Adobe Inc. (NASDAQ:ADBE)

The reported values for goodwill and intangible assets demonstrate varied trends over the observed period. Goodwill consistently represents the largest component of these assets, exhibiting a general pattern of increase followed by stabilization and a slight decline in recent periods. Other intangible assets, while smaller in aggregate, show more pronounced fluctuations, particularly in the net carrying value.

Goodwill

Goodwill increased from US$10,742 million in 2020 to US$12,805 million in 2023, representing a cumulative increase of approximately 19.2%. Subsequent to 2023, goodwill experienced a minor decrease to US$12,788 million in 2024, followed by a slight increase to US$12,857 million in 2025. This suggests a period of active acquisitions contributing to goodwill, followed by a stabilization and minor adjustments.

Customer Contracts and Relationships

The value of customer contracts and relationships increased from US$958 million in 2020 to US$1,213 million in 2021, and remained relatively stable at US$1,204 million in both 2022 and 2023. A slight decrease to US$1,203 million occurred in 2024, with a minor recovery to US$1,208 million in 2025. This indicates a consistent, though modest, contribution to overall intangible asset value.

Purchased Technology

Purchased technology experienced an initial increase from US$756 million in 2020 to US$1,060 million in 2022. However, a downward trend is observed from 2022, decreasing to US$984 million in 2023, US$877 million in 2024, and US$881 million in 2025. This decline may indicate impairment or amortization of previously acquired technologies.

Trademarks

Trademarks remained relatively stable throughout the period, fluctuating between US$375 million and US$384 million. A slight decrease to US$372 million is noted in both 2024 and 2025, but the overall change is minimal.

Other Intangibles

The gross carrying amount of other intangibles increased from US$2,182 million in 2020 to US$2,702 million in 2021, remaining at US$2,700 million in 2022 before decreasing to US$2,586 million in 2023 and further to US$2,494 million in 2024, and US$2,521 million in 2025. Accumulated amortization increased consistently throughout the period, from -US$823 million in 2020 to -US$2,026 million in 2025. Consequently, the net carrying value of other intangibles decreased significantly from US$1,359 million in 2020 to US$495 million in 2025, indicating substantial amortization impacting the reported value.

Total Goodwill and Intangibles

The combined value of goodwill and other intangibles increased from US$12,101 million in 2020 to US$14,488 million in 2021. A subsequent decline is observed, reaching US$13,352 million in 2025. This overall trend mirrors the initial growth in goodwill, offset by the decreasing net value of other intangibles due to accumulated amortization and potential impairments.

The consistent increase in accumulated amortization suggests a systematic reduction in the carrying value of intangible assets over time. The decline in purchased technology warrants further investigation to understand the underlying reasons for the reduction in value.

The information presents a comparison between reported and adjusted financial figures for total assets and stockholders’ equity over a six-year period. The adjustments appear to relate to the removal of goodwill and intangible assets, significantly impacting the reported values. A substantial difference exists between the reported and adjusted figures for both total assets and stockholders’ equity, indicating a considerable amount of goodwill and intangibles on the balance sheet.

Total Assets

Reported total assets generally increased from 2020 to 2023, rising from 24,284 million to 29,779 million. A slight decrease was observed in 2025 to 29,496 million. However, adjusted total assets show a more moderate growth pattern, increasing from 13,542 million in 2020 to 16,974 million in 2023, and then decreasing to 16,639 million in 2025. The gap between reported and adjusted total assets widened between 2020 and 2023, suggesting a continued accumulation of goodwill and intangibles, before narrowing slightly in 2024 and 2025.

Stockholders’ Equity

Reported stockholders’ equity increased from 13,264 million in 2020 to a peak of 16,518 million in 2023, before declining sharply to 11,623 million in 2025. Adjusted stockholders’ equity demonstrates a far more volatile pattern. It began at 2,522 million in 2020, decreased to 1,264 million in 2022, then increased to 3,713 million in 2023, and subsequently fell to -1,234 million in 2025. The negative adjusted stockholders’ equity in 2025 is a significant development, indicating that the accumulated adjustments to equity, primarily related to goodwill and intangible asset write-downs, have exceeded the initial equity balance. The difference between reported and adjusted stockholders’ equity is substantial and growing, particularly in the later years.

The trend suggests that the company has been actively acquiring other businesses, resulting in a significant amount of goodwill and intangible assets being recorded. The adjustments indicate a reassessment of these assets, leading to write-downs that substantially reduce the reported equity. The negative adjusted stockholders’ equity in the most recent period warrants further investigation, as it could signal potential financial distress or a significant restructuring of the balance sheet. The divergence between reported and adjusted figures highlights the importance of understanding the composition of assets and equity when evaluating the company’s financial position.

The financial metrics demonstrate a significant impact from adjusting for goodwill and intangible assets. Reported ratios generally show moderate changes, while adjusted ratios reveal substantially different performance trends, indicating the considerable weight of these non-operating assets in the original calculations.

Total Asset Turnover

Reported total asset turnover consistently increased from 0.53 in 2020 to 0.81 in 2025, suggesting improving efficiency in asset utilization. However, the adjusted total asset turnover exhibits a more dramatic increase, moving from 0.95 in 2020 to 1.43 in 2025. This indicates that excluding goodwill and intangibles reveals a considerably higher efficiency in generating revenue from operating assets.

Financial Leverage

Reported financial leverage increased from 1.83 in 2020 to 2.54 in 2025, indicating a growing reliance on debt financing. The adjusted financial leverage, however, shows a much more volatile pattern, peaking at 13.24 in 2024 after a substantial increase from 5.37 in 2020, and then lacking a value for 2025. This suggests that the inclusion of goodwill and intangibles significantly understates the true level of financial risk when considering the company’s asset base.

Return on Equity (ROE)

Reported ROE fluctuated, starting at 39.66% in 2020, decreasing to 32.59% in 2021, then increasing to 61.34% in 2025. The adjusted ROE demonstrates a far more substantial and consistent increase, rising from 208.56% in 2020 to 422.17% in 2024, with no value reported for 2025. This highlights the considerable contribution of non-operating assets to the reported equity returns, and a much stronger underlying profitability when these assets are excluded.

Return on Assets (ROA)

Reported ROA remained relatively stable, ranging from 17.51% to 24.17% between 2021 and 2025. The adjusted ROA, while also showing some fluctuation, generally remained in the 31%-43% range, with a value of 42.85% in 2025. This indicates that the company’s profitability, when measured against its operating assets, is significantly higher than what the reported ROA suggests.

In summary, the adjustments for goodwill and intangible assets reveal a markedly different financial picture. The adjusted ratios consistently demonstrate higher levels of efficiency, profitability, and financial risk than the reported figures, suggesting that these non-operating assets have a substantial impact on the company’s financial performance as it is traditionally measured.

An examination of the provided financial information reveals distinct trends in both adjusted and reported total asset turnover ratios over the observed period. The adjusted total asset turnover demonstrates a generally increasing trend, while the reported total asset turnover shows a more moderate increase, with some fluctuation.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio exhibits a consistent upward trajectory, increasing from 0.95 in 2020 to 1.43 in 2025. This indicates a growing efficiency in generating revenue from the adjusted asset base. A notable increase occurred between 2021 and 2022, rising from 1.08 to 1.22. While the ratio experienced a slight decrease in 2023 to 1.14, it resumed its upward trend, reaching 1.23 in 2024 and peaking at 1.43 in 2025. This suggests improved utilization of assets after excluding the impact of goodwill and intangible assets.

Reported Total Asset Turnover

The reported total asset turnover ratio also demonstrates an overall increase from 0.53 in 2020 to 0.81 in 2025. However, the progression is less linear than that of the adjusted ratio. The ratio increased from 0.53 in 2020 to 0.58 in 2021, then to 0.65 in both 2022 and 2023. A further increase to 0.71 was observed in 2024, culminating in 0.81 in 2025. This indicates a growing, but more moderate, efficiency in generating revenue from the total reported asset base.

Asset Base Comparison

The difference between reported and adjusted total assets is substantial. Adjusted total assets, which exclude goodwill and intangible assets, are consistently lower than reported total assets. The gap between the two asset figures appears relatively stable over the period, suggesting a consistent level of goodwill and intangible assets relative to total assets. The increasing turnover ratios, particularly the adjusted ratio, suggest that the core operating assets are being utilized more effectively over time.

The divergence between the reported and adjusted turnover ratios highlights the significant impact of goodwill and intangible assets on the overall asset turnover calculation. The higher adjusted turnover ratios suggest that the company’s operational efficiency is stronger when these items are excluded from the asset base.

An examination of the financial information reveals significant fluctuations in adjusted financial leverage over the observed period. Reported total assets generally increased from 2020 to 2023, with a slight decrease in 2024 and a more pronounced decrease in 2025. Reported stockholders’ equity followed a similar pattern of growth until 2023, followed by declines in both 2024 and 2025. However, the adjusted figures present a markedly different picture, particularly concerning stockholders’ equity and the resulting leverage calculation.

Adjusted Financial Leverage

Adjusted financial leverage exhibited a substantial increase from 5.37 in 2020 to 6.84 in 2021, peaking at 11.38 in 2022. A considerable decrease to 4.57 was noted in 2023, but this was followed by a sharp rise to 13.24 in 2024. The value for 2025 is not available. This volatility suggests a significant difference between reported and adjusted equity, impacting the leverage ratio.

Adjusted Total Assets

Adjusted total assets demonstrated a consistent upward trend from 2020 to 2023, increasing from US$13,542 million to US$16,974 million. A modest increase occurred in 2024, reaching US$17,442 million, before declining to US$16,639 million in 2025. This indicates that the adjustments made to total assets are generally increasing their value, but with a recent reversal.

Adjusted Stockholders’ Equity

Adjusted stockholders’ equity experienced considerable variability. It began at US$2,522 million in 2020, decreased to US$2,129 million in 2021, and continued to decline to US$1,264 million in 2022. A notable increase to US$3,713 million occurred in 2023, but this was followed by a substantial decrease to US$1,317 million in 2024, and a further decline resulting in a negative value of US$-1,234 million in 2025. This negative equity position in 2025 is a significant development and warrants further investigation.

The divergence between reported and adjusted figures, particularly in stockholders’ equity, is the primary driver of the fluctuations in adjusted financial leverage. The trend suggests that adjustments are significantly reducing the reported equity base, leading to a higher adjusted leverage ratio. The negative adjusted stockholders’ equity in 2025 is a critical point requiring detailed scrutiny to understand the nature and implications of the adjustments made.

Reported Financial Leverage

Reported financial leverage remained relatively stable between 2020 and 2023, fluctuating between 1.80 and 1.93. However, it increased to 2.14 in 2024 and further to 2.54 in 2025. While less volatile than the adjusted leverage, the upward trend in reported leverage mirrors the decline in reported equity.

The period demonstrates significant fluctuations in both reported and adjusted stockholders’ equity, which consequently impacts reported and adjusted return on equity (ROE) values. A notable divergence exists between the reported and adjusted ROE figures, suggesting the impact of goodwill and intangible assets on the overall equity calculation is substantial.

Reported Stockholders’ Equity

Reported stockholders’ equity generally increased from 2020 to 2023, rising from US$13,264 million to US$16,518 million. However, a decrease is observed in 2024 to US$14,105 million, followed by a more substantial decline in 2025 to US$11,623 million. This indicates potential equity reductions through share repurchases, dividend payouts, or losses.

Adjusted Stockholders’ Equity

Adjusted stockholders’ equity exhibits a more volatile pattern. It decreased from US$2,522 million in 2020 to US$1,264 million in 2022. A significant increase occurred in 2023, reaching US$3,713 million, but this was followed by a decline to US$1,317 million in 2024. The most dramatic change is a move to a negative value of US$-1,234 million in 2025. This suggests a considerable write-down or impairment of goodwill and intangible assets relative to the total equity base, particularly in the latest period.

Reported ROE

Reported ROE fluctuated between 32.59% and 39.66% from 2020 to 2023. A substantial increase to 61.34% is observed in 2025, likely driven by the decrease in reported stockholders’ equity while net income remained relatively stable or increased. This elevated ROE figure should be examined in conjunction with the declining equity base to assess its sustainability.

Adjusted ROE

Adjusted ROE demonstrates exceptionally high and volatile values. It began at 208.56% in 2020 and peaked at 422.17% in 2024. The values in 2020, 2021, 2022 and 2024 are significantly higher than the reported ROE, indicating that the reported ROE is substantially understated when considering the impact of goodwill and intangible assets. The absence of a value for 2025, coupled with the negative adjusted stockholders’ equity, suggests a potentially significant impairment impacting profitability when adjusted for these assets.

The substantial differences between reported and adjusted ROE, and the trend towards negative adjusted equity in 2025, warrant further investigation into the nature and magnitude of goodwill and intangible assets, and their potential impact on the company’s financial performance and valuation.

The analysis reveals a significant divergence between reported and adjusted return on assets (ROA) over the observed period. While reported ROA demonstrates relative stability with a recent increase, adjusted ROA consistently exhibits higher values and a more pronounced upward trend in the latest period.

Reported Total Assets

Reported total assets increased from US$24,284 million in 2020 to US$29,779 million in 2023, representing a cumulative growth of approximately 22.6%. A slight increase to US$30,230 million was observed in 2024, followed by a decrease to US$29,496 million in 2025. This suggests a period of expansion followed by stabilization and a minor contraction.

Adjusted Total Assets

Adjusted total assets followed a similar pattern to reported total assets, increasing from US$13,542 million in 2020 to US$16,974 million in 2023, a cumulative growth of roughly 25.3%. Adjusted total assets increased to US$17,442 million in 2024 before decreasing to US$16,639 million in 2025. The magnitude of change in adjusted total assets is smaller than that of reported total assets, indicating the adjustments are impacting the overall asset base.

Reported ROA

Reported ROA began at 21.66% in 2020, decreased to 17.70% in 2021, and remained relatively stable around 17.5% to 18.4% through 2024. A substantial increase to 24.17% is observed in 2025, suggesting improved profitability relative to reported assets in the most recent period.

Adjusted ROA

Adjusted ROA started at a significantly higher level of 38.84% in 2020. It experienced a decline to 33.09% in 2021 and remained relatively consistent around 33.1% to 31.9% through 2024. A marked increase to 42.85% is evident in 2025, mirroring the trend in reported ROA but at a considerably higher magnitude. This suggests that the adjustments made to total assets have a substantial impact on the calculated return.

The consistent difference between reported and adjusted ROA indicates that a significant portion of reported total assets may not be contributing proportionally to profitability. The substantial increase in both reported and adjusted ROA in 2025 warrants further investigation to determine the underlying drivers of this improvement. The adjustments to total assets appear to be consistently reducing the asset base, resulting in a higher ROA calculation. Understanding the nature of these adjustments is crucial for a comprehensive assessment of the company’s financial performance.