Stock Analysis on Net

Adobe Inc. (NASDAQ:ADBE)

$24.99

Common-Size Income Statement

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Adobe Inc., common-size consolidated income statement

Microsoft Excel
12 months ended: Nov 29, 2024 Dec 1, 2023 Dec 2, 2022 Dec 3, 2021 Nov 27, 2020 Nov 29, 2019
Subscription
Product
Services and other
Revenue
Subscription
Product
Services and other
Cost of revenue
Gross profit
Research and development
Sales and marketing
General and administrative
Acquisition termination fee
Amortization of intangibles
Operating expenses
Operating income
Interest expense
Realized investment gains
Realized investment losses
Unrealized investment gains (losses), net
Investment gains (losses), net
Interest income
Foreign exchange gains (losses)
Realized gains on fixed income investments
Realized losses on fixed income investments
Other
Other income (expense), net
Non-operating income (expense), net
Income before income taxes
(Provision for) benefit from income taxes
Net income

Based on: 10-K (reporting date: 2024-11-29), 10-K (reporting date: 2023-12-01), 10-K (reporting date: 2022-12-02), 10-K (reporting date: 2021-12-03), 10-K (reporting date: 2020-11-27), 10-K (reporting date: 2019-11-29).


Revenue Composition Trends
The subscription segment shows a continuous increase in its share of total revenue, rising steadily from 89.47% in 2019 to 95.42% in 2024. Conversely, the product revenue proportion consistently decreases, declining from 5.8% in 2019 to 1.79% in 2024. The services and other revenue category also declines gradually from 4.74% to 2.78% over the same period. This pattern indicates a strategic shift or market preference favoring subscription-based offerings.
Cost of Revenue and Gross Profit
The cost of revenue as a percentage of revenue decreases from 14.97% in 2019 to 10.96% in 2024, suggesting improved cost efficiency or economies of scale. Correspondingly, the gross profit margin improves from 85.03% to 89.04%, reflecting stronger profitability at the gross level.
Operating Expenses Analysis
Research and development (R&D) expenses relative to revenue show a slight upward trend, increasing from 17.28% in 2019 to 18.34% in 2024, indicating sustained or growing investment in innovation. Sales and marketing expenses fluctuate but generally trend downward, dropping from 29.04% to 26.8%, which may imply enhanced marketing efficiency. General and administrative expenses remain relatively stable, hovering around 7% of revenue throughout the period.
Special Items Impact
Beginning in 2024, an acquisition termination fee appears, accounting for 4.65% of revenue, significantly impacting operating expenses this year. Additionally, amortization of intangibles steadily decreases from 1.57% to 0.79%, reflecting diminishing intangible asset charges over time.
Operating Income and Profitability
Operating income as a percentage of revenue improves from 29.25% in 2019 to a peak of 36.76% in 2021 before declining to 31.35% in 2024. This decline in recent years partly corresponds with increased operating expenses in 2024 due to the acquisition termination fee. Income before income taxes follows a similar trajectory, peaking in 2021 and then moderating.
Non-Operating Items and Investment Income
Interest expense consistently decreases over time from 1.41% to 0.79% but with a slight uptick in 2024. Investment gains and losses fluctuate, with net investment income showing small positive percentages overall. Interest income increases notably after 2021, rising from 0.11% to 1.59% by 2024, suggesting increased returns from investments or cash holdings. Foreign exchange losses remain minimal but persist throughout the period.
Income Tax and Net Income
The provision for income taxes exhibits variability, with a notable positive benefit recorded in 2020 (8.42%), contrasting with negative provisions in other years. Net income as a percentage of revenue spikes in 2020 at 40.88%, likely influenced by this tax benefit, followed by a decline and stabilization near mid-20% levels in later years. By 2024, net income stands at 25.85% of revenue, indicating ongoing profitability but a reduction from peak levels.
Summary
Overall, the financial data depict a company increasingly reliant on subscription revenues with improving gross margins and sustained investment in R&D. Operating efficiency shows mixed results due to special charges in the latest period, impacting profitability. Non-operating income components contribute modestly, with interest income gains over time. Variability in tax provisions influences net income outcomes, with the company maintaining solid profitability throughout.