Adobe Delivers Strong Q1 Financial Results

New Product Launches Expected to Fuel Company’s Revenue and Earnings Growth

SAN JOSE, Calif. — Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its first quarter fiscal year 2010 ended March 5, 2010.

In the first quarter of fiscal 2010, Adobe achieved revenue of $858.7 million, compared to $786.4 million reported for the first quarter of fiscal 2009 and $757.3 million reported in the fourth quarter of fiscal 2009.  This represents 9 percent year-over-year revenue growth.  Adobe’s first quarter revenue target range was $800 to $850 million.

“Stability in our creative business, combined with strength in our Acrobat and Omniture solutions, helped drive strong financial performance in Q1,” said Shantanu Narayen, president and CEO of Adobe.  “The market trends enabling our diverse business remain strong and we are bullish about the upcoming launches of Flash Player and Creative Suite.”

First Quarter Fiscal 2010 GAAP Results

Adobe’s GAAP diluted earnings per share for the first quarter of fiscal 2010 were $0.24, based on 532.6 million weighted average shares. This compares with GAAP diluted earnings per share of $0.30 reported in the first quarter of fiscal 2009 based on 527.8 million weighted average shares, and GAAP diluted loss per share of $0.06 reported in the fourth quarter of fiscal 2009 based on 532.0 million weighted average shares.

GAAP operating income was $176.8 million in the first quarter of fiscal 2010, compared to $207.9 million in the first quarter of fiscal 2009 and $153.6 million in the fourth quarter of fiscal 2009.  As a percent of revenue, GAAP operating income in the first quarter of fiscal 2010 was 20.6 percent, compared to 26.4 percent in the first quarter of fiscal 2009 and 20.3 percent in the fourth quarter of fiscal 2009.

GAAP net income was $127.2 million for the first quarter of fiscal 2010, compared to GAAP net income of $156.4 million reported in the first quarter of fiscal 2009 and GAAP net loss of $32.0 million in the fourth quarter of fiscal 2009.

First Quarter Fiscal 2010 Non-GAAP Results

Adobe’s non-GAAP diluted earnings per share for the first quarter of fiscal 2010 were $0.40.  This compares with non-GAAP diluted earnings per share of $0.45 reported in the first quarter of fiscal 2009 and non-GAAP diluted earnings per share of $0.39 reported in the fourth quarter of fiscal 2009.

Adobe’s non-GAAP operating income was $289.3 million in the first quarter of fiscal 2010, compared to 

$295.0 million in the first quarter of fiscal 2009 and $265.2 million in the fourth quarter of fiscal 2009.  As a percent of revenue, non-GAAP operating income in the first quarter of fiscal 2010 was 33.7 percent, compared to 37.5 percent in the first quarter of fiscal 2009 and 35.0 percent in the fourth quarter of fiscal 2009.

Non-GAAP net income was $211.7 million for the first quarter of fiscal 2010, compared to $236.8 million in the first quarter of fiscal 2009 and $206.8 million in the fourth quarter of fiscal 2009.

Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.   

Second Quarter Fiscal 2010 Financial Targets

For the second quarter of fiscal 2010, Adobe is targeting revenue of $875 million to $925 million.  The Company’s operating margin is targeted to be 21.0 percent to 24.5 percent on a GAAP basis, and 33.5 percent to 35.5 percent on a non-GAAP basis.  In addition, the Company is targeting its share count to be between 531 million and 535 million shares, and it is targeting non-operating expense between $16 million and $18 million.  Adobe’s GAAP and non-GAAP tax rate is expected to be approximately 25 percent.

These targets lead to a second quarter diluted earnings per share target range of $0.23 to $0.30 on a GAAP basis, and an earnings per share target range of $0.39 to $0.44 on a non-GAAP basis.

Reconciliation between these GAAP and non-GAAP financial targets is provided at the end of this press release.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including those related to revenue, operating margin, non-operating expense, tax rate, share count, earnings per share and business momentum, which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: failure to develop, market and distribute new products and services or upgrades or enhancements to existing products and services that meet customer requirements, introduction of new products, services and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, the economic downturn and continued uncertainty in the financial markets and other adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, difficulty in predicting revenue from new businesses, failure to realize the anticipated benefits of past or future acquisitions, and difficulty in integrating such acquisitions, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobe’s intellectual property from third-party infringers, or unauthorized copying, use or disclosure, security vulnerabilities in our products and systems, interruptions or delays in our service or service from third-party service providers that host or deliver services, security or privacy breaches, or failure in data collection, failure to manage Adobe’s sales and distribution channels and third-party customer service and technical support providers effectively, disruption of

Adobe’s business due to catastrophic events, risks associated with global operations, currency fluctuations, risks associated with our debt service obligations, changes in, or interpretations of, accounting principles, impairment of Adobe’s goodwill or amortizable intangible assets, changes in, or interpretations of, tax rules and regulations, Adobe’s inability to attract and retain key personnel, impairment of Adobe’s investment portfolio due to deterioration of the capital markets, and market risks associated with Adobe’s equity investments. For further discussion of these and other risks and uncertainties, individuals should refer to Adobe’s SEC filings.

The financial information set forth in this press release reflects estimates based on information available at this time.  These amounts could differ from actual reported amounts stated in Adobe’s Quarterly Report on Form 10-Q for our first quarter ended March 5, 2010, which the Company expects to file in April 2010. Adobe does not undertake an obligation to update forward-looking statements.