Table of ~~revenue recognition.~~Contents

We generally recognize revenue from subscription offerings ratably over the terms of their subscription agreements, which range from 1 to 36 months. 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. Declines in new or renewed subscriptions 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 and our use of ETLAs, a number of factors could affect our revenue, including longer-than-expected sales and implementation cycles, potential deferral of revenue due to multiple-element revenue arrangements 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.

If our customers fail to renew subscriptions in accordance with our expectations, our future revenue and operating results could suffer.

Our Adobe Experience Cloud, Creative Cloud and Document Cloud offerings typically involve subscription-based offerings pursuant to product and service agreements. Revenue from our subscription customers is generally recognized ratably over the term of their agreements, which typically range from 1 to 36 months. Our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period, and customers may not renew their subscriptions at the same or higher level of service, for the same number of seats or for the same duration of time, if at all. Moreover, under certain circumstances, some of our customers have the right to cancel their agreements prior to the expiration of the terms. Our varied customer base combined with the flexibility we offer in the length of our subscription-based agreements complicates our ability to precisely forecast renewal rates. Therefore, we cannot provide assurance that we will be able to accurately predict future customer 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 those offered by our competitors, 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 economic downturns or uncertainty in financial ~~markets.~~markets, including as a result of the COVID-19 pandemic. If our customers do not renew their subscriptions or if they renew on terms less favorable to us, our revenue may decline.

We ~~may not realize~~face various risks associated with our operating as a multinational corporation.

As a global business that generates approximately 42% of our total revenue from sales to customers outside of the ~~anticipated benefits~~Americas, we are subject to a number of ~~past~~risks, including:

•foreign currency fluctuations and controls;

•international and regional economic, political and labor conditions, including any instability or ~~future investments~~security concerns abroad, including uncertainty caused by the United Kingdom’s exit from the European Union (Brexit) on January 31, 2020, including the effects of the Trade and Cooperation Agreement between the European Union, the European Atomic Energy Community and the United Kingdom signed on December 30, 2020, as well as uncertainty caused by the evolving relations between the United States and China;

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

•increased financial accounting and reporting burdens and complexities;

•changes in, or ~~acquisitions,~~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 ~~integration of acquisitions may disrupt our business~~difficulties in managing and ~~management.~~staffing international operations;

~~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;~~

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

•the ~~cost~~imposition of ~~effectively integrating the operations, technologies, products or services, and personnel of the acquired business;~~

~~entry into markets~~governmental economic sanctions on countries in which we ~~have minimal prior experience~~do business or where we plan to expand our business;

•costs and ~~where competitors~~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 ~~markets have stronger market positions;~~as terrorism, war, natural disasters and pandemics, including fluctuations in the severity and duration of the COVID-19 pandemic and resulting restrictions on business activity which may vary significantly by region.

~~disruption~~Some of our ~~ongoing~~third-party business partners have international operations and ~~distraction~~are also subject to these risks and if our third-party business partners are unable to appropriately manage these risks, our business may be harmed. If sales to any of our ~~management and other employees from other opportunities and challenges;~~

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~~inability to retain personnel~~customers outside of the ~~acquired business;~~

~~inability to retain key customers, distributors, vendors and other business partners~~Americas are reduced, delayed or canceled because of any 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~~above factors, our ~~operating results;~~

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

~~increased accounts receivables collection times and working capital requirements associated with acquired business models;~~

~~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 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; and~~

~~incompatibility of business cultures.~~

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

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, or 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, including during the COVID-19 pandemic, 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 the distribution platforms of third parties like 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 outsource a substantial portion of our customer service and technical support activities to third-party service providers. We depend heavily on these third-party customer service and technical support representatives working on our behalf, and we expect to continue to rely heavily on third parties in the future. This strategy presents risks to our business due to the fact that we may not be able to influence the quality of support as directly as we would be able to do 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.

If we are unable to recruit and retain key personnel, our business may be harmed.

Much of our future success depends on the continued service, availability and performance of our senior management. These individuals have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could harm our business, especially if we have not been successful in developing adequate succession plans. Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled personnel across all levels of our organization. Our efforts to attract, develop, integrate and retain highly skilled employees with appropriate qualifications may be compounded by intensified restrictions on travel (including during the COVID-19 pandemic), immigration, or the availability of work visas. Experienced personnel in the information technology industry are in high demand and competition for their talents is intense in many areas where our employees are located. We may experience higher compensation costs to retain senior management and experienced personnel that may not be offset by improved productivity or increased sales. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed.

We ~~face various risks associated~~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 these employees in these countries has increased, which may impact our ability to retain these employees and increase our expenses resulting from competitive compensation. 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 to offset these expected increases in costs and operating expenses, 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 ~~operating as~~corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

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

AsWe contract with a ~~global business that generates approximately 43%~~number of software distributors and other strategic partners, none of which are individually responsible for a material amount of our total net revenue ~~from sales~~for any recent period. Nonetheless, if any single 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 ~~customers outside~~reach various customer segments for our products and services is a complex process across the broad range of ~~the Americas, we are subject to a number of risks, including:~~

~~foreign currency fluctuations and controls;~~

~~international and regional economic, political and labor conditions, including any instability or security concerns abroad;~~

~~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~~geographies where we do business or ~~where we~~ plan to ~~expand~~do business. Our distributors and other channel partners are independent businesses that we do not control. Notwithstanding the independence of our ~~business;~~

~~costs~~channel partners, we face legal risk and ~~delays associated with developing products in multiple languages;~~

~~operating in locations with a higher incidence~~potential reputational harm from the activities of these third parties including, but not limited to, export control violations, workplace conditions, corruption and ~~fraudulent business practices;~~anti-competitive behavior.

We cannot be certain that our distribution channel will continue to market or sell our products and

~~other factors beyond~~ services effectively. If our ~~control, such as terrorism, war, natural disasters~~partner and ~~pandemics.~~

~~Some of~~distribution channels are not successful, we may lose sales opportunities, customers and revenue. Our distributors also sell our ~~third-party business partners have international operations~~competitors’ products and ~~are~~services, and if they favor our competitors’ products or services for any reason, they may fail to market our products or services effectively or to devote resources necessary to provide effective sales, which would cause our results to suffer. We also ~~subject to these risks~~distribute some products and services through our OEM channel, and if our ~~third-party~~OEMs decide not to bundle our applications on their devices, our results could suffer. In addition, 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 associated with direct sales efforts, 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 become as productive as we would like, as in most cases it takes a significant period of time before they achieve full productivity. Our business ~~partners~~could be seriously harmed if our expansion efforts do not generate a corresponding significant increase in revenue and we are unable to ~~appropriately manage~~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.

Catastrophic events may disrupt our business.

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 ~~risks,~~systems or third-party hosted services in the event of a major earthquake, fire, flood, tsunami or other weather 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 fulfilling our customers’ orders 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. Our corporate headquarters, a significant portion of our research and development activities, certain of our data centers and certain other critical business ~~may be harmed. If sales to~~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, and 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. For example, wildfires have resulted in power shut-offs in California and are likely to occur in the future, and this could adversely affect the work-from-home operations of our employees on the west coast.

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

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throughout the state and annual periods of wildfire danger increase the probability of planned power outages in the communities where we work and live. 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 due to COVID-19 in 2020. 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, ~~outside~~and may cause us to experience higher attrition, losses, and additional costs to maintain or resume operations. To accurately assess and take potential proactive action as appropriate, Adobe is aligned with the guidelines of the ~~Americas are reduced, delayed or canceled because of any of~~Financial Stability Board’s Task Force on Climate-related Financial Disclosures recommendations and the ~~above factors, our revenue may decline.~~Sustainability Accounting Standards Board environmental metrics.

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, 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 response to the COVID-19 pandemic, federal, state, local and foreign governmental authorities have imposed, and may continue to impose, protocols and restrictions intended to contain the spread of the virus, including limitations on the size of gatherings, closures of work facilities, schools, public buildings and businesses, quarantines, lockdowns and travel restrictions. Such restrictions have disrupted and may continue to disrupt our business operations and limit our ability to perform critical functions.

In addition, approximately ~~49%~~48% 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.

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

~~Changes in accounting principles, or interpretations thereof, could have~~As a ~~significant impact on~~global company, Adobe is subject to global data privacy and security laws, regulations and codes of conduct that apply to our ~~financial position~~various business units. These laws 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~~regulations may be inconsistent across jurisdictions and are subject to ~~interpretation by the SEC~~evolving and ~~various bodies formed to interpret~~differing (sometimes conflicting) interpretations. Government officials and ~~create appropriate accounting principles. A change in these principles,~~regulators, privacy advocates and class action attorneys are increasingly scrutinizing how ~~the principles are interpreted, or the adoption of new accounting standards can have a significant effect on our reported results,~~companies collect, process, use, store, share and ~~could even 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~~transmit personal data. This increased scrutiny may result in ~~materially different financial results~~new interpretations of existing laws, thereby further impacting Adobe’s business. Globally, new and ~~may require that~~emerging laws, such as the General Data Protection Regulation (“GDPR”) and the Network and Information Systems Directive (“NISD”) in Europe, state laws in the U.S. on privacy, data and related technologies, such as the California Consumer Privacy Act and the recently passed California Privacy Rights 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 ~~change how we process, analyze and report financial information and that we change financial reporting controls. For additional information regarding~~have invested in readiness to comply with applicable requirements, these new ~~standards, see~~and emerging laws, regulations and codes 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 ~~section titled “Recent Accounting Pronouncements Not Yet Effective” within Part II. Item 8, Note 1. Basis~~laws (such as individual rights of ~~Presentation~~access, correction and ~~Summary~~deletion of ~~Significant Accounting Policies.~~their personal information), and to implement our business models effectively. These new laws 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. Any perception of our practices, products or services as a violation of individual privacy rights may subject us to public criticism, class action lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt our business and expose us to increased liability. Additionally, we collect and store

~~Such changes~~

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information on behalf of our business customers and if our customers fail to comply with contractual obligations or applicable laws, it could result in ~~accounting principles may~~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 ~~effect on~~impact to our ability to process and transfer personal data as part of our business ~~financial position,~~operations. For example, European data transfers outside the European Economic Area are highly regulated and ~~income, or cause an adverse deviation from our revenue~~litigated. The mechanisms that we and ~~profitability targets, which may negatively impact our financial results.~~

~~Changes~~many other companies rely upon for European data transfers (e.g., Privacy Shield and Model Clauses) are the subject of recent judicial decisions by the Court of Justice of the European Union resulting in ~~tax rules and regulations, or interpretations thereof, may adversely affect our effective tax rates.~~

the invalidation of Privacy Shield. We are a United States-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. The Tax Act, enacted into law on December 22, 2017, changes existing U.S. tax law applicable to us and includes adoption of a territorial tax system requiring us to incur a transition tax on previously untaxed earnings and profits of our foreign subsidiaries. A significant portion of our foreign earnings forclosely monitoring the ~~current fiscal year were earned by our Irish subsidiaries. As part~~impact of the ~~adoption of a territorial~~

~~tax system, the Tax Act also provides an exemption from federal income taxes for distributions from foreign subsidiaries made after December 31, 2017 that were not subject~~Privacy Shield invalidation and other developments related to the ~~one-time transition tax. In addition, certain international provisions introduced in the Tax Act will be effective~~remaining valid transfer mechanisms available for ~~us in fiscal 2019. These provisions and changes that we may make to our corporate tax structure could adversely affect our tax rate and cash flow in future years.~~

Our income tax expense has differed from the tax computed at the U.S. federal statutory income tax rate due primarily to discrete items and to tax on earnings from foreign operations. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by changes in or our interpretation of tax rules and regulations in the jurisdictions in which we do business, by unanticipated decreases in the amount of earnings in countries with low statutory tax rates, by unexpected negative changes in business and market conditions that could reduce certain tax benefits, or by changes in the valuation of our deferred tax assets and liabilities.

~~In addition, in the United States, the European Commission, countries in~~transferring personal data outside the European Union and other countries ~~where we do business, we are subject~~that have similar trans-border data flow requirements and adjusting our practices accordingly. The invalidation of Privacy Shield and the open questions related to the validity of Model Clauses have resulted in some changes in the obligations required to provide our services in the European Union and could expose us to potential ~~changes in relevant tax, accounting~~sanctions and fines for non-compliance. Several other ~~laws, regulations~~countries, including Australia, New Zealand, Brazil, and ~~interpretations, including changes to tax laws applicable to corporate multinationals~~Japan, have also established specific legal requirements for cross-border transfers of personal information. Other countries, such as ~~Adobe. These~~India, are considering requirements for data localization (e.g., where personal data must remain in the country). If other countries ~~and other governmental bodies have or~~implement more restrictive regulations for cross-border data transfers (or do not permit data to leave the country of origin), such developments could make unprecedented assertions about how taxation is determined in their jurisdictions that are contrary to the way in which we have interpreted and historically applied the rules and regulations described above in our income tax returns filed in such jurisdictions. In the current global tax policy environment, any changes in laws, regulations and interpretations related to these assertions could adversely affect our effective tax rates or result in other costs to us which could adversely affect our operations and financial results.

Moreover, we are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities. These tax examinations are expected to focus on our intercompany transfer pricing practices as well as other matters. 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 adjustments that may result from these examinations. We cannot provide assurance that the final determination of any of these examinations will not have an adverse effect on our operating results and financial position.

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. 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 affect our derivative counterparties. Any of these events would likely harm~~ our business, financial condition and results of ~~operations.~~

~~Political instability or adverse political developments~~operations, in ~~or around any of the major countries in which we do business would also likely harm our business, results of operations and financial condition.~~

~~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 attract new customers and contributors to these online marketplaces for creative content, as well as our ability to continue to retain existing customers and contributors. 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.~~

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 U.S. 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, adverse effects on operations and harm to 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 U.S. In some foreign countries, the mechanisms to enforce intellectual property rights may be inadequate to protect our technology, which could harm our business.

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. The loss of future trade secret protection 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 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 secrets may be disclosed or published without our authorization, and in these situations, enforcing our rights may be difficult or costly.

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 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. 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.

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

We ~~may incur losses associated~~prepare our consolidated financial statements in accordance with ~~currency fluctuations and may not be able to effectively hedge our exposure.~~

~~Our operating results~~accounting principles generally accepted in the United States of America (“GAAP”). These principles are subject to ~~fluctuations~~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, and could even 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 these new standards, see the section titled “Recent Accounting Pronouncements Not Yet Effective” within Part II, Item 8, Note 1. Basis of Presentation and Summary of Significant Accounting Policies.

Such changes in accounting principles may have an adverse effect on our business, financial position and income, 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 U.S. and foreign ~~currency exchange rates~~tax jurisdictions. A significant portion of our foreign earnings for the current fiscal year were earned by our Irish subsidiaries. The U.S. Tax Cuts and Jobs Act (“U.S. Tax Act”), enacted into law on December 22, 2017, changed existing U.S. tax law applicable to us and included certain international provisions effective for us starting in fiscal 2019. Among other considerations, the applicability and impact of these new tax provisions, and of other international tax law changes could adversely affect our effective income tax rate and cash flows in years beyond fiscal 2020. See the section titled “Provision for (Benefit from) Income Taxes” within Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our income tax expense has differed from the tax computed at the U.S. federal statutory income tax rate due primarily to discrete items including, but not limited to, the ~~global scope~~effects of tax credits, net tax benefits from trading structure changes, tax benefits from stock-based compensation and settlements of tax examinations, and to net tax on earnings from foreign operations. 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, the geographic mix of earnings, our repatriation policy or the valuation of our ~~business. Global economic events,~~deferred tax assets and liabilities, by changes in or our interpretation of tax rules and regulations in the jurisdictions in which we do business, or by unexpected negative changes in business and market conditions that could reduce certain tax benefits.

In addition, in countries where we conduct business and in jurisdictions in which we are subject to tax, including ~~trade disputes, economic sanctions and emerging market volatility, and associated uncertainty may cause currencies~~those covered by governing bodies that enact tax laws applicable to ~~fluctuate. We attempt to mitigate a portion of these risks through foreign currency hedging based on our judgment~~us, such as the European Commission of the ~~appropriate trade-offs among risk, opportunity~~European Union, we are subject to potential changes in relevant tax, accounting and ~~expense. We regularly review~~other laws, regulations and interpretations, including changes to tax laws applicable to corporate multinationals such as Adobe. These countries, other 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 in their jurisdictions that are contrary to the way in which we have interpreted and historically applied the rules and regulations described above in such jurisdictions. In the current global tax policy environment, any changes in laws, regulations and interpretations related to these assertions could adversely affect our ~~program~~effective tax rates, cause us to ~~partially hedge~~respond by making changes to our ~~exposure~~business structure, or result in other costs to foreign currency fluctuations and make adjustments as necessary. Our hedging activities may not offset more than a portion of the adverse financial impact resulting from unfavorable movement in foreign currency exchange rates,us which could adversely affect our operations and financial ~~condition or results of operations.~~results.

~~Failure~~Moreover, we are subject to the continual examination of our ~~third-party customer service~~income tax returns by the U.S. Internal Revenue Service and ~~technical support providers~~other domestic and foreign tax authorities. These tax examinations are expected to ~~adequately address customers’ requests could harm our business and adversely affect our financial results.~~

~~Our customers rely~~focus on our ~~customer service support organization~~intercompany transfer pricing practices, application of tax rules and other matters. We regularly assess the likelihood of outcomes resulting from these examinations to ~~resolve issues with our products and services. We outsource a substantial portion~~determine the adequacy of our ~~customer service~~provision for income taxes and ~~technical support activities to third-party service providers.~~have reserved for potential adjustments that may result from these examinations. We ~~depend heavily on~~cannot provide assurance that the final determination of any of these ~~third-party customer service and technical support representatives working~~examinations will not have an adverse effect on our ~~behalf,~~operating results and we expect to continue to rely heavily on third parties in the future. This strategy presents risks to our business due to the fact that we may not be able to influence the quality of support as directly as we would be able to do 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.~~

~~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 Adobe Experience Cloud 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; 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.financial position.

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 government entities, both domestically and internationally. Risks associated with licensing and selling products and services to government entities include more extended sales and collection cycles, varying governmental budgeting processes and adherence to complex procurement regulations and other government-specific contractual requirements. We may 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

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termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.

IfRisks Related to Financial Performance or General Economic Conditions

Uncertainty about current and future economic conditions and other adverse changes in general political conditions in any of the major countries in which we ~~are unable to recruit and retain key personnel,~~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, uncertainty caused by the United Kingdom’s exit from the European Union (Brexit), and other events beyond our control, such as the COVID-19 pandemic. Additionally, the business downturn caused by the pandemic may ~~be harmed.~~

~~Much~~adversely impact the businesses and financial health of many of our ~~future success depends on the continued service, availability~~customers and performance of our senior management. These individuals have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could harm our business, especially if we have not been successful in developing adequate succession plans. Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled personnel across all levels of our organization. Experienced personnelhurt their creditworthiness (e.g., international travel bans impacting customers in the ~~information technology industry are in high demand~~travel and competition for their talents is intense in many areas where our employees are located. We may experience higher compensation costs to retain senior management and experienced personnel that may not be offset by improved productivityhospitality industries). As a result, current or ~~increased sales. If we are unable to continue to successfully attract and retain key personnel, 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 these employees in these countries has increased, which may impact our ability to retain these employees and increase our expenses resulting from competitive compensation. We may continue to expand our international operations and international sales and marketing activities, which would require significant management attention and resources. Wepotential customers may be unable to ~~scale~~fund software purchases, which could cause them to delay, decrease or cancel purchases of our ~~infrastructure effectively~~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, and we have already experienced and may continue to experience the impact of a global decline in advertising spend as ~~quickly as~~the pandemic continues to unfold. This could result in reductions in sales of our ~~competitors in these markets,~~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 ~~may not increase~~could decline if spending cuts impact the government’s ability to ~~offset these expected increases~~purchase our products and services. Deterioration in ~~costs and operating expenses, causing our results to suffer.~~

~~We believe that a critical contributor to our success to date has been our corporate culture,~~economic conditions in any of the countries in which we ~~have built to foster innovation, teamwork~~do business could also cause slower or impaired collections on accounts receivable, which may adversely impact our liquidity and ~~employee satisfaction. As~~financial condition.

A disruption in financial markets could impair our banking partners, on which we ~~grow, including from the integration of employees~~rely for operating cash management 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~~derivative counterparties. Any of these events would likely harm our business, financial condition and ~~recruit personnel who are essential to our future success.~~

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

We contract with a number of software distributors and other strategic partners, none of which is individually responsible for a material amount of our total net revenue for any recent period. Nonetheless, if any single 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.

Political instability or adverse political developments in or around any of the major countries in which we do business would also likely harm our business, financial condition and results of operations.

~~Successfully managing~~Subscription offerings could create risks related to the timing of revenue recognition.

We generally recognize revenue from subscription offerings ratably over the terms of their subscription agreements, which typically range from 1 to 36 months. 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 ~~indirect distribution channel efforts to reach various customer segments~~revenue results until a later quarter. Declines in new or renewed subscriptions may decrease our revenue in future quarters. Lower sales, reduced demand for our products and services, isand 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 and our use of ETLAs, a ~~complex process across the broad range~~number of ~~geographies where we do business or plan to do business. Our distributors~~factors could affect our revenue, including longer-than-expected sales and ~~other channel partners are independent businesses that we do not control. Notwithstanding the independence~~implementation cycles, potential deferral of revenue and alternative licensing arrangements. If any of our ~~channel partners, we face legal risk~~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 ~~potential reputational harm from~~may not be able to effectively hedge our exposure.

Our operating results are subject to fluctuations in foreign currency exchange rates due to the ~~activities~~global scope of our business. Global economic events, including trade disputes, economic sanctions and emerging market volatility, and associated uncertainty may cause currencies to fluctuate, and the impact of the COVID-19 pandemic may introduce further volatility. We attempt to mitigate a portion of these ~~third parties including, but~~risks through foreign currency hedging based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We regularly review our program to partially hedge our exposure to foreign currency fluctuations and make adjustments as necessary. Our hedging activities may not ~~limited~~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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Revenue, margin or earnings shortfalls or the volatility of the market generally may cause the market price of our stock to ~~export control violations, workplace conditions, corruption~~decline.

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

~~We cannot be certain that~~•shortfalls in, or changes in expectations about, our ~~distribution channel will continue~~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 market or sell our products and services effectively. If our distribution channel is not successful, we may lose sales opportunities, customers and revenue. Our distributors also sell our competitors’ products and services, and if they favor our competitors’value high technology SaaS companies;

•the announcement of new products or services, ~~for any reason, they may fail~~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; and

•unusual events such as significant acquisitions by us or our ~~products or services effectively or~~competitors, divestitures, litigation, regulatory actions and other factors, including factors unrelated to ~~devote resources necessary to provide effective sales, which would cause~~ our ~~results to suffer. We also distribute some products and services through our OEM channel, and if our OEMs decide not to bundle our applications on their devices, our results could suffer.~~ operating performance.

In addition, the ~~financial health of~~market for technology stocks or the stock market in general may experience uneven investor confidence, which may cause the market price for our ~~distributors and our continuing relationships with them are important~~common stock to decline for reasons unrelated to our ~~success. Some~~operating performance. Volatility in the market price of these distributors may be unable to withstand adverse changes in economic conditions, which could result in insolvency, the inability of such distributors to obtain credit to finance 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 associated with direct sales efforts, challenges related to hiring, retaining and motivating our direct sales force, and substantial amounts of ongoing trainingcompany’s securities for ~~sales representatives. Moreover, recent hires may not become as productive as we would like, as in most cases it takes~~ a ~~significant~~ period of time ~~before they achieve full productivity. Our business could be seriously harmed if~~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 expansion efforts 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.business.

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. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include 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 were determined, negatively impacting our results of operations.

We have issued ~~$1.9~~$4.15 billion of notes in debt offerings ~~and have a $2.25 billion term loan,~~ and may incur other debt in the future, which may adversely affect our financial condition and future financial results.

We have ~~$1.9~~$4.15 billion in senior unsecured notes and ~~a $2.25 billion senior unsecured term loan outstanding. We also have~~ a $1 billion senior unsecured revolving credit agreement, which is 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 ~~flow~~flows from operations to service our ~~indebtedness,~~debt, thereby reducing the amount of expected cash ~~flow~~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.

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Our senior unsecured notes and senior unsecured credit ~~agreements impose~~agreement imposes 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 ~~lenders~~noteholders or ~~noteholders,~~lenders, then, subject to applicable cure periods, any outstanding ~~indebtedness~~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 revolving credit facility ~~and term loan~~ could increase. Downgrades in our credit ratings could also affect the terms of any such financing and restrict our ability to obtain additional financing in the future.

~~Catastrophic events may disrupt our business.~~

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 event, power loss, telecommunications failure, software or hardware malfunctions, pandemics, 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 fulfilling our customers’ orders 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. 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.

~~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 prolonged droughts due to climate change. In the event of a natural disaster that disrupts business due to limited access to these resources, we have the potential to experience losses to our business, and added costs to resume operations. To accurately assess and take potential proactive action as appropriate, Adobe is aligned with the guidelines of the Financial Stability Board’s (“FSB”) Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations.

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

Our cash equivalent and short-term investment portfolio as of November ~~30, 2018~~27, 2020 consisted of asset-backed securities, corporate debt securities, foreign government ~~securities and U.S. Treasury~~ securities, money market mutual funds, municipal securities and time ~~deposits and asset-backed securities.~~deposits. 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 the COVID-19 pandemic, 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 November ~~30, 2018,~~27, 2020, 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 can provide no assurance that our investment portfolio will remain materially unimpaired.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

~~The following table sets forth the location, approximate~~Our corporate headquarters is located in San Jose, California where we occupy approximately 1.1 million square ~~footage and use~~feet of office space. We own a substantial portion of our ~~principal~~San Jose, California properties ~~during fiscal~~ ~~2018~~:which we use for research, product development, sales, marketing, and administrative purposes. We own and lease properties in various locations throughout the United States which we also use for research, product development, sales, marketing, and administrative purposes, and data centers.



~~Location~~	~~Owned / Leased~~	~~Approximate~~ ~~Square Footage~~		~~Use~~
~~Americas:~~
~~San Jose, California~~	~~Owned & leased~~	~~1,081,000~~	⁽¹⁾	~~Research, product development, sales, marketing~~Outside of the United States, we own and ~~administration~~
~~San Francisco, California~~	~~Owned & leased~~	~~549,000~~	⁽²⁾	~~Research, product development, sales, marketing and administration~~
~~Lehi, Utah~~	~~Owned & leased~~	~~282,000~~	⁽³⁾	~~Research, product development, sales, marketing and administration~~
~~Hillsboro, Oregon~~	~~Owned~~	~~85,000~~		~~Data center~~
~~APAC:~~
~~Bangalore, India~~	~~Owned & leased~~	~~422,000~~	⁽⁴⁾	~~Research, product development, sales and administration~~
~~Noida, India~~	~~Owned & leased~~	~~554,000~~	⁽⁵⁾	~~Research, product development, sales and administration~~
~~Japan~~	~~Leased~~	~~64,000~~		~~Research, product development, sales and administration~~
~~EMEA:~~
~~Bucharest, Romania~~	~~Leased~~	~~97,000~~		~~Research and product development~~
~~Dublin, Ireland~~	~~Leased~~	~~42,000~~		~~Administration~~
~~Maidenhead, United Kingdom~~	~~Leased~~	~~49,000~~		~~Product development, sales, marketing and administration~~

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⁽¹⁾	~~We own approximately 989,000 square feet of our San Jose properties where our headquarters is located.~~


⁽²⁾	~~We own approximately 346,000 square feet of our San Francisco properties.~~


⁽³⁾	~~We own approximately 257,000 square feet of our Lehi properties.~~


⁽⁴⁾	~~We own approximately 250,000 square feet of our Bangalore properties.~~


⁽⁵⁾	~~We own our Noida properties except for a land lease for one of our buildings. The term for the land lease is until 2091.~~

We lease ~~or sublease the~~properties throughout EMEA and APAC for research, product development, sales, and administrative purposes. The largest properties we occupy ~~under~~outside of the United States are the Bangalore, India and Noida, India offices which are approximately 0.4 million and 0.6 million square feet, respectively. We own and lease these properties in India.

Additionally, we have ongoing building construction in San Jose, California and Bangalore, India which are currently targeted for completion in fiscal 2023.

Beginning in March 2020, our employees across all geographic regions have shifted to working from home due to the pandemic. Our focus remains on promoting employee health and safety as we carefully evaluate reopening plans and timelines. As of November 27, 2020, we have not terminated any significant lease arrangements. We believe our facilities, with an average overall operating ~~leases. Such leases expire at various times through 2031, with the exception~~capacity of approximately 89% prior to our ~~ground lease in Noida.~~

~~In general, all facilities~~shift to working from home, are ~~in good condition,~~ suitable for the conduct of our business ~~and are operating at an average capacity~~should we decide to reopen our facilities in the next twelve months.

See Note 18 of ~~approximately 91%.~~Part II, Item 8 titled “Notes to Consolidated Financial Statements” for further information regarding our lease obligations.

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ITEM 3. 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.

In addition to intellectual property disputes, we are subject to legal proceedings, claims and investigations in the ordinary course of business, including claims relating to commercial, employment and other matters. Some of these disputes and legal proceedings 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 and our independent registered public accounting firm.~~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 our Consolidated Financial Statements and notes thereto, we have determined that no provision for liability or 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, cash flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations.

In connection with our piracy conversion 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, cash flows or results of operations could be negatively affected in any particular period by the resolution of one or more of these counter-claims.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock is traded on the NASDAQ Global Select Market under the symbol “ADBE.”

Stockholders

According to the records of our transfer agent, there were ~~1,030~~974 holders of record of our common stock on January ~~18, 2019.~~8, 2021. Because many of such shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Dividends

We do not anticipate paying any cash dividends in the foreseeable future.

Issuer Purchases of Equity Securities

Below is a summary of stock repurchases for the three months ended November ~~30, 2018.~~ 27, 2020. See Note 1214 of our Notes to Consolidated Financial Statements for information regarding our stock repurchase programs.


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
	(in millions, except average price per share)
Beginning repurchase authority(1)					$	3,066
August 29 — September 25, 2020
Shares repurchased	0.3	$	490.89	0.3	$	(167)
September 26 — October 23, 2020
Shares repurchased	0.7	$	484.50	0.7	$	(311)	(2)
October 24 — November 27, 2020
Shares repurchased	0.6	$	471.53	0.6	$	(283)	(2)

Total	1.6			1.6	$	2,305

(1)In May 2018, the Board of Directors granted authority to repurchase up to $8 billion in common stock through the end of fiscal 2021.

(2)In September 2020, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $850 million. As of November 27, 2020, approximately $255 million of the prepayment remained under this agreement.

Period

Total Number of Shares
Repurchased

Average
Price
Per
Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans

Approximate
Dollar Value
that May
Yet be
Purchased
Under the
Plan

(in thousands, except average price per share)

Beginning repurchase authority⁽¹⁾
$ 8,397,282

September 1 — September 28, 2018
Shares repurchased 945
$ 261.72
945
$ (247,282 )
October 27 — November 30, 2018

Shares repurchased 616
$ 243.52
616
$ (150,000 )
⁽²⁾
Total 1,561

1,561
$ 8,000,000

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⁽¹⁾	In January 2017, the Board of Directors granted authority to repurchase up to $2.5 billion in common stock through the end of fiscal 2019. In May 2018, the Board of Directors approved another authority to repurchase up to $8.0 billion in common stock through the end of fiscal 2021. As of November 30, 2018, there is no remaining balance under our January 2017 authority.


⁽²⁾	In October 2018, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $300 million. As of November 30, 2018, approximately $150.0 million of the prepayment remained under this agreement.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data ~~(presented in thousands, except per share amounts and employee data)~~ is derived from our Consolidated Financial Statements. As our historical operating results are not necessarily indicative of future operating results, this data should be read in conjunction with the Consolidated Financial Statements and notes thereto, and with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

On November 30, 2019, the beginning of our fiscal year 2020, we adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), using the alternative modified retrospective transition method provided in ASU 2018-11, Leases (Topic 842): Targeted Improvements. Similarly, on December 1, 2018, the beginning of our fiscal year 2019, we adopted the FASB’s ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method of transition. Financial information prior to the respective periods of adoption has not been restated and continues to be reported under the accounting standards in effect for those periods.


(in millions, except per share amounts and employee data)	Fiscal Years
	2020		2019		2018		2017		2016(2)
Operations:
Revenue	$	12,868	$	11,171	$	9,030	$	7,302	$	5,854
Gross profit	$	11,146	$	9,498	$	7,835	$	6,291	$	5,035
Income before income taxes	$	4,176	$	3,205	$	2,794	$	2,138	$	1,435
Net income	$	5,260	$	2,951	$	2,591	$	1,694	$	1,169
Net income per share:
Basic	$	10.94	$	6.07	$	5.28	$	3.43	$	2.35
Diluted	$	10.83	$	6.00	$	5.20	$	3.38	$	2.32
Shares used to compute basic net income per share	481		486		491		494		498
Shares used to compute diluted net income per share	485		492		498		501		504
Financial position:
Cash, cash equivalents and short-term investments	$	5,992	$	4,177	$	3,229	$	5,820	$	4,761
Working capital(1)	$	2,634	$	(1,696)	$	556	$	3,720	$	3,028
Total assets	$	24,284	$	20,762	$	18,769	$	14,536	$	12,697
Debt, current	$	—	$	3,149	$	—	$	—	$	—
Debt, non-current	$	4,117	$	989	$	4,125	$	1,881	$	1,892
Stockholders’ equity	$	13,264	$	10,530	$	9,362	$	8,460	$	7,425
Additional data:
Worldwide employees	22,516		22,634		21,357		17,973		15,706

(1)As of November 29, 2019, working capital was in a deficit primarily due to the reclassification of our $2.25 billion term loan due April 30, 2020 and $900 million 4.75% senior notes due February 1, 2020 to current liabilities. We subsequently refinanced our Term Loan and 2020 Notes in February 2020, before the respective due dates.

(2)Our fiscal year is a 52- or 53-week year that ends on the Friday closest to November 30. Fiscal 2016 was a 53-week fiscal year compared with the other periods presented which were 52-week fiscal years.

Fiscal Years
2018 2017 2016 2015 2014
Operations:
Revenue $ 9,030,008
$ 7,301,505
$ 5,854,430
$ 4,795,511
$ 4,147,065
Gross profit $ 7,835,009
$ 6,291,014
$ 5,034,522
$ 4,051,194
$ 3,524,985
Income before income taxes $ 2,793,876
$ 2,137,641
$ 1,435,138
$ 873,781
$ 361,376
Net income $ 2,590,774
$ 1,693,954
$ 1,168,782
$ 629,551
$ 268,395
Net income per share:

Basic $ 5.28
$ 3.43
$ 2.35
$ 1.26
$ 0.54
Diluted $ 5.20
$ 3.38
$ 2.32
$ 1.24
$ 0.53
Shares used to compute basic net income per share 490,564
493,632
498,345
498,764
497,867
Shares used to compute diluted net income per share 497,843
501,123
504,299
507,164
508,480
Financial position:⁽¹⁾

Cash, cash equivalents and short-term investments $ 3,228,962
$ 5,819,774
$ 4,761,300
$ 3,988,084
$ 3,739,491
Working capital⁽²⁾
$ 555,913
$ 3,720,356
$ 3,028,139
$ 2,608,336
$ 2,107,893
Total assets $ 18,768,682
$ 14,535,556
$ 12,697,246
$ 11,714,500
$ 10,781,991
Debt, non-current $ 4,124,800
$ 1,881,421
$ 1,892,200
$ 1,895,259
$ 907,248
Stockholders’ equity $ 9,362,114
$ 8,459,869
$ 7,424,835
$ 7,001,580
$ 6,775,905
Additional data:

Worldwide employees 21,357
17,973
15,706
13,893
12,499

^{_________________________________________}

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⁽¹⁾	~~Information associated with our financial position is as of the Friday closest to November 30 for the five fiscal periods through~~ ~~2018~~.


⁽²⁾	For fiscal 2014, our working capital did not include the effects of the adoption of ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which required all deferred tax assets and liabilities and any related valuation allowance to be classified as non-current on our Consolidated Balance Sheets. The new standard was adopted prospectively starting fiscal 2015.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto. Discussion regarding our financial condition and results of operations for fiscal 2019 as compared to fiscal 2018 is included in Item 7 of our Annual Report on Form 10-K for the fiscal year ended November 29, 2019, filed with the SEC on January 21, 2020.

ACQUISITIONS

Subsequent to November 27, 2020, we completed our acquisition of Workfront, a privately held company that provides a work management platform for marketers, for approximately $1.5 billion in cash consideration. Workfront will be integrated into our Digital Experience reportable segment for financial reporting purposes in the first quarter of fiscal 2021.

During fiscal 2019, we acquired the remaining interest in Allegorithmic SAS (“Allegorithmic”), a privately held 3D editing and authoring software company for gaming and entertainment, for approximately $106 million in cash consideration, and integrated it into our Digital Media reportable segment.

During fiscal 2018, we completed our acquisitions of Marketo, a privately held marketing cloud platform company, for ~~$4.74~~approximately $4.73 billion and Magento, a privately held commerce platform company, for approximately $1.64 ~~billion. As of the end of fiscal 2018, we are continuing to integrate Marketo~~billion, and ~~Magento into our Digital Experience reportable segment.~~

~~During fiscal 2017, we completed our acquisition of TubeMogul, a publicly held video advertising platform company, for $560.8 million. As of the end of fiscal 2018, we have~~ integrated ~~TubeMogul~~them into our Digital Experience reportable segment.

We also completed other immaterial business acquisitions during the fiscal years presented.

See Note 23 of our Notes to Consolidated Financial Statements for further information regarding these acquisitions, including pro forma financial information related to the Marketo acquisition. Pro forma information has not been presented for our other acquisitions during the fiscal years presented as the impact to our Consolidated Financial Statements was not material.

Subsequent to November 30, 2018, we acquired the remaining interest in Allegorithmic SAS (“Allegorithmic”), a privately held 3D editing and authoring software company for gaming and entertainment, for approximately $105.0 million in cash consideration. Allegorithmic will be integrated into our Digital Media reportable segment for financial reporting purposes in the first quarter of fiscal 2019.

~~See Note 2 of our Notes to Consolidated Financial Statements for further information regarding these acquisitions.~~

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing our Consolidated Financial Statements in accordance with 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. ~~On a regular basis, we~~We evaluate our assumptions, judgments and ~~estimates.~~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 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, soand 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.

Revenue Recognition

Our contracts with customers may include multiple goods and services. For example, some of our offerings include both on-premise and/or on-device software licenses and cloud services. Determining whether the software licenses and the cloud services are distinct from each other, and therefore performance obligations to be accounted for separately, or not distinct from each other, and therefore part of a single performance obligation, may require significant judgment. We have concluded that the on-premise/on-device software licenses and cloud services provided in our Creative Cloud and Document Cloud subscription offerings are not distinct from each other such that revenue from each offering should be recognized ratably over the subscription period for which the cloud services are provided. In reaching this conclusion, we considered the nature of our promise to Creative Cloud and Document Cloud customers, which is to provide a complete end-to-end creative design or document workflow solution that operates seamlessly across multiple devices and teams. We fulfill this promise by providing access to a solution that integrates cloud-based and on-premise/on-device features that, together through their integration, provide functionalities, utility and workflow efficiencies that could not be obtained from either the on-premise/on-device software or cloud services on their own.

Cloud-based features that are integral to our Creative Cloud and Document Cloud offerings and that work together with the on-premise/on-device software include, but are not limited to: Creative Cloud Libraries, which enable customers to access their work, settings, preferences and other assets seamlessly across desktop and mobile devices and collaborate across teams in

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real time; shared reviews which enable simultaneous editing and commenting of PDFs across desktop, mobile and web; automatic cloud rendering of a design which enables it to be worked on in multiple mediums; and Sensei, Adobe’s cloud-hosted artificial intelligence and machine learning framework, which enables features such as automated photo-editing, photograph content-awareness, natural language processing, optical character recognition and automated document tagging.

Business Combinations

We allocate the purchase price of acquired companies to ~~the~~ tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets and deferred revenue obligations. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:

•future expected cash flows from software license sales, subscriptions, support agreements, consulting contracts and acquired developed technologies and patents;

•historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;

•the acquired company’s trade name and trademarks as well as assumptions about the period of time the acquired trade name and trademarks will continue to be used in the combined company’s product portfolio;

•the expected use of the acquired assets; and

•discount rates.

In connection with the purchase price allocations for our acquisitions, we estimate the fair value of the deferred revenue obligations assumed. The estimated fair value of these obligations is determined utilizing a cost build-up approach. The cost build-up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin.

Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

Accounting for Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Management must make assumptions, judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and liabilities.

Our assumptions, judgments and estimates relative to the current provision for income taxes take into account current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have established reserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities. In addition, we are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service ~~(“IRS”)~~ and other domestic and foreign tax authorities. ~~We expect future~~These tax examinations are expected to focus on our intercompany transfer pricing practices, ~~as well as~~application of tax rules, and other matters. 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 such examinations. We believe such estimates to be reasonable; however, we cannot provide assurance that the final determination of any of these examinations ~~could significantly~~will not have a significant impact on the amounts provided for income taxes in our Consolidated Financial Statements.

During fiscal 2020, we completed intra-entity transfers of certain intellectual property rights (“IP rights”) which resulted in the establishment of deferred tax assets, net of valuation allowance, and related tax benefits of $224 million and $1.13 billion, based on the fair value of the IP rights transferred in April and November 2020, respectively. The determination of the fair value involves significant judgment on future revenue growth, operating margins and discount rates. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results. The sustainability of our future tax benefits is dependent upon the acceptance of the valuation estimates and assumptions by the taxing authorities.

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Recent Accounting Pronouncements

See Note 1 of our Notes to Consolidated Financial Statements for information regarding recent accounting pronouncements that are of significance, or potential significance to us.

RESULTS OF OPERATIONS

Overview of ~~2018~~2020

For our fiscal ~~2018,~~2020, we ~~reported~~experienced strong ~~financial results~~demand across our Digital Media offerings consistent with the continued execution of our long-term plans ~~for~~with respect to this segment. In our ~~two~~Digital Experience segment, we continued to experience growth in software-based subscription revenue across our portfolio of offerings.

During the second quarter of fiscal 2020, we began to discontinue our transaction-driven Advertising Cloud offerings, allowing us to focus our investment on strategic growth ~~areas, Digital Media and~~initiatives. In the fourth quarter of fiscal 2020, we moved our Advertising Cloud offerings from our Digital Experience ~~(formerly~~segment into our new Publishing and Advertising segment, which combined Advertising Cloud with our previous Publishing segment. This realignment is consistent with how we manage our Digital ~~Marketing), while continuing~~Experience segment to ~~market~~better reflect the strategic shift related to Advertising Cloud and ~~license a broad portfolio~~to align with our overall core value proposition of ~~products and solutions.~~delivering on customer experience management.

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 and immersive content. Creative Cloud delivers value with deep, cross-product integration, frequent product updates and feature enhancements, ~~cloud-based~~cloud-enabled services including storage and syncing of files across users’ machines, machine learning and artificial intelligence, access to marketplace, social and community-based features with our 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 acquiring new users ~~on account~~as a result of low cost of entry and delivery of additional features and value to Creative Cloud, as well as keeping existing customers current on our latest release. 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 users, attract more new customers, and grow our recurring and predictable revenue stream that is recognized ratably.

We continue to implement strategies that will 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 and mobile applications, as well as targeted promotions and offers that attract past customers and potential users to try out 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 ~~Adobe~~ Document Cloud offerings built around our Adobe Acrobat family of products, including Adobe Acrobat Reader DC, and a set of integrated mobile apps and cloud-based document services, including Adobe Scan and Adobe Sign. Acrobat provides reliable creation and exchange of electronic documents, regardless of platform or application source type. Document

Cloud, which we believe enhances the way people manage critical documents at home, in the office and across devices, includes Adobe Acrobat DC and Adobe Sign, and a set of integrated services enabling users to create, review, approve, sign and track documents whether on a desktop or mobile device. Adobe Acrobat DC ~~with a touch-enabled user interface,~~ is offered both through subscription and perpetual licenses.

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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, unbilled backlog and ~~unbilled deferred revenue~~remaining performance obligation 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 material exchange rates changes. Our reported ARR results in the current fiscal ~~2018~~year are based on currency rates set at the ~~start~~beginning of ~~fiscal 2018~~the year and held constant throughout the year. We calculate ARR as follows:



Creative ARR			Annual Value of Creative Cloud Subscriptions and Services + ~~Annual Digital Publishing Suite Contract Value~~ + 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 fiscal ~~2018~~2020 was ~~$6.03~~$8.72 billion, up from ~~$4.77~~$7.25 billion at the end of fiscal ~~2017.~~2019. Document Cloud ARR exiting fiscal ~~2018~~2020 was ~~$801 million,~~$1.46 billion, up from ~~$614 million~~$1.08 billion at the end of fiscal ~~2017.~~2019. Total Digital Media ARR grew to ~~$6.83~~$10.18 billion at the end of fiscal ~~2018,~~2020, up from ~~$5.39~~$8.33 billion at the end of fiscal ~~2017.~~2019. Revaluing our ending ARR for fiscal ~~2018~~2020 using currency rates at the beginning of fiscal ~~2019,~~2021, our Digital Media ARR at the end of fiscal ~~2018~~2020 would be ~~$6.71~~$10.26 billion or approximately ~~$123~~$77 million ~~lower~~higher than the ARR reported above.

Our success in driving growth in ARR has positively affected our revenue growth. Creative revenue in fiscal ~~2018~~2020 was ~~$5.34~~$7.74 billion, up from ~~$4.17~~$6.48 billion in fiscal ~~2017~~2019 and representing ~~28%~~19% year-over-year growth. Document Cloud revenue in fiscal ~~2018~~2020 was ~~$981.8 million,~~$1.50 billion, up from ~~$836.7 million~~$1.22 billion in fiscal ~~2017~~2019 and representing ~~17%~~22% year-over-year revenue growth and reflecting an increase in demand driven by the shift to remote work as ~~we continue~~well as our continued efforts to transition Document Cloud to a subscription-based model. Total Digital Media segment revenue grew to ~~$6.33~~$9.23 billion in fiscal ~~2018,~~2020, up from ~~$5.01~~$7.71 billion in fiscal ~~2017~~2019 and representing ~~26%~~20% year-over-year growth. These increases were driven by strong net new user growth, including those resulting from the current work-from-home environment reflecting expanded digital engagement.

Digital Experience

We are a market leader in the fast-growing category addressed by our Digital Experience segment. Our Digital Experience business provides comprehensive solutions that include analytics, social marketing, targeting, media optimization, digital experience management, cross-channel campaign management, marketing automation, audience management, commerce, premium video delivery and monetization. These comprehensive solutions enable marketers to measure, personalize and optimize marketing campaigns and digital experiences across channels for optimal marketing performance.

~~Our hierarchy of solutions in the Digital Experience segment, available in our~~The Adobe Experience Cloud ~~consists~~applications, services and platform are designed to manage customer journeys, enable shoppable experiences and deliver intelligence for businesses of any size in any industry. Our differentiation and competitive advantage is strengthened by our ability to use the Adobe Experience Platform to connect our comprehensive set of solutions.

Adobe Experience Cloud is focused on delivering solutions for our enterprise customers across the following ~~cloud offerings:~~strategic growth pillars:

•Customer data and insights. Our solutions deliver real-time customer profiles and intelligence across the customer journey. Our offerings include Adobe Advertising Cloud—delivers an end-to-end platform for managing advertising across traditional TV and digital formats, and simplifies the delivery of video, display and search advertising across channels and screens.

Experience Platform, Adobe Analytics, Cloud—enables businesses to move from insights to actions in real time by uniquely integrating audiences as the core system of intelligence for the enterprise; makes data available across all Adobe clouds through the

~~capture, aggregation, rationalization and understanding of vast amounts of disparate data and then translating that data into singular customer profiles; includes Adobe Analytics and~~ Adobe Audience ~~Manager.~~Manager, Customer Journey Analytics, Real-time Customer Data Platform and Intelligent Services.

~~Adobe Marketing Cloud—provides an integrated set of~~•Content and commerce. Our solutions to help ~~marketers differentiate their brands~~customers manage, deliver, test, target and ~~engage their customers, helping~~optimize content delivery and enable shopping experiences that scale from mid-market to enterprise businesses. Our offerings include Adobe Experience Manager, Adobe Target and Adobe Commerce.

•Customer journey management. Our solutions help businesses manage, personalize and orchestrate campaigns and customer ~~journeys; includes Adobe Experience Manager (“AEM”),~~journeys across B2E use cases. Our offerings include Adobe Campaign, ~~Adobe Target,~~ Marketo ~~Engagement Platform~~Engage and ~~Adobe Primetime.~~Journey Orchestration.

Magento Commerce Cloud—provides digital commerce, order management and predictive intelligence based on a unified commerce platform enabling shopping experiences across a wide array of industries. This cloud offering was integrated into the Adobe Experience Cloud after our acquisition of privately held Magento in June 2018.

In addition to chief marketing officers, chief revenue officers and digital marketers, users of our ~~Adobe~~Digital Experience ~~Cloud~~ solutions include advertisers, campaign managers, ~~digital marketers,~~ publishers, data analysts, content managers, social marketers, marketing executives and ~~marketing~~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

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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.

In October 2018, we acquired privately held marketing cloud platform company Marketo. We began integrating Magento, as discussed above, and Marketo into our Digital Experience business in the second half of fiscal 2018.

We utilize a direct sales force to market and license our ~~Adobe~~Digital Experience ~~Cloud~~ 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.

~~We achieved record Adobe~~Digital Experience revenue for all fiscal years presented has been updated to reflect the Advertising Cloud segment move. Digital Experience revenue ~~of $2.44~~was $3.13 billion in fiscal ~~2018,~~2020, up from ~~$2.03~~$2.80 billion in fiscal ~~2017~~2019 which represents ~~20%~~12% year-over-year growth. Driving ~~the~~this increase ~~in Adobe Experience Cloud revenue~~ was the increase in subscription revenue across our offerings which grew to ~~$1.95~~$2.66 billion in fiscal ~~2018~~2020 from ~~$1.55~~$2.28 billion in fiscal ~~2017,~~2019, representing ~~26%~~17% year-over-year growth. ~~Also contributing~~

COVID-19 UPDATE

In March 2020, the World Health Organization declared the outbreak of a disease caused by a novel strain of the coronavirus (COVID-19) to be a pandemic. This pandemic has had widespread, rapidly-evolving and unpredictable impacts on global societies, economies, financial markets and business practices. Federal and state governments have implemented measures in an effort to contain the ~~increase in Digital Experience subscription~~virus, including physical distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply chain logistical changes and closure of non-essential businesses. Our focus remains on promoting employee health and safety, serving our customers and ensuring business continuity. As a result, we have taken action to direct our teams to work from home, suspend travel and replace in-person events such as Adobe Summit and MAX, with digital events through July 2021.

During the pandemic, digital has become the primary way for people to connect, work, learn and be entertained, and for businesses to engage with customers. This macro trend towards all things digital has increased the importance and relevance of our solutions and accelerated the tailwinds that benefit our business, which contributed to our continued growth year over year. However, while our revenue toand earnings are relatively predictable as a ~~lesser extent, was revenue associated with Magento’s commerce platform offerings~~result of our subscription-based business model, the broader implications of the pandemic on our results of operations and ~~Marketo’s marketing cloud platform offerings. We expect that~~overall financial performance remain uncertain. See Risk Factors for further discussion of the ~~addition~~possible impact of ~~Marketo and Magento, and continued demand across~~the pandemic on our ~~portfolio of Adobe Experience Cloud solutions, will drive revenue growth in future years.~~business.

Financial Performance Summary for Fiscal ~~2018~~2020

•Total Digital Media ARR of approximately ~~$6.83~~$10.18 billion as of November ~~30, 2018~~27, 2020 increased by ~~$1.44~~$1.85 billion, or ~~27%~~22%, from ~~$5.39~~$8.33 billion as of ~~December 1, 2017.~~November 29, 2019. The ~~change~~increase in our Digital Media ARR was primarily due to ~~strong~~new user adoption of our Creative Cloud and ~~Adobe~~ Document Cloud offerings.

•Creative revenue of ~~$5.34~~$7.74 billion increased by ~~$1.17~~$1.25 billion, or ~~28%~~19%, during fiscal ~~2018,~~2020, from ~~$4.17~~$6.48 billion in fiscal ~~2017.~~2019. Document Cloud revenue of $1.50 billion increased by $272 million, or 22%, during fiscal 2020, from $1.22 billion in fiscal 2019. The increases were primarily due to subscription revenue growth associated with our Creative Cloud and Document Cloud offerings.

•Digital Experience revenue of $3.13 billion increased by $330 million, or 12%, during fiscal 2020, from $2.80 billion in fiscal 2019. The increase was primarily due to ~~the increase in~~ subscription revenue ~~associated with our Creative Cloud offerings.~~

Adobe Experience Cloud revenue of $2.44 billion increased by $413.4 million, or 20%, during fiscal 2018, from $2.03 billion in fiscal 2017. The increase was primarily due to the increase in subscription revenuegrowth across our offerings.

~~Our total deferred revenue~~•Remaining performance obligation of ~~$3.05~~$11.34 billion as of November ~~30, 2018~~27, 2020 increased by ~~$559.1 million,~~$1.52 billion, or ~~22%~~15%, from ~~$2.49~~$9.82 billion as of ~~December 1, 2017. The increase was~~November 29, 2019, primarily due to new contracts and renewals for our Digital Media and Digital Experience offerings.

•Cost of revenue of $1.72 billion increased by $49 million, or 3%, during fiscal 2020, from $1.67 billion in fiscal 2019 primarily due to increases in ~~new contracts and the timing of renewals related to our Digital Media offerings and, to a lesser extent, deferred revenue assumed from Magento and Marketo.~~

Cost of revenue of $1.19 billion increased by $184.5 million, or 18%, during fiscal 2018, from $1.01 billion in fiscal 2017. The increase was primarily due to increases in media rebill costs associated with our Advertising Cloud offerings and hosting services and data center costs, offset in large part by decreases in Advertising Cloud media costs.

•Operating expenses of ~~$4.99~~$6.91 billion increased by ~~$871.7~~$679 million, or ~~21%~~11%, during fiscal ~~2018,~~2020, from ~~$4.12~~$6.23 billion in fiscal ~~2017. The increase was~~2019 primarily due to increases in base and incentive compensation and related benefits costs, ~~and stock-based compensation expense associated with headcount growth.~~as well as increased marketing spend. These increases were offset in part by decreases in travel-related expenses.

•Net income of ~~$2.59~~$5.26 billion increased by ~~$896.8 million,~~$2.31 billion, or ~~53%~~78%, during fiscal ~~2018~~2020 from ~~$1.69~~$2.95 billion in fiscal ~~2017~~2019 primarily due to increases in ~~subscription~~ revenue and ~~to a lesser extent,~~ the ~~decrease in the provision for~~non-recurring benefit from income ~~taxes.~~taxes resulting from intra-entity transfers of certain intellectual property rights.

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•Net cash ~~flow~~flows from operations of ~~$4.03~~$5.73 billion during fiscal ~~2018~~2020 increased by ~~$1.12~~$1.31 billion, or ~~38%~~30%, from ~~$2.91~~$4.42 billion during fiscal ~~2017~~2019 primarily due to higher net ~~income.~~income adjusted for the net effect of non-cash items.

~~Revenue (dollars in millions)~~Presentation Changes

~~Revenue for fiscal 2016 benefited from an extra week in~~In the ~~first~~fourth quarter of fiscal ~~2016 due~~2020, we moved our Advertising Cloud offerings from our Digital Experience segment into our new Publishing and Advertising segment, which combined our Advertising Cloud offerings with our previous Publishing segment. This realignment is consistent with how we manage our Digital Experience segment to better reflect the strategic shift related to Advertising Cloud and to align with our ~~52/53-week~~overall core value proposition of delivering on customer experience management.

Further, we reclassified revenue and related cost of revenue of our Advertising Cloud offerings from subscription to services and other on our Consolidated Statements of Income.

Financial information for all fiscal years presented has been updated to reflect these reclassifications. There were no other updates to disclosures included in our prior year report in relation to the reclassifications.

Revenue

Our financial ~~calendar whereby~~results for fiscal ~~2016~~2020 and 2019 are presented in accordance with Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which was ~~a 53-week year compared~~adopted under the modified retrospective method at the beginning of fiscal 2019. Fiscal 2018 results have not been restated which limits its comparability with other fiscal ~~2018 and 2017, which were 52-week years.~~years presented.


(dollars in millions)	2020			2019			2018			% Change 2020-2019		% Change 2019-2018
Subscription	$	11,626		$	9,634		$	7,604		21	%	27	%
Percentage of total revenue	90		%	86		%	84		%
Product	507			648			622			(22)	%	4	%
Percentage of total revenue	4		%	6		%	7		%
Services and other	735			889			804			(17)	%	11	%
Percentage of total revenue	6		%	8		%	9		%
Total revenue	$	12,868		$	11,171		$	9,030		15	%	24	%

Fiscal
2018 Fiscal
2017 Fiscal
2016 % Change
2018-2017 % Change
2017-2016
Subscription $ 7,922.2
$ 6,133.9
$ 4,584.8
29 % 34 %
Percentage of total revenue 88 % 84 % 78 %
Product 622.1
706.7
800.5
(12 )% (12 )%
Percentage of total revenue 7 % 10 % 14 %
Services and support 485.7
460.9
469.1
5 % (2 )%
Percentage of total revenue 5 % 6 % 8 %
Total revenue $ 9,030.0
$ 7,301.5
$ 5,854.4
24 % 25 %
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—~~segments: Digital Media, Digital Experience, and ~~Publishing.~~Publishing and Advertising. Subscription revenue by reportable segment for fiscal ~~2018~~, ~~2017~~2020, 2019 and ~~2016~~2018 is as ~~follows (dollars~~follows:


(dollars in millions)	2020		2019		2018		% Change 2020-2019		% Change 2019-2018
Digital Media	$	8,813	$	7,208	$	5,858	22	%	23	%
Digital Experience	2,660		2,280		1,600		17	%	43	%
Publishing and Advertising	153		146		146		5	%	*
Total subscription revenue	$	11,626	$	9,634	$	7,604	21	%	27	%

(*) Percentage is less than 1%.

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

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product revenue at the point in ~~millions):~~time the software is available to the customer, provided all other revenue recognition criteria are met.

Fiscal
2018 Fiscal
2017 Fiscal
2016 % Change
2018-2017 % Change
2017-2016
Digital Media $ 5,857.7
$ 4,480.8
$ 3,370.8
31 % 33 %
Digital Experience 1,949.3
1,552.5
1,123.2
26 % 38 %
Publishing 115.2
100.6
90.8
15 % 11 %
Total subscription revenue $ 7,922.2
$ 6,133.9
$ 4,584.8
29 % 34 %

~~In fiscal 2018, we moved our legacy enterprise offerings from our Digital Experience segment into Publishing. Prior year information in the table above has been reclassified to reflect this change.~~ ~~See below for additional details.~~

Services and Other

Our services and ~~support~~other revenue is comprised primarily of fees related to consulting, training, ~~and~~ maintenance and support ~~primarily related to~~and our advertising offerings. We typically sell our consulting contracts on a time-and-materials and fixed-fee basis. These revenues are recognized as the ~~licensing of our enterprise offerings~~services are performed for time and materials contracts and on a relative performance basis for fixed-fee contracts. Training revenues are recognized as the ~~sale of our hosted Adobe Experience Cloud services. Our support revenue also includes technical support and developer support to partners and developer organizations related to our desktop products.~~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.

Segments

In fiscal ~~2018~~,2020, we categorized our products into the following reportable segments:

•Digital Media—Our Digital Media segment provides tools and solutions that enable individuals, ~~small and medium businesses~~teams and enterprises to create, publish, promote and monetize their digital content anywhere. Our customers include ~~traditional~~ content creators, ~~web application~~experience designers, app developers, enthusiasts, students, social media users and ~~digital media~~creative professionals, as well as ~~their management in~~ marketing departments and agencies, companies and publishers. Our customers also include knowledge workers who create, collaborate on and distribute ~~documents.~~

documents and creative content.

•Digital Experience—Our Digital Experience segment provides products, services and solutions for creating, managing, executing, measuring, monetizing and ~~services for how digital advertising and marketing are created, managed, executed, measured and optimized.~~optimizing customer experiences from analytics to commerce. Our customers include ~~digital~~ marketers, advertisers, agencies, publishers, merchandisers, merchants, web analysts, ~~chief~~data scientists, developers, marketing ~~officers, chief~~executives, information ~~officers~~management and ~~chief revenue officers. This segment also includes our Marketo marketing cloud platform offerings~~technology executives, product development executives, and ~~Magento commerce platform offerings, both acquired in fiscal 2018.~~

sales and support executives.

•Publishing and Advertising—Our Publishing and Advertising segment addresses market opportunities ranging from the diverse authoring and publishing needs of technical and business publishing to our legacy type and OEM printing businesses. It also includes our platforms for Advertising Cloud, web conferencing, ~~and~~ document and forms, ~~platforms.~~

~~In fiscal 2018, we moved our legacy enterprise offerings—Adobe Connect web conferencing platform~~ and Adobe LiveCycle, an enterprise document and forms platform—from our Digital Experience segment into Publishing, in order to more closely align our Digital Experience business with the strategic growth opportunity. Prior year information in the tables below have been reclassified to reflect this change.

Primetime.

Segment Information ~~(dollars in millions)~~

Fiscal
2018 Fiscal
2017 Fiscal
2016 % Change
2018-2017 % Change
2017-2016
Digital Media $ 6,325.3
$ 5,010.6
$ 3,941.0
26 % 27 %
Percentage of total revenue 70 % 69 % 67 %
Digital Experience 2,443.7
2,030.3
1,631.4
20 % 24 %
Percentage of total revenue 27 % 28 % 28 %
Publishing 261.0
260.6
282.0
— % (8 )%
Percentage of total revenue 3 % 3 % 5 %
Total revenue $ 9,030.0
$ 7,301.5
$ 5,854.4
24 % 25 %

~~Fiscal 2018 Revenue Compared to Fiscal 2017 Revenue~~


(dollars in millions)	2020			2019			2018			% Change 2020-2019		% Change 2019-2018
Digital Media	$	9,233		$	7,707		$	6,325		20	%	22	%
Percentage of total revenue	72		%	69		%	70		%
Digital Experience	3,125			2,795			2,073			12	%	35	%
Percentage of total revenue	24		%	25		%	23		%
Publishing and Advertising	510			669			632			(24)	%	6	%
Percentage of total revenue	4		%	6		%	7		%
Total revenue	$	12,868		$	11,171		$	9,030		15	%	24	%

Digital Media

Revenue from Digital Media increased ~~$1.31~~$1.53 billion during fiscal ~~2018~~2020 as compared to fiscal ~~2017, primarily~~2019, driven by increases in revenue associated with our Creative ~~offerings.~~

and Document Cloud offerings due to increased demand and digital engagement amid the work-from-home environment.

Revenue associated with our Creative offerings, which includes our Creative Cloud, perpetually licensed Creative and stock photography offerings, increased during fiscal ~~2018. The increase was~~2020 primarily due to ~~an increase~~increases in ~~subscription revenue~~net new subscriptions across ~~all of~~ our Creative Cloud ~~offerings driven by the increase in net new subscriptions.~~offerings.

~~Adobe~~ Document Cloud revenue, which includes our Acrobat product family and Adobe Sign service, increased during fiscal ~~2018 as compared to fiscal 2017~~2020 primarily due to increases in ~~subscriptions~~subscription revenue driven by strong adoption of our Document ~~Cloud.~~Cloud offerings including Adobe Sign.

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Digital Experience

Revenue from Digital Experience increased ~~$413.4~~$330 million during fiscal ~~2018,~~2020, as compared to fiscal ~~2017~~2019 primarily due to subscription revenue growth ~~associated with~~across our ~~Adobe Experience Cloud offerings. The increase in subscription revenue was primarily driven by continued adoption~~offerings of which the largest contributors were our AEM ~~offerings which is part of our Marketing Cloud~~ and growth in revenue associated with our Analytics Cloud. Also contributing to the increase in subscription revenue, but to a lesser extent, was revenue associated with our Magento Commerce Cloud and Advertising Cloud.

~~Fiscal 2017 Revenue Compared to Fiscal 2016 Revenue~~

~~Digital Media~~

~~Revenue from Digital Media increased $1.07 billion during fiscal 2017 as compared to fiscal 2016, primarily driven by increases in revenue associated with our creative~~Marketo Engage offerings.

~~Revenue associated with our Creative offerings, which includes our Creative Cloud, perpetually licensed Creative and stock photography offerings, increased during fiscal 2017 as compared to fiscal~~ ~~2016~~. The increase was primarily due to an increase in subscription revenue associated with our Creative Cloud offerings driven by increases in individual, team and enterprise subscriptions. Also contributing to the increase in revenue was revenue growth associated with our Creative Cloud Photography Plan subscription offering.

~~Document Cloud revenue, which includes our Acrobat product family and Adobe Sign service, increased during fiscal 2017 as compared to fiscal~~ ~~2016~~ primarily due to increases in Document Cloud subscription revenue, offset in part by expected declines in revenue associated with our perpetually licensed Acrobat offering. Also contributing to the increase in Document Cloud revenue was an increase in Adobe Sign revenue.

~~Digital Experience~~

~~Revenue from Digital Experience increased $398.9 million during fiscal 2017, as compared to fiscal~~ ~~2016~~ primarily due to subscription revenue growth associated with our Adobe Experience Cloud. The increase in subscription revenue was driven by strong performance with our Marketing Cloud offerings, which include AEM and Adobe Campaign, and our Analytics Cloud offerings, which includes Audience Manager. Also contributing to the increase in Adobe Experience Cloud revenue were increases in revenue associated with our Advertising Cloud offerings, including TubeMogul which we acquired in fiscal 2017.

Geographical Information ~~(dollars in millions)~~

Fiscal
2018 Fiscal
2017 Fiscal
2016 % Change
2018-2017 % Change
2017-2016
Americas $ 5,116.8
$ 4,216.5
$ 3,400.1
21 % 24 %
Percentage of total revenue 57 % 58 % 58 %
EMEA 2,550.0
1,985.1
1,619.2
28 % 23 %
Percentage of total revenue 28 % 27 % 28 %
APAC 1,363.2
1,099.9
835.1
24 % 32 %
Percentage of total revenue 15 % 15 % 14 %
Total revenue $ 9,030.0
$ 7,301.5
$ 5,854.4
24 % 25 %

~~Fiscal 2018 Revenue by Geography Compared to Fiscal 2017 Revenue by Geography~~


(dollars in millions)	2020			2019			2018			% Change 2020-2019		% Change 2019-2018
Americas	$	7,454		$	6,506		$	5,117		15	%	27	%
Percentage of total revenue	58		%	58		%	57		%
EMEA	3,400			2,975			2,550			14	%	17	%
Percentage of total revenue	26		%	27		%	28		%
APAC	2,014			1,690			1,363			19	%	24	%
Percentage of total revenue	16		%	15		%	15		%
Total revenue	$	12,868		$	11,171		$	9,030		15	%	24	%

Overall revenue during fiscal ~~2018~~2020 increased in all geographic regions as compared to fiscal ~~2017~~2019 primarily due to increases in Digital Media revenue and, to a lesser extent, increases in 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. ~~Further, the overall increase in EMEA revenue during fiscal 2018 was positively impacted by the relative weakening of the U.S. Dollar against EMEA currencies as discussed below.~~

~~Fiscal 2017 Revenue by Geography Compared to Fiscal 2016 Revenue by Geography~~

Overall revenue during fiscal 2017 increased in all geographic regions as compared to fiscal 2016 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. The overall increase in EMEA revenue was slightly offset by declines due to the relative strength of the U.S. Dollar against EMEA currencies as discussed below.

Included in the overall change in revenue for fiscal ~~2018~~2020 and fiscal ~~2017~~2019 were impacts associated with foreign currency as shown below. Our ~~currency~~cash flow hedging program is used to mitigate a portion of the foreign currency impact to revenue.


(in millions)	Fiscal 2018		Fiscal 2017			(in millions)	2020		2019
Revenue impact:	Increase/(Decrease)					Revenue impact:	Increase/(Decrease)
Euro	$	96.3	$	(2.3	)	Euro	$	(24)	$	(73)
Australian Dollar						Australian Dollar	(16)		(27)
British Pound	21.6		(46.1		)	British Pound	(5)		(27)
Japanese Yen	2.8		4.0			Japanese Yen	14		2
Brazilian Real						Brazilian Real	(14)		(2)
Other currencies	1.9		6.1			Other currencies	(8)		(11)
Total revenue impact	122.6		(38.3		)	Total revenue impact	(53)		(138)
Hedging impact:						Hedging impact:
Euro	29.1		13.7			Euro	8		30
British Pound	11.3		7.1			British Pound	(2)		8
Japanese Yen	8.2		12.1			Japanese Yen	(2)		2
Australian Dollar						Australian Dollar	(1)		—
Total hedging impact	48.6		32.9			Total hedging impact	3		40
Total impact	$	171.2	$	(5.4	)	Total impact	$	(50)	$	(98)

During fiscal ~~2018,~~2020, the U.S. Dollar ~~weakened~~strengthened largely against EMEA currencies and the Australian Dollar, which ~~positively impacted~~decreased revenue in U.S. Dollar equivalents. ~~In addition, we had $48.6 million in hedging gains from our EMEA currency hedging programs during fiscal 2018.~~

~~During fiscal 2017, the U.S. Dollar strengthened against the British Pound, which negatively impacted revenue in EMEA measured in U.S. Dollar equivalents.~~ The ~~net~~ foreign currency impact to revenue was partially offset ~~in part~~ by ~~hedging~~ gains primarily from our ~~EMEA and Japanese Yen currencies~~Euro cash flow hedging ~~programs during fiscal 2017.~~program.

See Note 172 of our Notes to ~~the~~ Consolidated Financial Statements for ~~further geographic information.~~

~~Backlog~~

~~Deferred revenue on our consolidated balance sheet consists of billings and payments received in advance~~additional details of revenue ~~recognition for our products and solutions and does not represent the total contract value~~by geography.

Table of existing annual or multi-year, non-cancellable commercial subscription, SaaS and managed services agreements or government contracts with fiscal funding clauses. Unbilled deferred revenue represents expected future billings that are contractually committed under our existing subscription, SaaS and managed services agreements that have not been invoiced and are not recorded in deferred revenue within our financial statements. Our presentation of unbilled deferred revenue backlog may differ from that of other companies in the industry. As of November 30, 2018, we had unbilled deferred revenue backlog, including that of our fiscal 2018 acquisitions, of approximately $5.05 billion of which approximately 40% to 50% is not reasonably expected to be billed during fiscal 2019. Comparatively, we had unbilled deferred revenue backlog of approximately $3.94 billion as of December 1, 2017, of which approximately 40% to 50% was not reasonably expected to be billed during fiscal 2018.Contents

We expect that the amount of unbilled deferred revenue backlog will change from period to period due to certain factors, including the timing and duration of large customer subscriptions, SaaS and managed service agreements, varying billing cycles of these agreements, the timing of customer renewals, the timing of when unbilled deferred revenue backlog is to be billed, changes in customer financial circumstances and foreign currency fluctuations. Additionally, the unbilled deferred revenue backlog for multi-year subscription agreements that are billed annually is typically higher at the beginning of the contract period, lower prior to renewal and typically increases when the agreement is renewed. Accordingly, fluctuations in unbilled deferred revenue backlog may not be a reliable indicator of future business prospects and the related revenue associated with these contractual commitments.

Cost of Revenue ~~(dollars in millions)~~


(dollars in millions)	2020			2019			2018			% Change 2020-2019		% Change 2019-2018
Subscription	$	1,108		$	926		$	574		20	%	61	%
Percentage of total revenue	9		%	8		%	6		%
Product	36			40			46			(10)	%	(13)	%
Percentage of total revenue	*			*			1		%
Services and other	578			707			575			(18)	%	23	%
Percentage of total revenue	4		%	6		%	6		%
Total cost of revenue	$	1,722		$	1,673		$	1,195		3	%	40	%

Fiscal
2018 Fiscal
2017 Fiscal
2016 % Change
2018-2017 % Change
2017-2016
Subscription $ 807.2
$ 623.0
$ 461.9
30 % 35 %
Percentage of total revenue 9 % 9 % 8 %
Product 46.0
57.1
68.9
(19 )% (17 )%
Percentage of total revenue 1 % 1 % 1 %
Services and support 341.8
330.4
289.1
3 % 14 %
Percentage of total revenue 4 % 5 % 5 %
Total cost of revenue $ 1,195.0
$ 1,010.5
$ 819.9
18 % 23 %
(*) Percentage is less than 1%

Subscription

Cost of subscription revenue consists of third-party ~~royalties~~hosting services and data center costs, royalty fees and other expenses related to operating our network infrastructure, including depreciation expense and operating lease payments associated with computer equipment, ~~data center costs,~~ salaries and related expenses of network operations, implementation, account management and technical support personnel, amortization of certain intangible assets and allocated overhead. We enter into contracts with third parties for hosting services and use of data center facilities. Our data center costs largely consist of the amounts we pay to these third parties for rack space, power and similar items.

Cost of subscription revenue increased due to the following:


	Components of % Change 2020-2019		Components of % Change 2019-2018
Hosting services and data center costs	10	%	16	%
Incentive compensation, cash and stock-based	5		5
Royalty costs	3		5
Base compensation and related benefits associated with headcount	3		5

Software licenses	2		2
Amortization of intangibles	(2)		24
Various individually insignificant items	(1)		4
Total change	20	%	61	%

Product

Cost of product revenue is primarily comprised of third-party royalties, amortization related to purchased intangibles and acquired rights to use technology, excess and obsolete inventory, 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 employee-related and other associated costs incurred to provide consulting services, training and product support. Cost of services and other also includes media costs related to impressions purchased from third-party ad inventory sources for our transaction-based Adobe Advertising Cloud ~~offerings.~~offerings, which we began to discontinue in the second quarter of fiscal 2020.

Cost of ~~subscription revenue increased~~services and other fluctuations were due to the following:


	Components of % Change 2020-2019		Components of % Change 2019-2018
Media costs	(9)	%	10	%
Base compensation and related benefits associated with headcount	(7)		4
Incentive compensation, cash and stock-based	(1)		6
Professional and consulting fees	3		—
Various individually insignificant items	(4)		3
Total change	(18)	%	23	%

% Change
2018-2017 % Change
2017-2016
Media rebill costs 8 % 9 %
Hosting services and data center costs 8
7
Royalty costs 4
6
Base compensation and related benefits associated with headcount 1
6
Incentive compensation, cash and stock-based 3
5
Amortization of purchased intangibles 2
2
Depreciation expense —
(1 )
Software licenses 2
—
Various individually insignificant items 2
1
Total change 30 % 35 %

~~Product~~

~~Cost~~Table of product revenue includes product packaging, third-party royalties, excess and obsolete inventory, amortization related to localization costs, purchased intangibles and acquired rights to use technology and the costs associated with the manufacturing of our products.Contents

Cost of product revenue decreased during fiscal 2018 and fiscal 2017 as compared to the corresponding year-ago periods primarily due to decreased royalty costs as a result of declines in obligations to certain key vendors for technology use.

~~Services and Support~~

~~Cost of services and support revenue is primarily comprised of employee-related costs and associated costs incurred to provide consulting services, training and product support.~~

~~Cost of services and support revenue increased due to the following:~~

% Change
2018-2017 % Change
2017-2016
Base compensation and related benefits associated with headcount 1 % 13 %
Incentive compensation, cash and stock-based 1
1
Professional and consulting fees —
(3 )
Various individually insignificant items 1
3
Total change 3 % 14 %

Compensation costs increased during fiscal 2017 as compared to fiscal 2016 primarily due to increases in headcount resulting from decreased usage of outside consultants that were providing consulting and training services to customers.

Operating Expenses ~~(dollars in millions)~~

Fiscal
2018 Fiscal
2017 Fiscal
2016 % Change
2018-2017 % Change
2017-2016
Research and development $ 1,537.8
$ 1,224.1
$ 976.0
26 % 25 %
Percentage of total revenue 17 % 17 % 17 %
Sales and marketing 2,620.8
2,197.6
1,910.2
19 % 15 %
Percentage of total revenue 29 % 30 % 33 %
General and administrative 744.9
624.7
576.2
19 % 8 %
Percentage of total revenue 8 % 9 % 10 %
Amortization of purchased intangibles 91.1
76.5
78.5
19 % (3 )%
Percentage of total revenue 1 % 1 % 1 %
Total operating expenses $ 4,994.6
$ 4,122.9
$ 3,540.9
21 % 16 %

~~Research and Development, Sales and Marketing and General and Administrative Expenses~~

Research and development, sales and marketing and general and administrative expenses increased during fiscal 2018 as compared to fiscal 2017 due to increases in base compensation and related benefits costs and stock-based compensation expenses associated with headcount growth.

Research and development, sales and marketing and general and administrative expenses increased during fiscal 2017 as compared to fiscal 2016 primarily due to increases in base compensation and related benefits costs driven by headcount increases and stock-based compensation expense.


(dollars in millions)	2020			2019			2018			% Change 2020-2019
Research and development	$	2,188		$	1,930		$	1,538		13	%
Percentage of total revenue	17		%	17		%	17		%
Sales and marketing	3,591			3,244			2,621			11	%
Percentage of total revenue	28		%	29		%	29		%
General and administrative	968			881			745			10	%
Percentage of total revenue	8		%	8		%	8		%


Amortization of intangibles	162			175			91			(7)	%
Percentage of total revenue	1		%	2		%	1		%
Total operating expenses	$	6,909		$	6,230		$	4,995		11	%

Research and Development

Research and development expenses consist primarily of salary and benefit expenses for software developers, contracted development efforts, third party fees for hosting services, related facilities costs and expenses associated with computer equipment used in software development.

Research and development expenses increased due to the following:

% Change
2018-2017 % Change
2017-2016
Base compensation and related benefits associated with headcount 14 % 11 %
Incentive compensation, cash and stock-based 8
9
Professional and consulting fees 3
4
Various individually insignificant items 1
1
Total change 26 % 25 %


	Components of % Change 2020-2019
Incentive compensation, cash and stock-based	11	%
Base compensation and related benefits associated with headcount	3


Travel	(1)
Total change	13	%

We believe that 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 salary and benefit expenses, 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 as a percentage of revenue during fiscal 2018 decreased slightly compared to fiscal 2017 primarily due to our revenue growing at a faster pace compared with the increases in sales and marketing expenses.

~~Sales and marketing expenses~~ increased due to the following:


	Components of % Change 2020-2019
Marketing spend related to campaigns, events and overall marketing efforts	8	%
Incentive compensation, cash and stock-based	4
Transaction fees	2
Base compensation and related benefits associated with headcount	1
Professional and consulting fees	(1)
Travel	(3)


Total change	11	%

% Change
2018-2017 % Change
2017-2016
Base compensation and related benefits associated with headcount 7 % 5 %
Incentive compensation, cash and stock-based 6
2
Professional and consulting fees —
2
Marketing spending related to product launches and overall marketing efforts 2
4
Various individually insignificant items 4
2
Total change 19 % 15 %

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General and Administrative

General and administrative expenses consist primarily of compensation and benefit expenses, 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 computer equipment and software used in the administration of the business, charitable contributions and various forms of insurance.

General and administrative expenses increased due to the following:


	Components of % Change 2020-2019
Incentive compensation, cash and stock-based	5	%
Charges related to cancellation of corporate events, net of recoveries	3
Bad debt expense	2
Charitable contributions	2
Base compensation and related benefits associated with headcount	1
Travel	(2)
Various individually insignificant items	(1)
Total change	10	%

% Change
2018-2017 % Change
2017-2016
Professional and consulting fees 10 % 1 %
Base compensation and related benefits associated with headcount 2
2
Incentive compensation, cash and stock-based 5
3
Facilities and telecom 2
2
Total change 19 % 8 %
During fiscal 2020, we recorded net charges related to the cancellation of our corporate events due to concerns over the pandemic. Certain of these charges were reversed as we successfully negotiated the right to apply certain commitments to other events.

~~Professional and consulting fees~~Bad debt expense increased ~~from~~during fiscal ~~2018~~2020 primarily due to specific reserves for certain categories of customers that were more impacted by the changes in the macroeconomic environment as a result of the pandemic.

Amortization of Intangibles

Amortization expense decreased during fiscal 2020 as compared to fiscal ~~2017~~2019 primarily due to ~~incurred transaction costs associated with our acquisitions of Magento and Marketo both of which closed in fiscal 2018.~~

~~Amortization of Purchased Intangibles~~

During the last several years, we have completed a number of business combinations and asset acquisitions. As a result of these acquisitions, we purchased intangible assets that are being amortized over their estimated useful lives ranging from one to fourteen years.

Amortization expense increased during fiscal 2018 as compared to fiscal 2017. The increase was primarily due to amortization of intangible assets purchased through our acquisitions of Magento and Marketo in the third and fourth quarter of fiscal 2018, respectively, and partially offset by certain fully amortized acquired intangible assets from previous acquisitions. We expect that intangible assets purchased through our acquisitions of Magento and Marketo will continue to increase our amortization expense in future periods.

~~Amortization expense remained relatively consistent during fiscal 2017 as compared to fiscal 2016. The decreases associated with certain fully amortized acquired~~ intangible assets from previous acquisitions, ~~were offset by increases associated with intangible assets purchased through our acquisition of TubeMogul in~~including from Marketo and Omniture, becoming fully amortized during the ~~first quarter of fiscal 2017.~~year.

Non-Operating Income (Expense), Net ~~(dollars in millions)~~


(dollars in millions)	2020			2019			2018			% Change 2020-2019
Interest expense	$	(116)		$	(157)		$	(89)		(26)	%
Percentage of total revenue	(1)		%	(1)		%	(1)		%
Investment gains (losses), net	13			52			3			(75)	%
Percentage of total revenue	*			*			*
Other income (expense), net	42			42			40			**
Percentage of total revenue	*			*			*
Total non-operating income (expense), net	$	(61)		$	(63)		$	(46)		(3)	%



Delaware			77-0019522
(State or other jurisdiction of incorporation or organization)			~~77-0019522~~ (I.R.S. Employer Identification No.)



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share	~~The~~ ADBE	NASDAQ ~~Stock Market LLC~~ ~~(NASDAQ Global Select Market)~~


					Page No.
PART I
Item 1.			Business		3
Item 1A.			Risk Factors		24
Item 1B.			Unresolved Staff Comments		38
Item 2.			Properties		38
Item 3.			Legal Proceedings		39
Item 4.			Mine Safety Disclosures		39

PART II						~~Page No.~~
~~PART I~~
Item 1.5.	~~Business~~			3
~~Item 1A.~~	~~Risk Factors~~	20
~~Item 1B.~~	~~Unresolved Staff Comments~~	32
~~Item 2.~~	~~Properties~~	32
~~Item 3.~~	~~Legal Proceedings~~	33
~~Item 4.~~	~~Mine Safety Disclosures~~	33

~~PART II~~
~~Item 5.~~	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3440
Item 6			Selected Financial Data		3541
Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations		3642
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk		5358
Item 8.			Financial Statements and Supplementary Data		5661
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~103~~110
Item 9A.			Controls and Procedures		~~103~~110
Item 9B.			Other Information		~~103~~110

PART III
Item 10.			Directors, Executive Officers and Corporate Governance		~~103~~111
Item 11.			Executive Compensation		~~104~~111
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~104~~111
Item 13.			Certain Relationships and Related Transactions, and Director Independence		~~104~~111
Item 14.			Principal Accounting Fees and Services		~~104~~111

PART IV
Item 15.			Exhibits, Financial Statement Schedules		~~104~~111

Signatures					~~110~~115
Summary of Trademarks					~~112~~117


(in millions)	Fiscal 2018			Fiscal 2017			Fiscal 2016			(in millions)	2020		2019		2018
Net cash provided by operating activities	$	4,029.3		$	2,912.9		$	2,199.7		Net cash provided by operating activities	$	5,727	$	4,422	$	4,029
Net cash used for investing activities	(4,685.3		)	(442.9		)	(960.0		)	Net cash used for investing activities	(414)		(456)		(4,685)
Net cash used for financing activities	(5.6		)	(1,183.7		)	(1,090.7		)	Net cash used for financing activities	(3,488)		(2,946)		(5)
Effect of foreign currency exchange rates on cash and cash equivalents	(1.7		)	8.5			(14.2		)	Effect of foreign currency exchange rates on cash and cash equivalents	3		(13)		(2)
Net increase (decrease) in cash and cash equivalents	$	(663.3	)	$	1,294.8		$	134.8		Net increase (decrease) in cash and cash equivalents	$	1,828	$	1,007	$	(663)



Board Approval Date	Repurchases Under the Plan	2018			2017			2016
Board Approval Date	Repurchases Under the Plan	Shares	Average		Shares	Average		Shares	Average
January 2015	Structured repurchases	—	$	—	4,263	$	118.00	10,428	$	97.16
January 2017	Structured repurchases	8,686	$	230.43	3,923	$	151.80	—	$	—
Total shares		8,686	$	230.43	8,186	$	134.20	10,428	$	97.16
Total cost		$2,001,500			$1,098,595			$1,013,131



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



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



Period	Total Number of Shares Repurchased	Average Price Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value that May Yet be Purchased Under the Plan
	(in thousands, except average price per share)
Beginning repurchase authority⁽¹⁾					$	8,397,282
September 1 — September 28, 2018
Shares repurchased	945	$	261.72	945	$	(247,282	)
October 27 — November 30, 2018
Shares repurchased	616	$	243.52	616	$	(150,000	)	⁽²⁾
Total	1,561			1,561	$	8,000,000



	% Change 2018-2017		% Change 2017-2016
Media rebill costs	8	%	9	%
Hosting services and data center costs	8		7
Royalty costs	4		6
Base compensation and related benefits associated with headcount	1		6
Incentive compensation, cash and stock-based	3		5
Amortization of purchased intangibles	2		2
Depreciation expense	—		(1	)
Software licenses	2		—
Various individually insignificant items	2		1
Total change	30	%	35	%


	As of					As of
(in millions)	November 30, 2018		December 1, 2017		(in millions)	November 27, 2020		November 29, 2019
Cash and cash equivalents	$	1,642.8	$	2,306.1	Cash and cash equivalents	$	4,478	$	2,650
Short-term investments	$	1,586.2	$	3,513.7	Short-term investments	$	1,514	$	1,527
Working capital	$	555.9	$	3,720.4	Working capital	$	2,634	$	(1,696)
Stockholders’ equity	$	9,362.1	$	8,459.9	Stockholders’ equity	$	13,264	$	10,530



	Payment Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Notes and Term Loan, including interest	$	4,538.5	$	153.3	$	3,271.2	$	65.0	$	1,049.0
Operating lease obligations	666.5		79.4		156.1		119.1		311.9
Purchase obligations	733.8		346.3		335.3		48.2		4.0
Total	$	5,938.8	$	579.0	$	3,762.6	$	232.3	$	1,364.9



Due within one year	$	612.1
Due between one and two years	564.2
Due between two and three years	282.2
Due after three years	127.7
Total	$	1,586.2



-150 BPS		-100 BPS		-50 BPS		Fair Value 11/30/18		+50 BPS		+100 BPS		+150 BPS
$	1,617.5	$	1,607.1	$	1,596.6	$	1,586.2	$	1,575.7	$	1,565.3	$	1,554.8
-150 BPS		-100 BPS		-50 BPS		Fair Value 12/1/17		+50 BPS		+100 BPS		+150 BPS
$	3,595.2	$	3,568.1	$	3,540.9	$	3,513.7	$	3,486.5	$	3,459.3	$	3,432.1



			Page No.
Consolidated Balance Sheets			5762
Consolidated Statements of Income			5863
Consolidated Statements of Comprehensive Income			5964
Consolidated Statements of Stockholders' Equity			6065
Consolidated Statements of Cash Flows			6166
Notes to Consolidated Financial Statements			6267
Report of KPMG LLP, Independent Registered Public Accounting Firm			~~101~~107


	November 30, 2018			December 1, 2017				November 27, 2020		November 29, 2019
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	1,642,775		$	2,306,072		Cash and cash equivalents	$	4,478	$	2,650
Short-term investments	1,586,187			3,513,702			Short-term investments	1,514		1,527
Trade receivables, net of allowances for doubtful accounts of $14,981 and $9,151, respectively	1,315,578			1,217,968
Trade receivables, net of allowances for doubtful accounts of $21 and of $10, respectively							Trade receivables, net of allowances for doubtful accounts of $21 and of $10, respectively	1,398		1,535
Prepaid expenses and other current assets	312,499			210,071			Prepaid expenses and other current assets	756		783
Total current assets	4,857,039			7,247,813			Total current assets	8,146		6,495
Property and equipment, net	1,075,072			936,976			Property and equipment, net	1,517		1,293
Operating lease right-of-use assets, net							Operating lease right-of-use assets, net	487		0
Goodwill	10,581,048			5,821,561			Goodwill	10,742		10,691
Purchased and other intangibles, net	2,069,001			385,658
Other intangibles, net							Other intangibles, net	1,359		1,721
Deferred income taxes							Deferred income taxes	1,370		0
Other assets	186,522			143,548			Other assets	663		562
Total assets	$	18,768,682		$	14,535,556		Total assets	$	24,284	$	20,762

LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Trade payables	$	186,258		$	113,538		Trade payables	$	306	$	209
Accrued expenses	1,163,185			993,773			Accrued expenses	1,422		1,399
Debt							Debt	0		3,149
Deferred revenue							Deferred revenue	3,629		3,378
Income taxes payable	35,709			14,196			Income taxes payable	63		56
Deferred revenue	2,915,974			2,405,950
Operating lease liabilities							Operating lease liabilities	92		0
Total current liabilities	4,301,126			3,527,457			Total current liabilities	5,512		8,191
Long-term liabilities:							Long-term liabilities:
Debt	4,124,800			1,881,421			Debt	4,117		989
Deferred revenue	137,630			88,592			Deferred revenue	130		123
Income taxes payable	644,101			173,088			Income taxes payable	529		616
Deferred income taxes	46,702			279,941			Deferred income taxes	10		140
Operating lease liabilities							Operating lease liabilities	499		0
Other liabilities	152,209			125,188			Other liabilities	223		173
Total liabilities	9,406,568			6,075,687			Total liabilities	11,020		10,232

Commitments and contingencies							Commitments and contingencies	0		0

Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized; none issued	—			—
Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; 487,663 and 491,262 shares outstanding, respectively	61			61
Preferred stock, $0.0001 par value; 2 shares authorized; NaN issued							Preferred stock, $0.0001 par value; 2 shares authorized; NaN issued	0		0
Common stock, $0.0001 par value; 900 shares authorized; 601 shares issued; 479 and 483 shares outstanding, respectively							Common stock, $0.0001 par value; 900 shares authorized; 601 shares issued; 479 and 483 shares outstanding, respectively	0		0
Additional paid-in-capital	5,685,337			5,082,195			Additional paid-in-capital	7,357		6,504
Retained earnings	11,815,597			9,573,870			Retained earnings	19,611		14,829
Accumulated other comprehensive income (loss)	(148,130		)	(111,821		)	Accumulated other comprehensive income (loss)	(158)		(188)
Treasury stock, at cost (113,171 and 109,572 shares, respectively), net of reissuances	(7,990,751		)	(6,084,436		)
Treasury stock, at cost (122 and 118 shares, respectively)							Treasury stock, at cost (122 and 118 shares, respectively)	(13,546)		(10,615)
Total stockholders’ equity	9,362,114			8,459,869			Total stockholders’ equity	13,264		10,530
Total liabilities and stockholders’ equity	$	18,768,682		$	14,535,556		Total liabilities and stockholders’ equity	$	24,284	$	20,762


	Years Ended
	November 27, 2020		November 29, 2019		November 30, 2018
Revenue:
Subscription	$	11,626	$	9,634	$	7,604
Product	507		648		622
Services and other	735		889		804
Total revenue	12,868		11,171		9,030
Cost of revenue:
Subscription	1,108		926		574
Product	36		40		46
Services and other	578		707		575
Total cost of revenue	1,722		1,673		1,195
Gross profit	11,146		9,498		7,835
Operating expenses:
Research and development	2,188		1,930		1,538
Sales and marketing	3,591		3,244		2,621
General and administrative	968		881		745

Amortization of intangibles	162		175		91
Total operating expenses	6,909		6,230		4,995
Operating income	4,237		3,268		2,840
Non-operating income (expense):
Interest expense	(116)		(157)		(89)
Investment gains (losses), net	13		52		3
Other income (expense), net	42		42		40
Total non-operating income (expense), net	(61)		(63)		(46)
Income before income taxes	4,176		3,205		2,794
Provision for (benefit from) income taxes	(1,084)		254		203
Net income	$	5,260	$	2,951	$	2,591
Basic net income per share	$	10.94	$	6.07	$	5.28
Shares used to compute basic net income per share	481		486		491
Diluted net income per share	$	10.83	$	6.00	$	5.20
Shares used to compute diluted net income per share	485		492		498



	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock
	Shares	Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Shares		Amount			Total
Balances at November 27, 2015	600,834	$	61	$	4,184,883		$	7,253,431		$	(169,080	)	(103,025	)	$	(4,267,715	)	$	7,001,580
Net income	—	—		—			1,168,782			—			—		—			1,168,782
Other comprehensive income (losses), net of taxes	—	—		—			—			(4,522		)	—		—			(4,522		)
Re-issuance of treasury stock under stock compensation plans	—	—		7,365			(307,696		)	—			6,872		209,628			(90,703		)
Tax benefit from employee stock plans	—	—		75,102			—			—			—		—			75,102
Purchase of treasury stock	—	—		—			—			—			(10,427	)	(1,075,000		)	(1,075,000		)
Stock-based compensation	—	—		348,981			—			—			—		—			348,981
Value of shares in deferred compensation plan	—	—		—			—			—			—		615			615
Balances at December 2, 2016	600,834	$	61	$	4,616,331		$	8,114,517		$	(173,602	)	(106,580	)	$	(5,132,472	)	$	7,424,835
Net income	—	—		—			1,693,954			—			—		—			1,693,954
Other comprehensive income (losses), net of taxes	—	—		—			—			61,781			—		—			61,781
Re-issuance of treasury stock under stock compensation plans	—	—		1,768			(234,601		)	—			5,194		151,058			(81,775		)
Purchase of treasury stock	—	—		—			—			—			(8,186	)	(1,100,000		)	(1,100,000		)
Equity awards assumed for acquisition	—	—		10,348			—			—			—		—			10,348
Stock-based compensation	—	—		453,748			—			—			—		—			453,748
Value of shares in deferred compensation plan	—	—		—			—			—			—		(3,022		)	(3,022		)
Balances at December 1, 2017	600,834	$	61	$	5,082,195		$	9,573,870		$	(111,821	)	(109,572	)	$	(6,084,436	)	$	8,459,869
Net income	—	—		—			2,590,774			—			—		—			2,590,774
Other comprehensive income (losses), net of taxes	—	—		—			—			(36,309		)	—		—			(36,309		)
Re-issuance of treasury stock under stock compensation plans	—	—		(1,125		)	(348,729		)	—			5,087		147,651			(202,203		)
Purchase of treasury stock	—	—		—			—			—			(8,686	)	(2,050,000		)	(2,050,000		)
Equity awards assumed for acquisition	—	—		2,784			—			—			—		—			2,784
Stock-based compensation	—	—		601,483			—			—			—		—			601,483
Value of shares in deferred compensation plan	—	—		—			—			—			—		(3,966		)	(3,966		)
Impacts of the U.S. Tax Act	—	—		—			(318		)	—			—		—			(318		)
Balances at November 30, 2018	600,834	$	61	$	5,685,337		$	11,815,597		$	(148,130	)	(113,171	)	$	(7,990,751	)	$	9,362,114


	2020
	Quarter Ended								Year Ended
(in millions)	February 28		May 29		August 28		November 27		November 27
Revenue:
Subscription	$	2,732	$	2,831	$	2,948	$	3,115	$	11,626
Product	143		128		109		127		507
Services and other	216		169		168		182		735
Total revenue	3,091		3,128		3,225		3,424		12,868
Cost of revenue:
Subscription	274		269		282		283		1,108
Product	7		9		10		10		36
Services and other	171		137		135		135		578
Total cost of revenue	$	452	$	415	$	427	$	428	$	1,722



(in thousands)	2018			2017			2016
Beginning balance	$	9,151		$	6,214		$	7,293
Increase due to acquisition	5,602			2,391			77
Charged to operating expenses	5,962			4,411			1,337
Deductions⁽¹⁾	(5,734		)	(3,865		)	(2,493		)
Ending balance	$	14,981		$	9,151		$	6,214


⁽¹⁾	~~Deductions related to the allowance for doubtful accounts represent amounts written off against the allowance, less recoveries.~~


		Weighted Average Useful Life (years)
Customer contracts and relationships		10
Purchased technology		6
Trademarks		9


Other		~~Weighted Average~~ ~~Useful Life (years~~)
~~Purchased technology~~	6
~~Customer contracts and relationships~~	9
~~Trademarks~~	9
~~Acquired rights to use technology~~	10
~~Backlog~~	2
~~Other intangibles~~	4


(dollars in millions)	Digital Media			Digital Experience			Publishing and Advertising			Total
Fiscal 2020
Revenue	$	9,233		$	3,125		$	510		$	12,868
Cost of revenue	352			1,126			244			1,722
Gross profit	$	8,881		$	1,999		$	266		$	11,146
Gross profit as a percentage of revenue	96		%	64		%	52		%	87		%
Fiscal 2019
Revenue	$	7,707		$	2,795		$	669		$	11,171
Cost of revenue	290			1,056			327			1,673
Gross profit	$	7,417		$	1,739		$	342		$	9,498
Gross profit as a percentage of revenue	96		%	62		%	51		%	85		%
Fiscal 2018
Revenue	$	6,325		$	2,073		$	632		$	9,030
Cost of revenue	249			679			267			1,195
Gross profit	$	6,076		$	1,394		$	365		$	7,835
Gross profit as a percentage of revenue	96		%	67		%	58		%	87		%


(in millions)	Amount		Weighted Average Useful Life (years)
Customer contracts and relationships	$	578	11
Purchased technology	444		7
Backlog	105		2
Non-competition agreements	12		2
Trademarks	329		9
Total identifiable intangible assets	1,468
Net liabilities assumed	(194)		N/A
Goodwill (1)	3,459		N/A
Total purchase price	$	4,733



	2018		2017
Net revenues	$	9,338,790	$	7,568,713
Net income	$	2,362,238	$	1,404,864


⁽¹⁾	~~Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts.~~


(in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Current assets:
Cash	$	849	$	0	$	—	$	849
Cash equivalents:
Corporate debt securities	28		0		0		28
Money market mutual funds	3,483		0		0		3,483

Time deposits	118		0		0		118

Total cash equivalents	3,629		0		0		3,629
Total cash and cash equivalents	4,478		0		0		4,478
Short-term fixed income securities:
Asset-backed securities	105		1		0		106
Corporate debt securities	1,378		8		0		1,386
Foreign government securities	3		0		0		3
Municipal securities	19		0		0		19





Total short-term investments	1,505		9		0		1,514
Total cash, cash equivalents and short-term investments	$	5,983	$	9	$	0	$	5,992



	2018					2017
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Corporate debt securities	$	969,701	$	(16,730	)	$	500,689	$	(4,666	)
Asset-backed securities	34,812		(313		)	32,383		(210		)
Municipal securities	11,532		(205		)	598		(17		)
Foreign government securities	4,154		(24		)	—		—
U.S. Treasury securities	—		—			338,950		(1,465		)
Total	$	1,020,199	$	(17,272	)	$	872,620	$	(6,358	)


(in millions)	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate debt securities	$	28	$	0	$	28	$	0
Money market mutual funds	3,483		3,483		0		0

Time deposits	118		118		0		0


Short-term investments:
Asset-backed securities	106		0		106		0
Corporate debt securities	1,386		0		1,386		0
Foreign government securities	3		0		3		0

Municipal securities	19		0		19		0


Prepaid expenses and other current assets:
Foreign currency derivatives	15		0		15		0
Other assets:
Deferred compensation plan assets	116		7		109		0
Total assets	$	5,274	$	3,608	$	1,666	$	0


Liabilities:
Accrued expenses:

Foreign currency derivatives	$	4	$	0	$	4	$	0


Liabilities:
Accrued expenses:
Treasury lock derivatives	$	30	$	0	$	30	$	0
Foreign currency derivatives	3		0		3		0


Total liabilities	$	33	$	0	$	33	$	0



	2018				2017
	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 ⁽¹⁾⁽²⁾	$	40,191	$	—	$	12,918	$	—
Interest rate swap ⁽³⁾	—		9,744		—		1,058
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts ⁽¹⁾	4,068		816		1,280		1,598
Total derivatives	$	44,259	$	10,560	$	14,198	$	2,656


⁽¹⁾	~~Included in prepaid expenses and other current assets and accrued expenses for asset derivatives and liability derivatives, respectively,~~Gains (losses) on ~~our Consolidated Balance Sheets.~~


⁽²⁾	~~Hedging effectiveness expected to be recognized to income within the next twelve months.~~


⁽³⁾	~~Included in other liabilities on our Consolidated Balance Sheets.~~


⁽¹⁾	~~Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”).~~