Summary
Adobe reported record revenue for its fiscal 2022 third quarter. Total revenue was $4.43 billion, up 12.7% from the prior-year quarter, and the company said growth was 15% in constant currency. The quarter ended September 2, 2022. Digital Media annualized recurring revenue exited at $13.40 billion, up from $12.15 billion at the end of fiscal 2021. That increase was $1.24 billion, or 10%. Net new Digital Media ARR was $449 million. Creative ARR reached $11.15 billion, up from $10.22 billion, and Document Cloud ARR reached $2.25 billion, up from $1.93 billion. Adobe also announced its intent to acquire Figma.
The income statement showed mixed profitability. Gross profit was $3.89 billion, up 12.1%. Gross margin slipped to 87.7%, down 0.4 percentage points from the prior-year quarter. Operating income rose 3.0% to $1.48 billion, but operating margin fell to 33.5%, down 3.1 percentage points. Net income was $1.14 billion, down 6.3%, and diluted EPS was $2.42, down 4.0%. The company said the increase in its provision for income taxes was primarily due to lower tax benefits related to stock-based compensation. On a non-GAAP basis, operating income was $1.96 billion, net income was $1.60 billion and diluted EPS was $3.40. Year to date, revenue was $13.08 billion, up 12.0%, while net income was $3.58 billion, roughly flat.
Cash generation remained solid. Operating cash flow was $1.70 billion in the quarter, up 21.4% from the prior-year quarter. Capital expenditures were $125 million, up 31.6%. For the first nine months, operating cash flow was $5.51 billion, up 6.8%. Deferred revenue was $4.94 billion at quarter end, up 12.5% from the prior-year quarter, and remaining performance obligations were $14.11 billion, up 11.7%. Adobe repurchased approximately 5.1 million shares during the quarter. During the first nine months, it repurchased 10.7 million shares, including 5.4 million at an average price of $429.13 and 5.3 million at an average price of $451.55. The company also entered a structured stock repurchase agreement with a $1.2 billion prepayment. Subsequent to quarter end, Adobe entered another structured repurchase agreement with a $1.75 billion prepayment, leaving $6.55 billion under its December 2020 authority. As of September 2, 2022, there were no outstanding borrowings under its $1.5 billion revolving credit facility.
Guidance points to continued growth but reflects a tougher backdrop. For the fiscal fourth quarter, Adobe targets Digital Media net new ARR of $550 million, non-GAAP EPS of $3.50, a GAAP tax rate target of 23.0% and a non-GAAP tax rate target of 17.5%, on a share count target of 467 million. It also targets fourth quarter Digital Media segment revenue growth of 10% to 14% in constant currency, Digital Experience segment revenue growth of 13% to 15% in constant currency, and Digital Experience subscription revenue growth of 13% to 15% in constant currency. Management said those targets factor in the macroeconomic environment, foreign exchange headwinds and typical year-end seasonal strength.
Foreign exchange is a clear headwind. The stronger U.S. dollar reduced revenue by $156 million in the quarter and $273 million for the first nine months, partly offset by hedging gains of $54 million and $105 million. Adobe said foreign currency may continue to hurt results in the fourth quarter. The company also halted new sales in Russia and Belarus and reduced Digital Media ARR by $87 million, including $75 million for Russia and Belarus and $12 million for Ukraine. The pending Figma deal carries execution and regulatory risk. Adobe intends to pay approximately $20 billion, half in cash and half in stock, with closing expected in 2023. The transaction includes approximately 6 million additional restricted stock units for Figma's CEO and employees that vest over four years. If regulators block the deal, Adobe could owe a $1 billion reverse termination fee. The company also flagged tax changes, including a corporate book minimum tax effective fiscal 2024 and an excise tax on net stock repurchases made after December 31, 2022. Adobe said it expects to maintain share repurchases while the Figma transaction is pending, at a minimum sufficient to offset dilution from employee equity issuances. It also faces broader risks from inflation, central bank actions, the COVID-19 pandemic and geopolitical conditions. During the second quarter of fiscal 2022, Adobe restructured certain long-term supplier commitments that increased minimum purchase obligations by $4.75 billion through May 2029.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $4.43B | $4.39B | +1.1% | $3.94B | +12.7% |
| Gross profit | $3.89B | $3.85B | +1.0% | $3.47B | +12.1% |
| Gross margin | 87.7% | 87.7% | -0.0 pp | 88.1% | -0.4 pp |
| Sales & marketing | $1.27B | $1.25B | +1.5% | $1.07B | +18.5% |
| General & administrative | $319.0M | $291.0M | +9.6% | $265.0M | +20.4% |
| Total operating expenses | $2.40B | $2.32B | +3.7% | $2.03B | +18.5% |
| Operating income (loss) | $1.48B | $1.53B | -2.9% | $1.44B | +3.0% |
| Operating margin | 33.5% | 34.9% | -1.4 pp | 36.6% | -3.1 pp |
| Net income (loss) | $1.14B | $1.18B | -3.6% | $1.21B | -6.3% |
| Net margin | 25.6% | 26.9% | -1.2 pp | 30.8% | -5.2 pp |
| Diluted EPS | $2.42 | $2.49 | -$0.07 | $2.52 | -$0.10 |
Risks
Adobe agreed to acquire Figma, Inc. for approximately $20 billion, roughly half cash and half stock, with closing expected in 2023 and subject to regulatory approvals. The deal includes a $1 billion reverse termination fee if regulatory clearance fails, and MD&A notes Adobe may use a term loan for the cash portion while maintaining share repurchases to offset dilution.
Foreign currency exchange rate fluctuations negatively impacted revenue and earnings during the nine months ended September 2, 2022, and MD&A says they may continue to negatively impact financial results in Q4 fiscal 2022. The stronger U.S. dollar decreased revenue by $156 million in Q3 and $273 million year to date, partly offset by hedging gains.
In response to the Russia-Ukraine war, Adobe halted new sales in Russia and Belarus and reduced Digital Media ARR by $87 million in total, including $75 million for Russia and Belarus and $12 million for Ukraine. The war may also disrupt customers, suppliers, and supply chain conditions.
Adobe is increasingly building AI into many offerings, and risk factors highlight social and ethical issues, potential government regulation of AI ethics, additional research and development costs, and reputational or legal liability that could slow AI adoption.
Risk factors note competition for experienced technology personnel has recently intensified, and MD&A reports operating expenses increased 19% in Q3 fiscal 2022 partly from increases in base and incentive compensation. Higher compensation costs may not be offset by improved productivity or increased sales.
Enterprise offerings including Adobe Experience Cloud and Enterprise Term License Agreements have extended and complex multi-phased sales cycles, with a higher percentage of quarterly sales historically occurring in the final weeks. This makes sales timing unpredictable and could affect results.
MD&A discloses that the U.S. Tax Act requires capitalization and amortization of research and development expenditures starting fiscal 2023, which Adobe expects to adversely impact effective tax rates. The Inflation Reduction Act also introduces a corporate book minimum tax beginning fiscal 2024 and an excise tax on net stock repurchases after December 31, 2022.
During Q2 fiscal 2022 Adobe restructured certain long-term supplier commitments, increasing minimum purchase obligations by $4.75 billion through May 2029. This adds fixed cash obligations and could pressure liquidity if demand slows.
SaaS KPIs
All quarters →Creative ARR
Document Cloud ARR
Remaining Performance Obligations (RPO)
Digital Media ARR
Net New Digital Media Annualized Recurring Revenue (ARR)
Summary, forecast, risks and KPIs are extracted from ADOBE INC.'s SEC filings for Q3 FY2022 (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.