ITEM 1A. RISK FACTORS

As previously discussed, our actual results could differ materially from our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed below. These and many other factors described in this report could adversely affect our operations, performance and financial condition.

If we cannot continue to develop, market and offer new products and services or enhancements to existing products and services that meet customer requirements, our operating results could suffer.

The process of developing new high technology products and services and enhancing existing products and services is complex, costly and uncertain. If we fail to anticipate customers’ changing needs and emerging technological trends, our market share and results of operations could suffer. We must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether our predictions will accurately reflect customer demand for our products and services. If we are unable to extend our core technologies into new applications and new platforms and to anticipate or respond to technological changes, the market’s acceptance of our products and services could decline and our results would suffer. Additionally, any delay in the development, production, marketing or offering of a new product or service or enhancement to an existing product or service could result in customer attrition or impede our ability to attract new customers, causing a decline in our revenue, earnings or stock price and weakening our competitive position. ~~We maintain strategic relationships with~~Furthermore, third parties to market certain of our ~~products and services~~offerings and support certain product functionality. If we are unsuccessful in establishing or maintaining our strategic relationships with these third parties, our ability to compete in the marketplace, to reach new customers and geographies or to grow our revenue could be impaired and our operating results could suffer.

We offer our products on a variety of personal computers, tablet and mobile devices. ~~Recent trends have shown a technological~~Consumers continue to shift away from personal computers to tablet and mobile devices. If we cannot continue to adapt our products to tablet and mobile devices, our business could be harmed. To the extent that consumer purchases of these devices slow down, or to the extent that significant demand arises for our products or competitive products on other platforms before we offer our products on those platforms, our business could be harmed. Releases of new devices or operating systems may make it more difficult for our products to perform or may require significant costs in order for us to adapt our solutions to such devices or operating systems. These potential costs and delays could harm our business.

Introduction of new products, services and business models by competitors or others could harm our competitive position and results of operations.

The markets for our products and services are characterized by intense competition, evolving industry standards, emerging business and distribution models, disruptive technology developments, short ~~product and service~~ life cycles, customer price sensitivity ~~on the part of customers~~ and frequent new product introductions (including alternatives with limited functionality available at lower costs or free of charge). Any of these factors could create downward pressure on pricing and gross margins and could adversely affect our renewal and upgrade rates, as well as our ability to attract new customers. Our future success will depend on our continued ability to enhance and better integrate our existing products and services, introduce new products and services onin a timely and cost-effective ~~basis,~~manner, meet changing customer needs, extend our core technology into new applications, and anticipate ~~and respond to~~ emerging standards, business models, software delivery methods and other technological developments, such as the ~~evolution~~emergence and ~~emergence~~evolution of digital application marketplaces as a direct sales and software delivery environment. These digital application marketplaces are often ~~have~~the exclusive ~~distribution~~distributors for certain platforms, which may make it more difficult for us to compete ~~in these markets.~~on those platforms. If any competing products, services or operating systems that doare not ~~support~~compatible with our solutions achieve widespread acceptance, our operating results could suffer. In addition, consolidation has occurred among some of the competitors in the markets in which we compete. Further consolidations in these markets may subject us to increased competitive pressures and may therefore harm our results of operations.

The introduction of certain technologies may reduce the effectiveness of our products. For example, some of our products rely on third-party cookies, which are placed on individual browsers when consumers visit websites that contain advertisements. We use these cookies to help our customers more effectively advertise, to gauge the performance of their advertisements, and to detect and prevent fraudulent activity. Consumers can block or delete cookies through their browsers or “ad-blocking” software or applications. The most common Internet browsers allow consumers to modify their browser settings to prevent cookies from being accepted by their browsers, or are set to block third-party cookies by default. Increased use of methods, software or applications that block cookies could harm our business.

For additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section entitled “Competition” contained in Item 1 of our Annual Report on Form 10-K for the fiscal year ended November 27, 2015.

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If we fail to successfully manage transitions to new business models and markets, our results of operations could suffer.

We often release new offerings and employ new product and ~~services~~service delivery methods in connection with our diversification into new business models and markets. It is uncertain whether these strategies will prove successful or whether we will be able to develop the necessary infrastructure and business models more quickly than our competitors. Market acceptance of new product and service offerings will be dependent in part on our ability to (1) include functionality and usability that satisfy customer requirements and (2) optimally price our products and services in light of marketplace conditions, our costs and customer demand. New product and service offerings may increase our risk of liability related to the provision of services and cause us to incur significant technical, legal or other costs. For example, with our cloud-based services and subscription-based licensing models, such as Creative Cloud, we have entered markets that may not be fully accustomed to cloud-based subscription offerings. Market acceptance of such services is affected by a variety of factors, including information security, reliability, performance, customer preference, social and community engagement, local government regulations regarding online services and user-generated content, the sufficiency of technological infrastructure to support our products and services in certain geographies, customer concerns with entrusting a third party to store and manage customer data, consumer concerns regarding data privacy and the enactment of laws or regulations that restrict our ability to provide such services to customers in the United States or internationally. If we are unable to respond to these factors, our business could be harmed.

From time to time we open-source certain of our technology initiatives, provide broader open access to our technology, license certain of our technology on a royalty-free basis or release selected technology for industry standardization. Additionally, customer requirements for open standards or open-source products could impact adoption or use of some of our products or services. To the extent we incorrectly predict customer requirements for such products or services, or if there is a delay in market acceptance of such products or services, our business could be harmed.

We also devote significant resources to the development of technologies and service offerings in markets where our operating history is less ~~extensive, such as the marketplace for stock imagery.~~extensive. These new offerings and markets may require a considerable investment of technical, financial, compliance and sales resources, and a scalable organization. Some of our competitors may have advantages over us due to their larger presence, larger developer network, deeper market experience and larger sales, consulting and marketing resources. In addition, the metrics we use to gauge the status of our business model transition may evolve ~~over the course of the transition~~ as significant trends emerge. If we are unable to successfully establish new offerings in light of the competitive environment, our results of operations could suffer.

Subscription offerings and ETLAs could create risks related to the timing of revenue recognition.

Our subscription model creates certain risks related to the timing of revenue recognition and potential reductions in cash flows. A portion of the subscription-based revenue we report each quarter results from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. A decline in new or renewed subscriptions in any period may not be immediately reflected in our reported financial results for that period, but may result in a decline in our revenue in future quarters. If we were to experience significant downturns in subscription sales and renewal rates, our reported financial results might not reflect such downturns 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. ~~Further, any increases in sales under our subscription sales model could result in decreased revenue over the short term if they are offset by a decline in sales from perpetual license customers.~~

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~~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 new businesses or our addition of a subscription-based model prove incorrect, our actual results may vary materially from those anticipated, estimated or projected.

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. Our customers include government entities, including the U.S. federal government, and if spending cuts impede the government’s ability to purchase our products and services, our revenue could decline. Deterioration in economic conditions in any of the countries in which we do business

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could also cause slower or impaired collections on accounts receivable, which may adversely impact our liquidity and financial condition.

A financial institution credit crisis could impair credit availability and the financial stability of our customers, including our distribution partners and channels. A disruption in the financial markets may also have an effect on our derivative counterparties

and could also impair our banking partners, on which we rely for operating cash management. Any of these events would likely harm our business, results of operations and financial condition.

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, results of operations and financial condition.

~~The increased emphasis on a~~Our cloud strategy may give rise to risks that could harm our business.

Over the past several years, our business has shifted away from pre-packaged software to focus on a subscription model that prices and delivers our products and services in a way that differs from our historical pricing and delivery methods. These changes reflect a significant shift from perpetual license sales and distribution of our software in favor of providing our customers the right to access certain of our software in a hosted environment or use downloaded software for a specified subscription period. This cloud strategy requires continued investment in product development and cloud operations, and may give rise to a number of risks, including the following:

if customers desire only perpetual licenses or to purchase or renew subscriptions for specific products rather than acquire the entire Creative Cloud offering, our subscription sales may lag behind our expectations;

our cloud strategy may raise concerns among our customer base, including concerns regarding changes to pricing over time, service availability, information security of a cloud solution and access to files while offline or once a subscription has expired;

customers may turn to competitive or open-source offerings;

our sales cycles may be delayed if we need to educate customers about the benefits of our cloud solutions, including technical capabilities, security, privacy and return on investment;

we may be unsuccessful in maintaining our target pricing, new seat adoption and projected renewal ~~rates;~~rates, or we may have to rely heavily on promotional rates to achieve target seat adoption, which could reduce average revenue per user; and

we may incur costs at a ~~higher than forecasted~~higher-than-forecasted rate as we expand our cloud operations.

We may be unable to predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.

The hosted business model we ~~utilize~~use in our Adobe Marketing Cloud offerings typically involves selling services on a subscription basis pursuant to service agreements that are generally one to three years in length. Our individual Creative Cloud and Document Cloud subscription agreements are generally month-to-month or one year in length, ETLAs for our Digital Media products and services are generally three years in length, and subscription agreements for other products and services may provide for shorter or longer terms. Our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period, and some customers elect not to renew. We cannot provide assurance that our subscriptions will be renewed at the same or higher level of service, for the same number of seats or licenses or for the same duration of time, if at all. Moreover, under certain circumstances, some of our customers have the right to cancel their service agreements prior to the expiration of the terms of their agreements. 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 to regularly add features and functionality, the reliability (including uptime) of our subscription services, the prices of our services, the actual or perceived information security of our systems and services, the prices of services offered by our competitors, mergers and acquisitions affecting 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. If our customers do not renew their subscriptions for our services or if they renew on terms less favorable to us, our revenue may decline.

Our future growth is also affected by our ability to sell additional features and services to our current customers, which depends on a number of factors, including customers’ satisfaction with our products and services, the level of innovation reflected in those additional features, the prices of our offerings and general economic conditions. If our efforts to cross-sell and upsell to our customers are unsuccessful, the rate at which our business grows may decline.

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Security vulnerabilities in our products and systems could lead to reduced revenue or to liability claims.

Maintaining the security of our products, computers and networks is a critical issue for us and our customers. Security researchers, criminal hackers and other third parties regularly develop new techniques to penetrate computer and network security measures and, as we have previously disclosed, certain parties have in the past managed to breach certain of our data security systems and misused certain of our systems and software in order to access our end users’ authentication and payment information. In addition, cyber-attackers also develop and deploy viruses, worms and other malicious software programs, some of which may be specifically designed to attack our products, systems, computers or networks. Sophisticated hardware and operating system applications that we develop or procure from third parties may contain defects in design or manufacture, including bugs and other problems that could unexpectedly compromise the security of the system or impair a customer’s ability to operate or use our products. The costs to prevent, eliminate or alleviate cyber- or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities are significant, and our efforts to address these problems may not be successful or may be delayed and could result in interruptions, delays, cessation of service and loss of existing or potential customers. It is impossible to predict the extent, frequency or impact of these problems may have on us.

Outside parties have in the past and may in the future attempt to fraudulently induce our employees or users of our products or services to disclose sensitive information via illegal electronic spamming, phishing or other tactics. Unauthorized parties may also attempt to gain physical access to our facilities in order to infiltrate our information systems. These actual and potential breaches of our security measures and the accidental loss, inadvertent disclosure or unauthorized dissemination of proprietary information or sensitive, personal or confidential data about us, our employees, our customers or their end users, including the potential loss or disclosure of such information or data as a result of hacking, fraud, trickery or other forms of deception, could expose us, our employees, our customers or the individuals affected to a risk of loss or misuse of this information. This may result in litigation and ~~potential~~ liability or fines, governmental inquiry or oversight or a loss of customer confidence, any of which could harm our business or damage our brand and reputation, possibly impeding our present and future success in retaining and attracting new customers and thereby requiring time and resources to repair our ~~brand.~~brand and reputation.

These problems affect our products and services in particular because cyber-attackers tend to focus their efforts on ~~the most~~ popular offerings ~~(such as those~~ with a large user ~~base),~~base, and we expect them to continue to do so. Critical vulnerabilities may be identified in certain of our applications. These vulnerabilities could cause such applications to crash and could allow an attacker to take control of the affected system, which could result in liability to us or limit our ability to conduct our business and deliver our products and services to customers. We devote significant resources to address security vulnerabilities through engineering more secure products, enhancing security and reliability features in our products and systems, code hardening, conducting rigorous penetration tests, deploying updates to address security vulnerabilities and improving our incident response time, but these security vulnerabilities cannot be totally eliminated. The cost of these steps could reduce our operating margins, and we may be unable to implement these measures quickly enough to prevent cyber-attackers from gaining unauthorized access into our systems and products. Despite our preventative efforts, actual or perceived security vulnerabilities in our products and systems may harm our reputation or lead to claims against us (and have in the past led to such claims), and could lead some customers to ~~seek to return products, to~~ stop using certain products or services, to reduce or delay future purchases of products or services, or to use competing products or services. If we do not make the appropriate level of investment in our technology systems or if our systems become out-of-date or obsolete and we are not able to deliver the quality of data security customers require, our business could be adversely affected. Customers may also adopt security measures designed to protect their existing computer systems from attack, which could delay adoption of new technologies. Further, if we or our customers are subject to a future attack, or our technology is ~~utilized~~used in a third-party attack, it may be necessary for us to take additional extraordinary measures and make additional expenditures to take appropriate responsive and preventative steps. Any of these events could adversely affect our revenue or margins. Moreover, delayed sales, lower margins or lost customers resulting from ~~the~~ disruptions ofcaused by cyber-attacks or preventative measures could adversely affect our financial results, stock price and reputation.

~~The success of certain 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 certain 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. To maintain and grow these businesses, we must regularly add new customers and retain existing customers. 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. To attract new customers and contributors and retain existing ones, 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. New technologies may render the features of our online marketplaces obsolete, our collection may fail to grow as anticipated and our marketing efforts may be unsuccessful, any of which may adversely affect our results of operations.

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Some of our lines of business rely on us or our third-party service providers to host and deliver services and data, and any interruptions or delays in these hosted services, security or privacy breaches, or failures in data collection could expose us to liability and harm our business and reputation.

Some of our lines of business and services, including our online store at adobe.com, Creative Cloud, Document Cloud, other hosted Digital Media offerings and our Adobe Marketing Cloud solutions, rely on hardware and services hosted and controlled directly by us or by our third-party service providers. We do not have redundancy for all of our systems, many of our critical applications reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities. If our business relationship with a third-party provider of hosting or content delivery services is negatively affected, or if one of our content delivery suppliers were to terminate its agreement with us, we might not be able to deliver the corresponding hosted offerings to our customers, which could subject us to reputational harm and cause us to lose customers and future business, thereby reducing our revenue.

We hold large amounts of customer data, some of which is hosted in third-party facilities. A security incident at those facilities or ours may compromise the confidentiality, integrity or availability of customer data. Unauthorized access to customer data stored on our computers or networks may be obtained through break-ins, breaches of our secure network by an unauthorized party, employee theft or misuse or other misconduct. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers. Accounts created with weak passwords could allow cyber-attackers to gain access to customer data. Additionally, failure by customers to remove accounts of their own employees, or the granting of accounts by the customer in an uncontrolled manner, may allow for access by former or unauthorized customer representatives. If there were an inadvertent disclosure of ~~personal~~customer information, or if a third party were to gain unauthorized access to the ~~personal~~ information we possess on behalf of our customers, our operations could be disrupted, our reputation could be damaged and we could be subject to claims or other liabilities. In addition, such perceived or actual unauthorized disclosure of the information we collect or breach of our security could damage our reputation, result in the loss of customers and harm our business.

Because of the large amount of data that weour customers collect and manage ~~on behalf of~~using our ~~customers,~~hosted solutions, it is possible that hardware or software failures or errors in our systems (or those of our third-party service providers) could result in data loss or corruption, or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as ~~significant.~~significant or cause us to fail to meet committed service levels. Furthermore, our ability to collect and report data may be delayed or interrupted by a number of factors, including access to the Internet, the failure of our network or software systems, security breaches or significant variability in visitor traffic on customer websites. In addition, computer viruses or other malware may harm our systems, causing us to lose data, and the transmission of computer viruses or other malware could expose us to litigation. We may also find, on occasion, that we cannot deliver data and reports to our customers in near real time because of a number of factors, including significant spikes in customer activity on their websites or failures of our network or software. If we supply inaccurate information or experience interruptions in our ability to capture, store and supply information in near real time or at all, our reputation could be harmed and we could lose customers, or we could be found liable for damages or incur other losses.

We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management.

We may not realize the anticipated benefits of an acquisition of a company, division, product or technology, each of which involves numerous risks. These risks include:

difficulty in integrating the operations and personnel of the acquired ~~company;~~business;

difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or services;

difficulty in maintaining controls, procedures and policies during the transition and integration;

entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions;

disruption of our ongoing business and distraction of our management and other employees from other opportunities and challenges;

inability to retain personnel of the acquired business;

inability to retain key customers, distributors, vendors and other business partners of the acquired business;

inability to achieve the financial and strategic goals for the acquired and combined businesses;

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inability to take advantage of anticipated tax ~~benefits as a result of unforeseen difficulties in our integration activities;~~benefits;

incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

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

~~potential~~ additional exposure to fluctuations in currency exchange rates;

~~potential~~ additional costs of bringing acquired companies into compliance with laws and regulations applicable to us as a multinational corporation;

~~potential~~ impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;

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failure of our due diligence processes to identify significant problems, liabilities or other challenges of an acquired company or technology, including, but not limited to, issues with the acquired company’s intellectual property, product quality or product architecture, data back-up and security (including security from cyber-attacks), privacy practices, revenue recognition or other accounting practices, employee, customer or partner issues or legal and financial contingencies;

exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including, but not limited to, 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;

~~potential~~ inability to conclude that our internal controls over financial reporting are effective;

~~potential~~ 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~~projections;

~~potential~~ delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings; and

~~potential~~ incompatibility of business cultures.

Mergers and acquisitions of high 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, we may not realize the benefits of the acquisition to the extent anticipated, and in certain circumstances an acquisition could harm our financial position.

The success of certain 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 certain 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. To maintain and grow these businesses, we must regularly add new customers and retain existing customers. 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. To attract new customers and contributors and retain existing ones, 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. 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.

We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings.

In connection with the enforcement of our intellectual property rights, the acquisition of third-party intellectual property rights, or 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 and complex, protracted litigation. Intellectual property disputes and litigation are typically 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 many past lawsuits and other disputes, we~~We may not prevail in every ~~case in the future.~~future 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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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 assets in this portfolio ~~can~~could result in lost revenues and thereby 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.

Additionally, ~~we take significant measures to protect the secrecy of our confidential information and trade secrets, including our source code. Despite these measures,~~ as we have previously disclosed, hackers have managed to access certain of our source code and may obtain access in the future. If unauthorized disclosure of our source code occurs through security breach, cyber-attack or otherwise, we could ~~potentially~~ 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.

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

Our industry is highly regulated, including for privacy and data security. We are also expanding our business in countries that have more stringent data protection laws than those in the United States, and such laws may be inconsistent across jurisdictions and are subject to evolving and differing interpretations. Governments, privacy advocates and class action attorneys are increasingly scrutinizing how companies collect, process, use, store, share and transmit personal data. New laws and industry self-regulatory codes have been enacted and more are being considered that may affect our ability to reach current and prospective customers, to understand how our products and services are being used, to respond to customer requests allowed under the laws, and to implement our ~~new~~ business models effectively. Any perception of our practices, products or services as an invasion of privacy, whether or not consistent with current regulations and industry practices, may subject us to public criticism, class action lawsuits, reputational harm or claims by regulators, industry groups or other third parties, all of which could disrupt our business and expose us to increased liability. Additionally, both laws regulating privacy ~~as well as~~and third-party products purporting to address privacy concerns could negatively affect the functionality of, and demand for, our products and services, thereby ~~harming~~reducing our revenue.

On behalf of certain customers, we collect and store anonymous and personal information derived from the activities of end users with various channels, including traditional websites, mobile websites and applications, email interactions, direct mail, point of sale, text messaging and call centers. Federal, state and foreign governments and agencies have adopted or are considering adopting laws regarding the collection, storage, use and disclosure of this information. Our compliance with privacy laws and regulations and our reputation among consumers depend in part on our customers’ adherence to privacy laws and regulations and their use of our services in ways consistent with such consumers’ expectations. We also rely on contractual representations made to us by customers that their own use of our services and the information they provide to us via our services do not violate any applicable privacy laws, rules and regulations or their own privacy policies. ~~We contractually~~As a component of our standardized customer contract, we obligate customers to ~~represent to us that they~~ provide their consumers the opportunity to “opt out” of the information collection associated with our services, as applicable. We do not formally audit such customers to confirm compliance with these representations. If these representations are false or if our customers do not otherwise comply with applicable privacy laws, we could face adverse publicity and possible legal or other regulatory action. In addition, some countries are considering enacting laws that would expand the scope of privacy-related obligations required of service providers, such as Adobe, that would require additional compliance expense and ~~increased liability.~~increase our liability risk.

In the past we have relied on the U.S.-European Union and the U.S.-Swiss Safe Harbor frameworks, as agreed to by the U.S. Department of Commerce and the European Union (“EU”) and Switzerland, as a means to legally transfer ~~European~~EU citizens’ personal information from ~~Europe~~the EU to the United States. However, on October 6, 2015, the European Court of Justice invalidated the U.S.-EU Safe Harbor framework and the Swiss data protection authorities later invalidated the U.S.-Swiss Safe Harbor framework. As a result, we have ~~been working~~worked to establish alternate legitimate means of transferring personal data from the European Economic Area and Switzerland to the United States; however, we continue to face uncertainty as to the legitimacy of these alternate means. At least one regulator has determined that, with respect to a small number of vendors that process certain of our EU employee data, we did not implement these alternate means quickly enough, resulting in a fine levied against us. We are closely monitoring developments regarding requirements for transferring personal data ~~from~~outside the ~~EU. Once finalized, these~~EU, such as Privacy Shield. These requirements may result in an increase in the obligations required of us to provide our services in ~~Europe~~the EU and in ~~potential~~ sanctions and fines for non-compliance. These developments could harm our business, financial condition and results of operations.

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We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.

Because our products are distributed and used globally, our operating results are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and expense. We have established a program to partially hedge our exposure to foreign currency exchange rate fluctuations for various ~~currencies. We~~currencies and we regularly review ~~our~~this hedging program and make

adjustments as necessary based on the factors discussed above. Our hedging activities may not 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.

If we fail to process transactions effectively, our revenue and earnings may be harmed.

We process a significant volume of transactions on a daily basis in our Digital Marketing and Digital Media businesses. Due to the size and volume of transactions that we handle, effective processing systems and controls are essential, but even the most sophisticated systems and ~~processes~~controls may not be effective in preventing all errors. The systems supporting our business are comprised of multiple technology platforms that may be difficult to scale. If we are unable to effectively manage these systems and processes, we may be unable to process customer data in an accurate, reliable and timely manner, which may harm our customer relationships or results of operations.

Failure to manage our sales and distribution channels and third-party customer service and technical support providers effectively could result in a loss of revenue and harm to our business.

We contract with a number of software distributors, 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.

Successfully managing our indirect distribution channel efforts to reach various customer segments for our products and services is a complex process across the broad range of geographies where we do business or plan to do business. Our distributors and other channel partners are independent businesses that we do not control. Notwithstanding the independence of our channel partners, we face ~~potential~~ legal risk and potential reputational harm from the activities of these third parties including, but not limited to, export control violations, workplace conditions, corruption and anti-competitive behavior. We cannot be certain that our distribution channel will continue 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’ 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 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.

In addition, the financial health of our distributors and our continuing relationships with them are important to our success. Some of these distributors may be adversely impacted by changes to our business model or unable to withstand adverse changes in economic conditions, which could result in insolvency and/or the inability of such distributors to obtain credit to finance purchases of our products and services. In addition, weakness in the end-user market could negatively affect the cash flows of our distributors who could, in turn, delay paying their obligations to us, which would increase our credit risk exposure. Our business could be harmed if the financial condition of some of these distributors substantially weakened and we were unable to ~~timely~~ secure replacement ~~distributors.~~distributors in a timely manner.

We also sell certain 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 training for sales representatives, including regular updates to cover new and upgraded systems, products and services. 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 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.

We also 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. Ineffectively managing these risks could result in various civil and criminal

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penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation.

We outsource a substantial portion of our customer service and technical support activities to third-party service providers. We rely 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 ~~provides us with lower operating costs and greater flexibility, but also~~ 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 and we could lose customers and associated revenue.

Certain of our enterprise offerings have extended and complex sales cycles, which can make our sales cycles unpredictable.

Sales cycles for some of our enterprise offerings, including our Adobe Marketing Cloud solutions and ETLAs in our Digital Media business, are multi-phased and complex. The complexity in these sales cycles is due to a number of factors, including:

the need for our sales representatives to educate customers about the use and benefit of our large-scale deployments of our products and services, including technical capabilities, security features, potential cost savings and return on investment;

the desire of large and medium size organizations to undertake significant evaluation processes to determine their technology requirements prior to making information technology expenditures;

the need for our representatives to spend a significant amount of time assisting potential customers in their testing and evaluation of our products and services;

the negotiation of large, complex, enterprise-wide contracts, as often required by our and our customers’ business and legal representatives;

the need for our customers to obtain requisition approvals from various decision makers within their organizations; and

customer budget constraints, economic conditions and unplanned administrative delays.

We spend substantial time and expense on our sales efforts without any assurance that potential customers will ultimately purchase our solutions. As we target our sales efforts at larger enterprise customers, these trends are expected to continue and could have a greater impact on our results of operations. Additionally, our enterprise sales pattern has historically been uneven, where a higher percentage of a quarter’s total sales occur during the final weeks of each quarter, which is common in our industry. Our extended sales cycle for these products and services makes it difficult to predict when a given sales cycle will close.

~~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 our website for our development, marketing, operational, 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, cyber-attack, war, terrorist attack or other catastrophic event 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.

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

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 and India are vulnerable to prolonged droughts due to climate change. 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. In the event of a natural disaster that disrupts business due to limited access to these resources, Adobe has the potential to experience losses to our business, time required to recover, and added costs to resume operations.

~~Additionally, climate change may pose regulatory and environmental challenges that affect where we locate our offices, who we partner with, and how we deliver products and services to our customers.~~

Net revenue, margin or earnings shortfalls or the volatility of the market generally may cause the market price of our stock to decline.

The market price for our common stock has in the past experienced significant fluctuations and may do so in the future. A number of factors may affect the market price for our common stock, including:

shortfalls in our revenue, margins, earnings, ~~the number of paid Creative Cloud and Document Cloud subscribers,~~ Annualized Recurring Revenue (“ARR”), bookings within our Adobe Marketing Cloud business 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 ~~and~~or services, product enhancements or service introductions 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;

variations in our or our competitors’ results of operations, changes in the competitive landscape generally and developments in our industry; and

unusual events such as significant acquisitions, divestitures, litigation, general socio-economic, regulatory, political or market conditions and other factors, including factors unrelated to our operating performance.

In addition, the technology industry as a whole may experience uneven investor confidence, which may cause the market price for our common stock to decline for reasons unrelated to our operating performance.

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, employee and third-party complaints, gift policies, conflicts of interest, employment and labor relations laws, 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. 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. We incur additional legal compliance costs associated with our global operations and could become subject to legal penalties if we fail to comply with local laws and regulations in U.S. jurisdictions or in foreign countries, which laws and regulations may be substantially different from those in the United States. 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 all of our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in or from countries where practices that violate such U.S. laws may be customary, will not take actions in violation of our internal policies or U.S. laws and regulations. Any such violation could have an adverse effect on our business.

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We 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 Americas, we are subject to a number of risks, including:

foreign currency fluctuations;

changes in government preferences for software procurement;

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;

unexpected 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 we do business or where we plan to expand our business;

costs and 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, including terrorism, war, natural disasters and pandemics.

If sales to any of our customers outside of the Americas are reduced, delayed or canceled because of any of the above factors, our revenue may decline.

In addition, approximately ~~53%~~52% 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. We may continue to expand our international operations and international sales and marketing activities. Expansion in international

markets has required, and will continue to 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, which would cause our results to suffer.

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 in the event that 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 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. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed. Effective succession planning is also a key factor for our long-term success. Our failure to enable the effective transfer of knowledge and facilitate smooth transitions of our key employees could adversely affect our long-term strategic planning and execution.

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 corporate culture, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.

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

We have $1.9 billion in senior unsecured notes outstanding. We also have a ~~$1.0~~$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:

requiring the dedication of a portion of our expected cash flow from operations to service our indebtedness, thereby reducing the amount of expected cash flow 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.

Our senior unsecured notes and senior unsecured revolving credit agreement impose 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 or noteholders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable.

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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 could increase. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.

~~Changes in accounting principles, or interpretations thereof, could have a significant impact on our financial position 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 are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Additionally, the adoption of new or revised accounting principles may require that we make significant changes to our systems, processes and controls.

For example, the Financial Accounting Standards Board (“FASB”) is currently working together with the International Accounting Standards Board (“IASB”) on several projects to further align accounting principles and facilitate more comparable financial reporting between companies who are required to follow GAAP under SEC regulations and those who are required to follow International Financial Reporting Standards outside of the United States. These efforts by the FASB and IASB may result in different accounting principles under GAAP that may result in materially different financial results for us in areas including, but not limited to, principles for recognizing revenue and lease accounting. Additionally, significant changes to GAAP resulting from the FASB’s and IASB’s efforts may require that we change how we process, analyze and report financial information and that we change financial reporting controls.

It is not clear if or when these potential changes in accounting principles may become effective, whether we have the proper systems and controls in place to accommodate such changes and the impact that any such changes may have on our financial position and results of operations.

~~If our goodwill or amortizable intangible assets become impaired we could be required to record a significant charge to earnings.~~

Under GAAP, we review our goodwill and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. GAAP requires us to test for goodwill impairment at least annually. 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. We could be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets were determined, negatively impacting our results of operations.

Changes in tax rules and regulations, or interpretations thereof, may adversely affect our effective tax rates.

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. A significant portion of our foreign earnings for the current fiscal year were earned by our Irish subsidiaries. In addition to providing for U.S. income taxes on earnings from the United States, we provide for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered permanently reinvested outside the United States. While we do not anticipate changing our intention regarding permanently reinvested earnings, if certain foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings.

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 earnings considered as permanently reinvested in 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, or by changes in the valuation of our deferred tax assets and liabilities. The United States, countries in the EU and other countries where we do business have been considering changes in relevant tax, accounting and other laws, regulations and interpretations, including

changes to tax laws applicable to corporate multinationals such as Adobe. These potential changes could adversely affect our effective tax rates or result in other costs to us.

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, including a current examination by the IRS of our fiscal 2010, 2011 and 2012 tax returns. 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

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provision for income taxes and have reserved for ~~potential~~ adjustments that may result from the current 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.

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

For example, the Financial Accounting Standards Board (“FASB”) has issued new accounting standards for revenue recognition and leasing and we are ~~unable~~evaluating the effect that these updated standards will have on our consolidated financial statements and related disclosures. 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.

If our goodwill or amortizable intangible assets become impaired we could be required to ~~recruit~~record a significant charge to earnings.

Under GAAP, we review our goodwill and ~~retain key personnel, our business~~amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. GAAP requires us to test for goodwill impairment at least annually. Factors that may be ~~harmed.~~

~~Much~~considered a change in circumstances indicating that the carrying value of our ~~future success depends on~~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. We could be required to record a significant charge to earnings in our financial statements during the ~~continued service, availability and performance~~period in which any impairment of our ~~senior management. These individuals have acquired specialized knowledge~~goodwill or amortizable intangible assets were determined, negatively impacting our results of operations.

Catastrophic events may disrupt our business.

We are a highly automated business and ~~skills with respect to Adobe. The~~rely on our network infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational, 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, cyber-attack, war, terrorist attack or other catastrophic event 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 ~~these individuals could harm~~ our data centers or our critical business especially in the event that 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 personnel in theor information technology industry are in high demand and competition for their talents is intense in many areas where our employees are located. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed. Effective succession planning is also a key factor for our long-term success. Our failure to enable the effective transfer of knowledge and facilitate smooth transitions of our key employeessystems could ~~adversely affect our long-term strategic planning and execution.~~

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 corporate culture, which could negativelyseverely affect our ability to ~~retain~~conduct normal business operations and, ~~recruit personnel who~~as a result, our future operating results could be adversely affected.

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

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 and India are ~~essential~~vulnerable to prolonged droughts due to climate change. 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. In the event of a natural disaster that disrupts business due to limited

access to these resources, Adobe has the potential to experience losses to our ~~future success.~~business, time required to recover, and added costs to resume operations.

Additionally, climate change may pose regulatory and environmental challenges that affect where we locate our offices, who we partner with, and how we deliver products and services to our customers.

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

Our cash equivalent and short-term investment portfolio as of ~~March 4,~~September 2, 2016 consisted of corporate bonds and commercial paper, U.S. agency securities and U.S. Treasury securities, foreign government securities, money market mutual funds, municipal securities, time deposits and asset-backed securities. 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, 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 ~~March 4,~~September 2, 2016, 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, or market liquidity or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Below is a summary of stock repurchases for the three months ended ~~March 4,~~September 2, 2016. See Note 9 of our Notes to Condensed Consolidated Financial Statements for information regarding our stock repurchase program.


Period		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 Plans⁽¹⁾					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 Plans⁽¹⁾
		(in thousands, except average price per share)									(in thousands, except average price per share)
Beginning repurchase authority	Beginning repurchase authority					$	1,613,226			Beginning repurchase authority					$	1,274,966
November 27—January 1, 2016
June 4—July 1, 2016										June 4—July 1, 2016
Shares repurchased	Shares repurchased	418	$	91.51	418	$	(38,226	)		Shares repurchased	766	$	97.85	766	$	(74,966	)
January 2, 2016—January 29, 2016
July 2—July 29, 2016										July 2—July 29, 2016
Shares repurchased	Shares repurchased	544	$	91.85	544	$	(50,000	)	⁽²⁾	Shares repurchased	1,394	$	95.67	1,394	$	(133,333	)	⁽²⁾
January 30—March 4, 2016
July 30—September 2, 2016										July 30—September 2, 2016
Shares repurchased	Shares repurchased	543	$	83.30	543	$	(45,238	)	⁽²⁾	Shares repurchased	1,371	$	98.70	1,371	$	(135,363	)	⁽²⁾
Total	Total	1,505			1,505	$	1,479,762			Total	3,531			3,531	$	931,304

^{_________________________________________}


⁽¹⁾	In January 2015, the Board of Directors approved a new stock repurchase program granting authority to repurchase up to $2 billion in common stock through the end of fiscal 2017. The new stock repurchase program approved by our Board of Directors is similar to our previous $2 billion stock repurchase program.


⁽²⁾	In ~~December 2015,~~June 2016, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of ~~$150~~$400 million. As of ~~March 4,~~September 2, 2016, ~~$54.8~~$131.3 million of the prepayment remained under this agreement.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended, we are required to disclose in our annual or quarterly reports whether we or any of our affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities subject to sanctions under U.S. law.None

During our first quarter of fiscal year 2016, we determined that a representative of the Paris branch of Bank Melli purchased a year-long subscription to Adobe Export PDF, a software service we provide. On January 16, 2016, Bank Melli was removed from the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) Specially Designated National List; however, it remains an entity whose property and interests in property must be blocked by U.S. persons pursuant to Executive Order 13599. Upon further investigation and verification of the identity of the entity, we promptly deactivated the account.

Adobe’s total revenue from this transaction was 24.34€, which is approximately U.S. $27.00 at the exchange rate for U.S. dollars on the transaction date of February 2, 2016. We are unable to determine the net profits attributable to this transaction, but such net profits would be less than the total revenue. Adobe does not intend to continue this activity in the future, and we are reviewing our internal compliance policies and processes to determine how to prevent a reoccurrence. Furthermore, we have voluntarily disclosed this matter to OFAC and intend to cooperate fully with regulatory inquiries, if any.

ITEM 6. EXHIBITS

The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	ADOBE SYSTEMS INCORPORATED

	By:	/s/ MARK GARRETT
		Mark Garrett
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

Date: ~~March 30,~~September 27, 2016

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SUMMARY OF TRADEMARKS

The following trademarks of Adobe Systems Incorporated or its subsidiaries, which may be registered in the United States and/or other countries, are referenced in this Form 10-Q:

Adobe

Acrobat

Behance

Creative Cloud

Fotolia

Reader

All other trademarks are the property of their respective owners.

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INDEX TO EXHIBITS

Incorporated by Reference**
Exhibit
Number
Exhibit Description Form Filing Date Exhibit Number SEC File No.
Filed
Herewith

3.1
Restated Certificate of Incorporation of Adobe Systems Incorporated 8-K 4/26/11 3.3
000-15175

3.2
Amended and Restated Bylaws 8-K 10/30/12 3.1
000-15175

4.1
Specimen Common Stock Certificate 10-Q 6/25/14 4.1
000-15175

4.2
Form of Indenture S-3 1/15/10 4.1
333-164378

4.3
Forms of Global Note for Adobe Systems Incorporated’s 4.750% Notes due 2020, together with Form of Officer’s Certificate setting forth the terms of the Note 8-K 1/26/10 4.1
000-15175

4.4
Form of Global Note for Adobe Systems Incorporated’s 3.250% Notes due 2025, together with Form of Officer’s Certificate setting forth the terms of the Note 8-K 1/26/15 4.1
000-15175

10.1A
Amended 1994 Performance and Restricted Stock Plan* 10-Q 4/9/10 10.1
000-15175

10.1B
Form of Restricted Stock Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan* 10-K 1/23/09 10.3
000-15175

10.1C
Form of Restricted Stock Unit Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan* 10-K 1/26/12 10.13
000-15175

10.2A
1996 Outside Directors Stock Option Plan, as amended* 10-Q 4/12/06 10.6
000-15175

10.2B
Forms of Stock Option Agreements used in connection with the 1996 Outside Directors Stock Option Plan* S-8 6/16/00 4.8
333-39524

10.3
1997 Employee Stock Purchase Plan, as amended* 10-Q 6/24/15 10.3
000-15175

10.4A
2003 Equity Incentive Plan, as amended* 8-K 4/10/15 10.1
000-15175

10.4B
Form of Stock Option Agreement used in connection with the 2003 Equity Incentive Plan* 8-K 12/20/10 99.4
000-15175

10.4C
Form of RSU Grant Notice and Award Agreement pursuant to the 2003 Equity Incentive Plan* 8-K 1/28/15 10.6
000-15175

Incorporated by Reference**

Exhibit

Number

Exhibit Description

Form

Filing Date

Exhibit Number

SEC File No.

Filed

Herewith

3.1

Restated Certificate of Incorporation of Adobe Systems Incorporated

8-K

4/26/11

3.3

000-15175

3.2

Amended and Restated Bylaws

8-K

9/2/16

3.2

000-15175

4.1

Specimen Common Stock Certificate

10-Q

6/25/14

4.1

000-15175

4.2

Form of Indenture

S-3

1/15/10

4.1

333-164378

4.3

Forms of Global Note for Adobe Systems Incorporated’s 4.750% Notes due 2020, together with Form of Officer’s Certificate setting forth the terms of the Note

8-K

1/26/10

4.1

000-15175

4.4

Form of Global Note for Adobe Systems Incorporated’s 3.250% Notes due 2025, together with Form of Officer’s Certificate setting forth the terms of the Note

8-K

1/26/15

4.1

000-15175

10.1A

Amended 1994 Performance and Restricted Stock Plan*

10-Q

4/9/10

10.1

000-15175

10.1B

Form of Restricted Stock Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan*

10-K

1/23/09

10.3

000-15175

10.1C

Form of Restricted Stock Unit Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan*

10-K

1/26/12

10.13

000-15175

10.2A

1996 Outside Directors Stock Option Plan, as amended*

10-Q

4/12/06

10.6

000-15175

10.2B

Forms of Stock Option Agreements used in connection with the 1996 Outside Directors Stock Option Plan*

S-8

6/16/00

4.8

333-39524

10.3

1997 Employee Stock Purchase Plan, as amended*

10-Q

6/29/16

10.3

000-15175

10.4A

2003 Equity Incentive Plan, as amended*

8-K

4/14/16

10.1

000-15175

10.4B

Form of Stock Option Agreement used in connection with the 2003 Equity Incentive Plan*

8-K

12/20/10

99.4

000-15175

10.4C

Form of RSU Grant Notice and Award Agreement pursuant to the 2003 Equity Incentive Plan*

8-K

1/28/15

10.6

000-15175

~~Table of Contents~~

Incorporated by Reference**

Exhibit

Number

Exhibit Description

Form

Filing Date

Exhibit Number

SEC File No.

Filed

Herewith

10.4D

Form of Restricted Stock Agreement used in connection with the 2003 Equity Incentive Plan*

10-Q

10/7/04

10.11

000-15175

10.4E

2013 Performance Share Program pursuant to the 2003 Equity Incentive Plan*

8-K

1/28/13

10.2

000-15175

10.4F

Form of Performance Share Award Grant Notice and Performance Share Award Agreement pursuant to the 2003 Equity Incentive Plan (applicable to the 2013 Performance Share Program)*

8-K

1/28/13

10.3

000-15175

10.4G

2014 Performance Share Program pursuant to the 2003 Equity Incentive Plan*

8-K

1/29/14

10.2

000-15175

10.4H

Form of Performance Share Award Grant Notice and Performance Share Award Agreement pursuant to the 2003 Equity Incentive Plan (applicable to the 2014 Performance Share Program)*

8-K

1/29/14

10.3

000-15175

10.4I

2015 Performance Share Program pursuant to the 2003 Equity Incentive Plan*

8-K

1/28/15

10.2

000-15175

10.4J

Form of 2015 Performance Share Award Grant Notice and Award Agreement pursuant to the 2003 Equity Incentive Plan (applicable to the 2015 Performance Share Program*Program)*

8-K

1/28/15

10.3

000-15175

10.4K

2016 Performance Share Program pursuant to the 2003 Equity Incentive Plan*

8-K

1/29/16

10.2

000-15175

10.4L

Form of 2016 Performance Share Award Grant Notice and Award Agreement pursuant to the 2003 Equity Incentive Plan (applicable to the 2016 Performance Share Program*

Program)*

8-K

1/29/16

10.3

000-15175

10.4M

Form of Director Initial Grant Restricted Stock Unit Award Agreement used in connection with the 2003 Equity Incentive Plan*

8-K

12/20/10

99.6

000-15175

10.4N

Form of Director Annual Grant Restricted Stock Unit Award Agreement used in connection with the 2003 Equity Incentive Plan*

8-K

12/20/10

99.7

000-15175

10.4O

Form of Director Annual Grant Stock Option Agreement used in connection with the 2003 Equity Incentive Plan*

8-K

12/20/10

99.8

000-15175

10.5A

2005 Equity Incentive Assumption Plan, as amended and restated*

10-Q

6/28/13

10.17

000-15175

~~Table of Contents~~

Incorporated by Reference**
Exhibit
Number
Exhibit Description Form Filing Date Exhibit Number SEC File No.
Filed
Herewith

10.5B
Form of Stock Option Agreement used in connection with the 2005 Equity Incentive Assumption Plan* 8-K 12/20/10 99.10
000-15175

10.5C
Form of RSU Grant Notice and Award Agreement pursuant to the 2005 Equity Incentive Assumption Plan* 8-K 1/28/13 10.7
000-15175

10.6
Retention Agreement between Adobe Systems Incorporated and Shantanu Narayen, effective December 5, 2014 8-K 12/11/14 10.20
000-15175

10.7
Form of Indemnity Agreement* 10-Q 6/26/09 10.12
000-15175

10.8A
Lease between Adobe Systems Incorporated and Selco Service Corporation, dated March 26, 2007 8-K 3/28/07 10.1
000-15175

10.8B
Participation Agreement among Adobe Systems Incorporated, Selco Service Corporation, et al. dated March 26, 2007 8-K 3/28/07 10.2
000-15175

10.8C
Master Amendment No. 2 among Adobe Systems Incorporated, Selco Service Corporation and KeyBank National Association dated October 31, 2011 10-K 1/22/13 10.13
000-15175

10.9
Adobe Systems Incorporated Deferred Compensation Plan, as Amended and Restated* 10-K 1/20/15 10.19
000-15175
10.10A
Credit Agreement, dated as of March 2, 2012, among Adobe Systems Incorporated and certain subsidiaries as Borrowers, The Royal Bank of Scotland PLC and U.S. Bank National Association as Co-Documentation Agents, JPMorgan Chase Bank, N.A., as Syndication Agent, Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the Other Lenders Party Thereto 8-K 3/7/12 10.1
000-15175

10.10B
Amendment to Credit Agreement, dated as of July 27, 2015, among Adobe Systems Incorporated and Bank of America, N.A. as Administrative Agent and Swing Line Lender and the Other Lenders Party Thereto 8-K 7/30/15 10.1
000-15175

10.11A
Omniture, Inc. 1999 Equity Incentive Plan, as amended (the “Omniture 1999 Plan”)* S-1 4/4/06 10.2A
333-132987

10.11B
Forms of Stock Option Agreement under the Omniture 1999 Plan* S-1 4/4/06 10.2B
333-132987

Incorporated by Reference**

Exhibit

Number

Exhibit Description

Form

Filing Date

Exhibit Number

SEC File No.

Filed

Herewith

10.5B

Form of Stock Option Agreement used in connection with the 2005 Equity Incentive Assumption Plan*

8-K

12/20/10

99.10

000-15175

10.5C

Form of RSU Grant Notice and Award Agreement pursuant to the 2005 Equity Incentive Assumption Plan*

8-K

1/28/13

10.7

000-15175

10.6

Retention Agreement between Adobe Systems Incorporated and Shantanu Narayen, effective December 5, 2014

8-K

12/11/14

10.20

000-15175

10.7

Form of Indemnity Agreement*

10-Q

6/26/09

10.12

000-15175

10.8A

Lease between Adobe Systems Incorporated and Selco Service Corporation, dated March 26, 2007

8-K

3/28/07

10.1

000-15175

10.8B

Participation Agreement among Adobe Systems Incorporated, Selco Service Corporation, et al. dated March 26, 2007

8-K

3/28/07

10.2

000-15175

10.8C

Master Amendment No. 2 among Adobe Systems Incorporated, Selco Service Corporation and KeyBank National Association dated October 31, 2011

10-K

1/22/13

10.13

000-15175

10.9

Adobe Systems Incorporated Deferred Compensation Plan, as Amended and Restated*

10-K

1/20/15

10.19

000-15175

10.10A

Credit Agreement, dated as of March 2, 2012, among Adobe Systems Incorporated and certain subsidiaries as Borrowers, The Royal Bank of Scotland PLC and U.S. Bank National Association as Co-Documentation Agents, JPMorgan Chase Bank, N.A., as Syndication Agent, Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the Other Lenders Party Thereto

8-K

3/7/12

10.1

000-15175

10.10B

Amendment to Credit Agreement, dated as of July 27, 2015, among Adobe Systems Incorporated and Bank of America, N.A. as Administrative Agent and Swing Line Lender and the Other Lenders Party Thereto

8-K

7/30/15

10.1

000-15175

10.11

Omniture, Inc. 2006 Equity Incentive Plan and related forms*

10-Q

8/6/09

10.3

000-52076

10.12

Omniture, Inc. 2007 Equity Incentive Plan and related forms*

10-K

2/27/09

10.9

000-52076

10.13

Omniture, Inc. 2008 Equity Incentive Plan and related forms*

10-K

2/27/09

10.10

000-52076

~~Table of Contents~~

Incorporated by Reference**
Exhibit
Number
Exhibit Description Form Filing Date Exhibit Number SEC File No.
Filed
Herewith

10.11C
Form of Stock Option Agreement under the Omniture 1999 Plan used for Named Executive Officers and Non-Employee Directors* S-1 6/9/06 10.2C
333-132987

10.12
Omniture, Inc. 2006 Equity Incentive Plan and related forms* 10-Q 8/6/09 10.3
000-52076

10.13
Omniture, Inc. 2007 Equity Incentive Plan and related forms* 10-K 2/27/09 10.9
000-52076

10.14
Omniture, Inc. 2008 Equity Incentive Plan and related forms* 10-K 2/27/09 10.10
000-52076

10.15
Demdex, Inc. 2008 Stock Plan, as amended* S-8 1/27/11 99.1
333-171902

10.16
2013 Executive Annual Incentive Plan* 8-K 1/28/13 10.5
000-15175

10.17
2014 Executive Annual Incentive Plan* 8-K 1/29/14 10.5
000-15175

10.18
2015 Executive Annual Incentive Plan* 8-K 1/28/15 10.5
000-15175

10.19
2016 Executive Annual Incentive Plan* 8-K 1/29/16 10.5
000-15175

10.20
2016 Executive Cash Performance Bonus Plan* 8-K 1/29/16 10.4
000-15175

10.21
EchoSign, Inc. 2005 Stock Plan, as amended* S-8 7/29/11 99.1
333-175910

10.22
TypeKit, Inc. 2009 Equity Incentive Plan, as amended*
S-8

10/7/11

99.1
333-177229

10.23
Auditude, Inc. 2009 Equity Incentive Plan, as amended*
S-8

11/18/11

99.1
333-178065

10.24
Auditude, Inc. Employee Stock Option Plan, as amended*
S-8

11/18/11

99.2
333-178065

10.25
Efficient Frontier, Inc. 2003 Stock Option/Stock Issuance Plan, as Amended and Restated*
S-8

1/27/12 99.1
333-179221

10.26
Nomination and Standstill Agreement between the Company and the ValueAct Group dated December 4, 2012
8-K

12/5/12

99.1
000-15175

10.27A
Behance, Inc. 2012 Equity Incentive Plan* S-8 1/23/13 99.1
333-186143

10.27B
Amendment No. 1 to the Behance, Inc. 2012 Equity Incentive Plan* S-8 1/23/13 99.2
333-186143



		Incorporated by Reference**
Exhibit Number	Exhibit Description	Form	Filing Date	Exhibit Number	SEC File No.	Filed Herewith


10.14	Demdex, Inc. 2008 Stock Plan, as amended*	S-8	1/27/11	99.1	333-171902

10.15	2013 Executive Annual Incentive Plan*	8-K	1/28/13	10.5	000-15175

10.16	2014 Executive Annual Incentive Plan*	8-K	1/29/14	10.5	000-15175

10.17	2015 Executive Annual Incentive Plan*	8-K	1/28/15	10.5	000-15175

10.18	2016 Executive Annual Incentive Plan*	8-K	1/29/16	10.5	000-15175

10.19	2016 Executive Cash Performance Bonus Plan*	8-K	1/29/16	10.4	000-15175

10.20	EchoSign, Inc. 2005 Stock Plan, as amended*	S-8	7/29/11	99.1	333-175910

10.21	TypeKit, Inc. 2009 Equity Incentive Plan, as amended*	S-8	10/7/11	99.1	333-177229

10.22	Auditude, Inc. 2009 Equity Incentive Plan, as amended*	S-8	11/18/11	99.1	333-178065

10.23	Auditude, Inc. Employee Stock Option Plan, as amended*	S-8	11/18/11	99.2	333-178065

10.24	Efficient Frontier, Inc. 2003 Stock Option/Stock Issuance Plan, as Amended and Restated*	S-8	1/27/12	99.1	333-179221

10.25A	Behance, Inc. 2012 Equity Incentive Plan*	S-8	1/23/13	99.1	333-186143

10.25B	Amendment No. 1 to the Behance, Inc. 2012 Equity Incentive Plan*	S-8	1/23/13	99.2	333-186143

10.26	Neolane 2008 Stock Option Plan*	S-8	8/27/13	99.1	333-190846

10.27	2012 Neolane Stock Option Plan for The United States*	S-8	8/27/13	99.2	333-190846

10.28	Description of 2013 Director Compensation*	10-K	1/21/14	10.80	000-15175

10.29	Description of 2014 Director Compensation*	10-K	1/21/14	10.81	000-15175

10.30	Description of 2015 Director Compensation*	10-K	1/20/15	10.52	000-15175

10.31	Description of 2016 Director Compensation*	10-K	1/19/16	10.32	000-15175

10.32A	Aviary, Inc. 2008 Stock Plan, as amended*	S-8	9/26/14	99.1	333-198973

~~Table of Contents~~

Incorporated by Reference**
Exhibit
Number
Exhibit Description Form Filing Date Exhibit Number SEC File No.
Filed
Herewith

10.28
Neolane 2008 Stock Option Plan* S-8 8/27/13 99.1
333-190846

10.29
2012 Neolane Stock Option Plan for The United States* S-8 8/27/13 99.2
333-190846

10.30
Description of 2013 Director Compensation* 10-K 1/21/14 10.80
000-15175

10.31
Description of 2014 Director Compensation* 10-K 1/21/14 10.81
000-15175

10.32
Description of 2015 Director Compensation* 10-K 1/20/15 10.52
000-15175

10.33
Description of 2016 Director Compensation* 10-K 1/19/16 10.32
000-15175

10.34A
Aviary, Inc. 2008 Stock Plan, as amended* S-8 9/26/14 99.1
333-198973

10.34B
Form of Stock Option Grant Notice and Award Agreement pursuant to the Aviary, Inc. 2008 Stock Plan (Installment Vesting)* S-8 9/26/14 99.2
333-198973

10.34C

Form of Stock Option Grant Notice and Award Agreement pursuant to the Aviary, Inc. 2008 Stock Plan (Installment Vesting, Non-
U.S.)*
S-8 9/26/14 99.3
333-198973

10.35

Adobe Systems Incorporated 2014 Executive
Severance Plan in the Event of a Change of
Control*
8-K 12/11/14 10.1
000-15175

31.1
Certification of Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
X

31.2
Certification of Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
X

32.1
Certification of Chief Executive Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934† X

32.2
Certification of Chief Financial Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934† X

101.INS XBRL Instance X

101.SCH XBRL Taxonomy Extension Schema X

101.CAL XBRL Taxonomy Extension Calculation X

~~Table of Contents~~

Incorporated by Reference**

~~Exhibit~~

~~Number~~

~~Exhibit Description~~

~~Form~~

~~Filing Date~~

~~Exhibit Number~~

~~SEC File No.~~

~~Filed~~

~~Herewith~~

~~101.LAB~~

~~XBRL Taxonomy Extension Labels~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition~~

Incorporated by Reference**

Exhibit

Number

Exhibit Description

Form

Filing Date

Exhibit Number

SEC File No.

Filed

Herewith

10.32B

Form of Stock Option Grant Notice and Award Agreement pursuant to the Aviary, Inc. 2008 Stock Plan (Installment Vesting)*

S-8

9/26/14

99.2

333-198973

10.32C

Form of Stock Option Grant Notice and Award Agreement pursuant to the Aviary, Inc. 2008 Stock Plan (Installment Vesting, Non-

U.S.)*

S-8

9/26/14

99.3

333-198973

10.33

Adobe Systems Incorporated 2014 Executive

Severance Plan in the Event of a Change of

Control*

8-K

12/11/14

10.1

000-15175

31.1

Certification of Chief Executive Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2

Certification of Chief Financial Officer, as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1

Certification of Chief Executive Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934†

32.2

Certification of Chief Financial Officer, as required by Rule 13a-14(b) of the Securities Exchange Act of 1934†

101.INS

XBRL Instance

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation

101.LAB

XBRL Taxonomy Extension Labels

101.PRE

XBRL Taxonomy Extension Presentation

101.DEF

XBRL Taxonomy Extension Definition

___________________________



*		Compensatory plan or arrangement.

**		References to Exhibits ~~10.11A~~10.11 through ~~10.14~~10.13 are to filings made by Omniture, Inc.

†		The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Adobe Systems Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o



		Page No.
PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Balance Sheets ~~March 4,~~September 2, 2016 and November 27, 2015	3
	Condensed Consolidated Statements of Income Three and Nine Months Ended ~~March 4,~~September 2, 2016 and ~~February 27,~~August 28, 2015	4
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ Three and Nine Months Ended ~~March 4,~~September 2, 2016 and ~~February 27,~~August 28, 2015	5
	Condensed Consolidated Statements of Cash Flows ~~Three~~Nine Months Ended ~~March 4,~~September 2, 2016 and ~~February 27,~~August 28, 2015	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2628
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4041
Item 4.	Controls and Procedures	4041

PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	4041
Item 1A.	Risk Factors	4142
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5455
Item 4.	Mine Safety Disclosures	5455
Item 5.	Other Information	5455
Item 6.	Exhibits	5455
Signature		5556
Summary of Trademarks		5657
Index to Exhibits		5758


	March 4, 2016			November 27, 2015			September 2, 2016			November 27, 2015
	(Unaudited)			(*)			(Unaudited)			(*)
ASSETS
Current assets:
Cash and cash equivalents	$	830,696		$	876,560		$	767,672		$	876,560
Short-term investments	3,267,192			3,111,524			3,678,726			3,111,524
Trade receivables, net of allowances for doubtful accounts of $5,359 and $7,293, respectively	599,207			672,006
Trade receivables, net of allowances for doubtful accounts of $6,066 and $7,293, respectively							731,166			672,006
Prepaid expenses and other current assets	238,295			161,802			241,146			161,802
Total current assets	4,935,390			4,821,892			5,418,710			4,821,892
Property and equipment, net	794,876			787,421			811,524			787,421
Goodwill	5,389,000			5,366,881			5,433,180			5,366,881
Purchased and other intangibles, net	518,686			510,007			454,230			510,007
Investment in lease receivable	80,439			80,439			80,439			80,439
Other assets	178,291			159,832			169,358			159,832
Total assets	$	11,896,682		$	11,726,472		$	12,367,441		$	11,726,472

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	71,706		$	93,307		$	83,444		$	93,307
Accrued expenses	591,821			679,884			666,278			679,884
Income taxes payable	4,458			6,165			10,662			6,165
Deferred revenue	1,563,821			1,434,200			1,745,282			1,434,200
Total current liabilities	2,231,806			2,213,556			2,505,666			2,213,556
Long-term liabilities:
Debt	1,916,831			1,907,231			1,916,591			1,907,231
Deferred revenue	44,839			51,094			52,703			51,094
Income taxes payable	261,305			256,129			276,131			256,129
Deferred income taxes	265,748			208,209			238,459			208,209
Other liabilities	94,951			88,673			99,945			88,673
Total liabilities	4,815,480			4,724,892			5,089,495			4,724,892
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; 500,693 and 497,809 shares outstanding, respectively	61			61
Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; 497,025 and 497,809 shares outstanding, respectively							61			61
Additional paid-in-capital	4,292,486			4,184,883			4,541,798			4,184,883
Retained earnings	7,221,083			7,253,431			7,714,904			7,253,431
Accumulated other comprehensive income (loss)	(151,679		)	(169,080		)	(134,111		)	(169,080		)
Treasury stock, at cost (100,141 and 103,025 shares, respectively), net of reissuances	(4,280,749		)	(4,267,715		)
Treasury stock, at cost (103,809 and 103,025 shares, respectively), net of reissuances							(4,844,706		)	(4,267,715		)
Total stockholders’ equity	7,081,202			7,001,580			7,277,946			7,001,580
Total liabilities and stockholders’ equity	$	11,896,682		$	11,726,472		$	12,367,441		$	11,726,472


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 4, 2016			February 27, 2015			September 2, 2016			August 28, 2015			September 2, 2016			August 28, 2015
Revenue:
Subscription	$	1,070,250		$	713,442		$	1,168,602		$	829,065		$	3,322,560		$	2,316,470
Product	201,112			290,774			180,960			275,338			578,572			840,650
Services and support	111,973			104,965			114,405			113,365			344,879			331,987
Total revenue	1,383,335			1,109,181			1,463,967			1,217,768			4,246,011			3,489,107
Cost of revenue:
Subscription	107,275			95,527			116,990			103,605			339,664			302,826
Product	20,299			19,703			15,435			24,545			51,490			65,715
Services and support	70,998			51,568			70,276			62,835			212,198			174,415
Total cost of revenue	198,572			166,798			202,701			190,985			603,352			542,956
Gross profit	1,184,763			942,383			1,261,266			1,026,783			3,642,659			2,946,151
Operating expenses:
Research and development	237,204			215,509			248,450			218,660			718,138			642,216
Sales and marketing	474,891			392,741			477,475			422,031			1,415,155			1,241,770
General and administrative	146,935			145,081			143,702			122,578			429,233			397,867
Restructuring and other charges	(419		)	1,755			(338		)	(751		)	(1,223		)	1,038
Amortization of purchased intangibles	18,394			14,272			22,652			18,246			60,034			50,599
Total operating expenses	877,005			769,358			891,941			780,764			2,621,337			2,333,490
Operating income	307,758			173,025			369,325			246,019			1,021,322			612,661
Non-operating income (expense):
Interest and other income (expense), net	4,187			3,338			2,725			4,433			12,995			11,510
Interest expense	(18,469		)	(14,545		)	(17,281		)	(16,519		)	(52,924		)	(47,669		)
Investment gains (losses), net	(1,169		)	1,430			1,532			(1,314		)	(2,955		)	339
Total non-operating income (expense), net	(15,451		)	(9,777		)	(13,024		)	(13,400		)	(42,884		)	(35,820		)
Income before income taxes	292,307			163,248			356,301			232,619			978,438			576,841
Provision for income taxes	38,000			78,360			85,513			58,154			209,269			169,995
Net income	$	254,307		$	84,888		$	270,788		$	174,465		$	769,169		$	406,846
Basic net income per share	$	0.51		$	0.17		$	0.54		$	0.35		$	1.54		$	0.82
Shares used to compute basic net income per share	499,125			498,754			498,584			498,630			499,224			498,891
Diluted net income per share	$	0.50		$	0.17		$	0.54		$	0.34		$	1.52		$	0.80
Shares used to compute diluted net income per share	505,676			507,526			503,669			505,809			505,135			507,124


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 4, 2016			February 27, 2015			September 2, 2016			August 28, 2015			September 2, 2016			August 28, 2015
	Increase/(Decrease)						Increase/(Decrease)						Increase/(Decrease)
Net income	$	254,307		$	84,888		$	270,788		$	174,465		$	769,169		$	406,846
Other comprehensive income (loss), net of taxes:
Available-for-sale securities:
Unrealized gains / losses on available-for-sale securities	(1,627		)	(817		)	3,055			(8,334		)	21,677			(8,275		)
Reclassification adjustment for recognized gains / losses on available-for-sale securities	(44		)	(927		)	(869		)	(570		)	(1,982		)	(2,130		)
Net increase (decrease) from available-for-sale securities	(1,671		)	(1,744		)	2,186			(8,904		)	19,695			(10,405		)
Derivatives designated as hedging instruments:
Unrealized gains / losses on derivative instruments	(1,711		)	12,296			13,233			(1,874		)	9,089			18,480
Reclassification adjustment for recognized gains / losses on derivative instruments	(2,935		)	(23,712		)	(3,656		)	(8,899		)	(9,964		)	(54,478		)
Net increase (decrease) from derivatives designated as hedging instruments	(4,646		)	(11,416		)	9,577			(10,773		)	(875		)	(35,998		)
Foreign currency translation adjustments	23,718			(82,556		)	(12,828		)	8,318			16,149			(86,334		)
Other comprehensive income (loss), net of taxes	17,401			(95,716		)	(1,065		)	(11,359		)	34,969			(132,737		)
Total comprehensive income (loss), net of taxes	$	271,708		$	(10,828	)
Total comprehensive income, net of taxes							$	269,723		$	163,106		$	804,138		$	274,109



x	QUARTERLY 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



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


(*)	The Condensed Consolidated Balance Sheet as of November 27, 2015 has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.


	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Current assets:
Cash	$	423,341	$	—	$	—		$	423,341	$	182,417	$	—	$	—		$	182,417
Cash equivalents:
Corporate bonds and commercial paper										7,491		—		(3		)	7,488
Money market mutual funds	399,846		—		—			399,846		560,630		—		—			560,630
Time deposits	7,509		—		—			7,509		14,537		—		—			14,537
U.S. Treasury securities										2,600		—		—			2,600
Total cash equivalents	407,355		—		—			407,355		585,258		—		(3		)	585,255
Total cash and cash equivalents	830,696		—		—			830,696		767,675		—		(3		)	767,672
Short-term fixed income securities:
Asset-backed securities	92,112		108		(49		)	92,171		107,976		259		(33		)	108,202
Corporate bonds and commercial paper	2,033,037		2,361		(8,322		)	2,027,076		2,338,853		14,919		(810		)	2,352,962
Foreign government securities	1,277		—		(2		)	1,275
Municipal securities	141,396		182		(20		)	141,558		140,247		173		(63		)	140,357
U.S. agency securities	111,407		50		(6		)	111,451		44,836		84		(1		)	44,919
U.S. Treasury securities	894,140		287		(766		)	893,661		1,031,685		863		(262		)	1,032,286
Total short-term investments	3,273,369		2,988		(9,165		)	3,267,192		3,663,597		16,298		(1,169		)	3,678,726
Total cash, cash equivalents and short-term investments	$	4,104,065	$	2,988	$	(9,165	)	$	4,097,888	$	4,431,272	$	16,298	$	(1,172	)	$	4,446,398


	2016					2015					2016					2015
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Corporate bonds and commercial paper	$	1,405,679	$	(7,818	)	$	1,112,883	$	(5,377	)	$	412,377	$	(694	)	$	1,112,883	$	(5,377	)
Asset-backed securities	46,133		(49		)	60,057		(147		)	29,605		(32		)	60,057		(147		)
Municipal securities	14,000		(19		)	35,594		(50		)	63,569		(63		)	35,594		(50		)
Foreign government securities	1,275		(2		)	1,268		(8		)	—		—			1,268		(8		)
U.S. Treasury and agency securities	713,723		(772		)	820,570		(1,287		)	327,554		(263		)	820,570		(1,287		)
Total	$	2,180,810	$	(8,660	)	$	2,030,372	$	(6,869	)	$	833,105	$	(1,052	)	$	2,030,372	$	(6,869	)


	Fair Value Measurements at Reporting Date Using								Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash equivalents:
Corporate bonds and commercial paper									$	7,488	$	—	$	7,488	$	—
Money market mutual funds	399,846		399,846		—		—		560,630		560,630		—		—
Time deposits	7,509		7,509		—		—		14,537		14,537		—		—
U.S. Treasury securities									2,600		—		2,600		—
Short-term investments:
Asset-backed securities	92,171		—		92,171		—		108,202		—		108,202		—
Corporate bonds and commercial paper	2,027,076		—		2,027,076		—		2,352,962		—		2,352,962		—
Foreign government securities	1,275		—		1,275		—
Municipal securities	141,558		—		141,558		—		140,357		—		140,357		—
U.S. agency securities	111,451		—		111,451		—		44,919		—		44,919		—
U.S. Treasury securities	893,661		—		893,661		—		1,032,286		—		1,032,286		—
Prepaid expenses and other current assets:
Foreign currency derivatives	13,500		—		13,500		—		19,278		—		19,278		—
Other assets:
Deferred compensation plan assets	37,660		1,052		36,608		—		41,690		1,214		40,476		—
Interest rate swap derivatives	29,019		—		29,019		—		28,024		—		28,024		—
Total assets	$	3,754,726	$	408,407	$	3,346,319	$	—	$	4,352,973	$	576,381	$	3,776,592	$	—


Liabilities:
Accrued expenses:
Foreign currency derivatives	$	1,600	$	—	$	1,600	$	—	$	1,696	$	—	$	1,696	$	—
Total liabilities	$	1,600	$	—	$	1,600	$	—	$	1,696	$	—	$	1,696	$	—



	2016				2015
	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) (3)}	$	11,986	$	—	$	16,979	$	—
Interest rate swap ⁽²⁾	29,019		—		19,821		—
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts ⁽¹⁾	1,514		1,600		2,147		2,154
Total derivatives	$	42,519	$	1,600	$	38,947	$	2,154


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


	2016							2015							2016							2015
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Purchased technology	$	199,662	$	(113,047	)	$	86,615	$	199,053	$	(104,704	)	$	94,349	$	175,719	$	(99,741	)	$	75,978	$	199,053	$	(104,704	)	$	94,349
Customer contracts and relationships	$	551,008	$	(224,024	)	$	326,984	$	506,639	$	(204,578	)	$	302,061	$	553,453	$	(265,945	)	$	287,508	$	506,639	$	(204,578	)	$	302,061
Trademarks	81,256		(43,921		)	37,335		81,219		(41,175		)	40,044		78,655		(46,616		)	32,039		81,219		(41,175		)	40,044
Acquired rights to use technology	145,083		(105,408		)	39,675		144,202		(100,278		)	43,924		93,310		(62,171		)	31,139		144,202		(100,278		)	43,924
Localization	904		(358		)	546		1,500		(358		)	1,142		2,122		(765		)	1,357		1,500		(358		)	1,142
Other intangibles	37,481		(9,950		)	27,531		36,280		(7,793		)	28,487		41,093		(14,884		)	26,209		36,280		(7,793		)	28,487
Total other intangible assets	$	815,732	$	(383,661	)	$	432,071	$	769,840	$	(354,182	)	$	415,658	$	768,633	$	(390,381	)	$	378,252	$	769,840	$	(354,182	)	$	415,658
Purchased and other intangible assets, net	$	1,015,394	$	(496,708	)	$	518,686	$	968,893	$	(458,886	)	$	510,007	$	944,352	$	(490,122	)	$	454,230	$	968,893	$	(458,886	)	$	510,007



Fiscal Year	Purchased Technology		Other Intangible Assets
Remainder of 2016	$	7,147	$	31,497
2017	24,364		103,554
2018	17,249		91,650
2019	11,312		64,753
2020	9,103		35,446
Thereafter	6,803		51,352
Total expected amortization expense	$	75,978	$	378,252



Fiscal Year	Purchased Technology		Other Intangible Assets
Remainder of 2016	$	22,405	$	85,073
2017	23,568		103,535
2018	16,441		92,171
2019	10,074		65,345
2020	7,865		35,220
Thereafter	6,262		50,727
Total expected amortization expense	$	86,615	$	432,071


	2016		2015		2016		2015
Accrued compensation and benefits	$	251,250	$	312,776	$	312,861	$	312,776
Sales and marketing allowances	57,569		66,876		60,945		66,876
Accrued corporate marketing	47,117		38,512		51,929		38,512
Taxes payable	29,405		27,996		37,461		27,996
Royalties payable	19,040		23,334		20,313		23,334
Accrued interest expense	7,335		26,538		6,993		26,538
Other	180,105		183,852		175,776		183,852
Accrued expenses	$	591,821	$	679,884	$	666,278	$	679,884


⁽²⁾	Included in other assets or other liabilities on our Condensed Consolidated Balance Sheets.


⁽³⁾	Hedging effectiveness expected to be recognized into income within the next twelve months.



	Three Months					Nine Months
	Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts		Foreign Exchange Option Contracts			Foreign Exchange Forward Contracts
Derivatives in cash flow hedging relationships:
Net gain (loss) recognized in OCI, net of tax⁽¹⁾	$	13,233		$	—	$	9,089		$	—
Net gain (loss) reclassified from accumulated OCI into income, net of tax⁽²⁾	$	3,904		$	—	$	10,732		$	—
Net gain (loss) recognized in income⁽³⁾	$	(7,733	)	$	—	$	(19,242	)	$	—
Derivatives not designated as hedging relationships:
Net gain (loss) recognized in income⁽⁴⁾	$	—		$	1,368	$	—		$	(1,335	)


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


⁽³⁾	Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net.


⁽⁴⁾	Classified in interest and other income (expense), net.



	2016		2015
Beginning outstanding balance	10,069		13,564
Awarded	3,325		4,012
Released	(4,288	)	(6,561	)
Forfeited	(255	)	(946	)
Ending outstanding balance	8,851		10,069


	Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value^(*) (millions)		Number of Shares (thousands)	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value^(*) (millions)
2016
Restricted stock units outstanding	8,851	1.52	$	762.7	8,398	1.25	$	869.7
Restricted stock units vested and expected to vest	7,716	1.45	$	654.2	7,597	1.19	$	775.2
2015
Restricted stock units outstanding	11,002	1.39	$	870.2	10,288	1.10	$	816.9
Restricted stock units vested and expected to vest	9,557	1.33	$	746.7	9,320	1.03	$	730.3


^(*)	The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of ~~March 4,~~September 2, 2016 and ~~February 27,~~August 28, 2015 were ~~$86.18~~$103.57 and $~~79.10~~79.40, respectively.



	2016					2015
	Shares Granted			Maximum Shares Eligible to Receive		Shares Granted		Maximum Shares Eligible to Receive
Beginning outstanding balance	1,940			3,881		1,517		3,034
Achieved	(1,373	)		(1,387	)	—		—
Awarded	1,206		⁽¹⁾	1,053		671		1,342
Forfeited	(133	)		(268	)	(248	)	(495	)
Ending outstanding balance	1,640			3,279		1,940		3,881


⁽¹⁾	Included in the 1.2 million shares awarded during the ~~three~~nine months ended ~~March 4,~~September 2, 2016 were 0.7 million shares awarded for the final achievement of the 2013 Performance Share program. The remaining awarded shares were for the 2016 Performance Share Program.



	2016				2015
Income Statement Classifications	Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards		Option Grants and Stock Purchase Rights		Restricted Stock and Performance Share Awards
Cost of revenue—subscription	$	1,119	$	5,115	$	1,070	$	4,946
Cost of revenue—services and support	4,087		5,494		3,897		4,711
Research and development	10,961		81,280		11,162		78,375
Sales and marketing	12,953		85,123		13,768		84,686
General and administrative	3,423		53,049		3,652		50,744
Total	$	32,543	$	230,061	$	33,549	$	223,462


Balance as of November 27, 2015	$	7,253,431		$	7,253,431
Net income	254,307			769,169
Re-issuance of treasury stock	(286,655		)	(307,696		)
Balance as of March 4, 2016	$	7,221,083
Balance as of September 2, 2016				$	7,714,904


	November 27, 2015			Increase / Decrease			Reclassification Adjustments				March 4, 2016			November 27, 2015			Increase / Decrease		Reclassification Adjustments				September 2, 2016
Net unrealized gains on available-for-sale securities:
Unrealized gains on available-for-sale securities	$	2,542		$	727		$	(333	)		$	2,936		$	2,542		$	16,209	$	(2,487	)		$	16,264
Unrealized losses on available-for-sale securities	(7,095		)	(2,354		)	289				(9,160		)	(7,095		)	5,468		505				(1,122		)
Total net unrealized gains on available-for-sale securities	(4,553		)	(1,627		)	(44		)	⁽¹⁾	(6,224		)	(4,553		)	21,677		(1,982		)	⁽¹⁾	15,142
Net unrealized gains / losses on derivative instruments designated as hedging instruments	2,915			(1,711		)	(2,935		)	⁽²⁾	(1,731		)	2,915			9,089		(9,964		)	⁽²⁾	2,040
Cumulative foreign currency translation adjustments	(167,442		)	23,718			—				(143,724		)	(167,442		)	16,149		—				(151,293		)
Total accumulated other comprehensive income (loss), net of taxes	$	(169,080	)	$	20,380		$	(2,979	)		$	(151,679	)	$	(169,080	)	$	46,915	$	(11,946	)		$	(134,111	)


⁽¹⁾	Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net.


⁽²⁾	Reclassification adjustments for loss on the interest rate lock agreement and gains / losses on other derivative instruments are classified in interest and other income (expense), net and revenue, respectively.


⁽¹⁾	Taxes related to derivative instruments other than the interest rate lock agreement were zero based on the tax jurisdiction where these derivative instruments were executed.


	Digital Media			Digital Marketing			Print and Publishing			Total			Digital Media			Digital Marketing			Print and Publishing			Total
Three months ended March 4, 2016
Three months ended September 2, 2016
Revenue	$	931,718		$	406,246		$	45,371		$	1,383,335		$	989,969		$	429,605		$	44,393		$	1,463,967
Cost of revenue	54,547			141,917			2,108			198,572			56,771			144,065			1,865			202,701
Gross profit	$	877,171		$	264,329		$	43,263		$	1,184,763		$	933,198		$	285,540		$	42,528		$	1,261,266
Gross profit as a percentage of revenue	94		%	65		%	95		%	86		%	94		%	66		%	96		%	86		%
Three months ended February 27, 2015
Three months ended August 28, 2015
Revenue	$	702,773		$	357,167		$	49,241		$	1,109,181		$	769,627		$	402,530		$	45,611		$	1,217,768
Cost of revenue	44,345			120,375			2,078			166,798			56,508			132,401			2,076			190,985
Gross profit	$	658,428		$	236,792		$	47,163		$	942,383		$	713,119		$	270,129		$	43,535		$	1,026,783
Gross profit as a percentage of revenue	94		%	66		%	96		%	85		%	93		%	67		%	95		%	84		%



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


(in millions)	2016			Three Months			Nine Months
Revenue impact:	Increase/ (Decrease)			Increase/ (Decrease)
EMEA:
Euro	$	(28.6	)	$	(6.6	)	$	(45.7	)
British Pound	(5.0		)	(9.6		)	(20.2		)
Other currencies	(1.4		)	(0.9		)	(3.3		)
Total EMEA	(35.0		)	(17.1		)	(69.2		)
Japanese Yen	(4.3		)	6.8			3.4
Other currencies	(8.8		)	(3.9		)	(18.2		)
Total revenue impact	(48.1		)	(14.2		)	(84.0		)
Hedging impact:
Euro	1.2			0.3			1.8
British Pound	1.9			3.6			8.8
Japanese Yen	0.1			—			0.1
Total hedging impact	3.2			3.9			10.7
Total impact	$	(44.9	)	$	(10.3	)	$	(73.3	)