Summary
Adobe closed fiscal 2021 third quarter with record revenue of $3.94 billion, up 22.0% from the prior-year quarter. GAAP diluted EPS was $2.52, up 27.9%, and non-GAAP diluted EPS was $3.11, up 21%. Gross profit rose to $3.47 billion, up 23.9%, and gross margin improved to 88.1% from 86.8%. Operating income was $1.44 billion, up 34.8%, with operating margin at 36.6%, up from 33.1%. Net income was $1.21 billion, up 26.9%. Non-GAAP operating income was $1.81 billion and non-GAAP net income was $1.50 billion.
Digital Media ARR increased $455 million quarter over quarter to $11.67 billion. Creative ARR grew to $9.87 billion and Document Cloud ARR grew to $1.79 billion. Total Digital Media ARR stood at $11.67 billion at quarter end, up from $10.26 billion at the end of fiscal 2020. Digital Media segment revenue grew 23% year over year, Creative revenue grew 21%, and Document Cloud revenue grew 31%. Digital Experience segment revenue grew 26%, with subscription revenue up 29%. Remaining performance obligations exiting the quarter were $12.63 billion, up 22.1% year over year. Deferred revenue was $4.39 billion. By region, revenue grew 20% in the Americas, 25% in EMEA, and 26% in APAC.
Cash generation was mixed. Operating cash flow for the quarter was $1.40 billion, down 2.2% from the prior-year quarter, while operating cash flow for the nine months ended September 3, 2021 was $5.16 billion, up 30.9%. Capital expenditures were $95 million in the quarter, down 24.6%, and $249 million for the nine months, down 21.2%. Adobe repurchased approximately 1.7 million shares during the quarter. Through the first nine months, the company repurchased approximately 5.6 million shares at an average price of $508.52. In August 2021, Adobe agreed to acquire Frame.io for approximately $1.28 billion, a deal expected to close in the fourth quarter of fiscal 2021 subject to regulatory approvals. The company had no outstanding borrowings under its $1 billion revolving credit facility as of September 3, 2021.
Management's fourth-quarter targets point to continued growth. Digital Media segment revenue is targeted to grow 20% year over year, with $550 million of net new Digital Media ARR. Digital Experience segment revenue is targeted to grow 22%, and Digital Experience subscription revenue is targeted to grow 26%. Non-GAAP diluted EPS is targeted at $3.18, and the company expects a share count of 480 million shares. The outlook factors current macroeconomic conditions and expected year-end seasonal strength. Adobe will host its fourth-quarter earnings call and financial analyst meeting on Dec. 16, when it plans to provide fiscal year 2022 targets.
Risks remain familiar but broad. Adobe cites competition, information security and privacy, potential interruptions or delays in hosted services, complex sales cycles, fluctuations in subscription renewal rates, and timing of revenue recognition from subscription offerings. The duration of the COVID-19 pandemic and the macroeconomic recovery remain uncertain. Tax matters also carry risk, including changes in tax laws and regulations, ongoing tax examinations, and a possible decrease in unrecognized tax benefits ranging from $0 to approximately $15 million over the next 12 months. The Frame.io deal adds integration and regulatory approval risk. Management notes that fiscal 2021 is a 53-week year, and the nine-month revenue comparison benefited from an extra week in the first quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.94B | $3.83B | +2.6% | $3.23B | +22.0% |
| Gross profit | $3.47B | $3.39B | +2.3% | $2.80B | +23.9% |
| Gross margin | 88.1% | 88.4% | -0.3 pp | 86.8% | +1.4 pp |
| Sales & marketing | $1.07B | $1.07B | -0.5% | $892.0M | +19.7% |
| General & administrative | $265.0M | $256.0M | +3.5% | $230.0M | +15.2% |
| Total operating expenses | $2.03B | $1.99B | +2.1% | $1.73B | +17.2% |
| Operating income (loss) | $1.44B | $1.41B | +2.5% | $1.07B | +34.8% |
| Operating margin | 36.6% | 36.7% | -0.0 pp | 33.1% | +3.5 pp |
| Net income (loss) | $1.21B | $1.12B | +8.6% | $955.0M | +26.9% |
| Net margin | 30.8% | 29.1% | +1.7 pp | 29.6% | +1.2 pp |
| Diluted EPS | $2.52 | $2.32 | +$0.20 | $1.97 | +$0.55 |
Risks
The COVID-19 pandemic continues to materially affect how Adobe and its customers operate, and the duration and extent of the impact on future results remains uncertain. Adobe began a phased U.S. office reopening in June 2021 with offices operating at reduced capacity, creating new workplace safety and operational risks, and the shift to work-from-home conditions may harm employee productivity.
Adobe discloses that certain unauthorized parties have in the past gained access to and misused its systems and software to reach end users' authentication, payment and personal information. The risk is compounded by the shift to work-from-home arrangements even as employees return to offices, and cyber-attackers tend to target popular offerings with a large user base.
Social and ethical issues relating to AI, which Adobe is increasingly building into many of its offerings, may cause brand or reputational harm, competitive harm or legal liability. The filing also cites risks from products being used to create misleading content such as DeepFakes, and potential government regulation of AI ethics increasing research and development costs.
Adobe is subject to expanding global data protection and privacy laws including the GDPR, the California Consumer Privacy Act and the recently passed California Privacy Rights Act. The invalidation of Privacy Shield and open questions about Model Clauses have changed obligations for providing services in the European Union and could expose Adobe to sanctions and fines for non-compliance.
Some enterprise offerings including Adobe Experience Cloud, Adobe Experience Platform and Enterprise Term License Agreements have multi-phased, complex sales cycles that make timing difficult to predict. Adobe notes its enterprise sales pattern is uneven, with a higher percentage of a quarter's total sales occurring in the final weeks of each quarter, and pandemic restrictions have limited its ability to negotiate in person.
Adobe's markets are characterized by intense competition, limited barriers to entry, short product life cycles and customer price sensitivity, including alternatives with limited functionality at lower costs or free of charge. These factors could create downward pressure on pricing and gross margins and adversely affect renewal and upsell and cross-sell rates, and competitor consolidation may increase competitive pressures.
Adobe's effective tax rate increased by approximately 5 percentage points for the quarter and 16 percentage points for the nine months ended September 3, 2021 versus the year-ago periods, primarily due to a change in its corporate tax trading structure and the geographic mix of international income. Adobe also flags potential changes in tax laws applicable to multinationals and ongoing IRS and foreign examinations focused on intercompany transfer pricing.
Adobe depends on the continued service of senior management and its ability to retain and hire highly skilled personnel across all levels, with competition for information technology talent described as intense in many locations where employees are based. Retention efforts may be compounded by travel and immigration restrictions, and Adobe may incur higher compensation costs that are not offset by improved productivity or increased sales.
Adobe increasingly uses third-party distribution platforms such as Apple's App Store and Google's Play Store for certain offerings, and these platform owners have wide discretion to change pricing structure, terms of service and other policies or to promote competing products. Adobe also relies on distributors it does not control and on third-party customer service and technical support providers, where quality issues could harm its reputation and lose customers.
SaaS KPIs
All quarters →Creative ARR
Document Cloud ARR
Remaining Performance Obligations (RPO)
Digital Media Annualized Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from ADOBE INC.'s SEC filings for Q3 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.