately 17% at the end of the second quarter, an improvement of 3 percentage points from the end of the first quarter. Omniture user transactions grew to 1.26 trillion, up 12% year over year. Shippable backlog was approximately 7% of second quarter revenue. The Omniture business maintained strong momentum in the quarter. The Platform and Print and Publishing segments also reported revenue in the quarter. The Knowledge Worker and Enterprise segments contributed to growth.
Management expects the strength in CS5 demand and revenue to continue through the remainder of fiscal 2010, assuming a stable economic environment in major markets. The company did not provide specific revenue or earnings guidance for the next quarter or the full fiscal year in this filing. Adobe completed its annual goodwill impairment test in the second quarter and found no impairment. The company flagged several risks: revenue recognition judgments for multiple element arrangements, estimates for product returns and price protection, channel inventory levels, foreign currency fluctuations, and the integration of Omniture. The company also noted that its revenue recognition for multiple element arrangements could change as go-to-market strategies evolve. Restructuring activities continued under the fiscal 2009 plan, with charges for facility closures and termination benefits. Adobe also issued senior notes in February 2010 and repaid its credit facility. The company's credit facility has no outstanding balance.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2010 | Q1 FY2010 | QoQ | Q2 FY2009 | YoY |
|---|---|---|---|---|---|
| Revenue | $943.0M | $786.4M | +19.9% | $704.7M | +33.8% |
| Gross profit | $835.2M | $709.0M | +17.8% | $632.7M | +32.0% |
| Gross margin | 88.6% | 90.2% | -1.6 pp | 89.8% | -1.2 pp |
| Sales & marketing | $321.0M | $249.5M | +28.7% | $243.2M | +32.0% |
| General & administrative | $90.0M | $74.1M | +21.5% | $70.8M | +27.0% |
| Total operating expenses | $607.9M | $501.1M | +21.3% | $471.3M | +29.0% |
| Operating income (loss) | $227.3M | $207.9M | +9.3% | $161.4M | +40.9% |
| Operating margin | 24.1% | 26.4% | -2.3 pp | 22.9% | +1.2 pp |
| Net income (loss) | $148.6M | $156.4M | -5.0% | $126.1M | +17.9% |
| Net margin | 15.8% | 19.9% | -4.1 pp | 17.9% | -2.1 pp |
| Diluted EPS | $0.28 | $0.30 | -$0.02 | $0.24 | +$0.04 |
Risks
Adobe faces intense competition from Microsoft, Google, Oracle, Apple and open source offerings, including Microsoft XPS and Office PDF features, Microsoft Expression Studio, Silverlight, JavaFX, and HTML5, which could harm its competitive position and results of operations.
Adobe is transitioning to SaaS and on-demand models and expanding into enterprise, government, mobile and non-PC device markets where it has limited operating history; market acceptance, reliability, privacy and data management concerns could negatively impact results.
The October 2009 Omniture acquisition for approximately $1.8 billion carries integration risks including retaining key personnel and customers, integrating technologies and controls, and achieving anticipated synergies.
The economic downturn and continued uncertainty in financial markets, including recent developments in certain European countries, could cause customers to delay or reduce technology, advertising and marketing spending, leading to longer sales cycles and increased price competition.
Three distributors, Ingram Micro, Softbank and Tech Data, represented 17%, 8% and 7% of net revenue for the second quarter of fiscal 2010, respectively; termination or financial weakness of these distributors could disrupt distribution and harm revenue.
Omniture collects and uses website visitor data, and Adobe relies on customer representations regarding privacy law compliance; actual or perceived privacy violations, unauthorized data disclosure or new privacy laws could lead to liability, lost customers and reputational harm.
Critical vulnerabilities have been identified in certain Adobe products, and security breaches or attacks on Adobe or third-party hosted services could lead to reduced revenues, liability claims, customer defection and harm to reputation.
Adobe issued $1.5 billion of senior unsecured notes in the first quarter of fiscal 2010 and has a $1.0 billion revolving credit facility; debt service, covenant compliance and potential credit rating downgrades could reduce financial flexibility.
Adobe early adopted new multiple-deliverable revenue accounting in the first quarter of fiscal 2010 and expects evolving go-to-market strategies; changes in VSOE, TPE or BESP assumptions could cause future revenue recognition to differ materially from the current period.
Adobe completed its annual goodwill impairment test in the second quarter of fiscal 2010 with no impairment, but a decline in stock price, market capitalization, future cash flows or slower industry growth could require a significant charge to earnings.
Over 50% of total revenue comes from outside the Americas and approximately 44% of employees are located outside the U.S., exposing Adobe to foreign currency fluctuations, tax laws, regulatory requirements and local business practice risks.
The CS5 launch drove record Q2 fiscal 2010 revenue, but CS4 revenue lagged CS3 revenue by approximately 17% at the end of the second quarter, and future results depend on timely product introductions and platform transitions.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from ADOBE INC.'s SEC filings for Q2 FY2010 (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 8, 2026.