Company DCF analysis file
Adobe DCF Analysis
An Adobe DCF must value renewing software economics rather than low physical capital spending alone. Revenue, delivery cost, development and selling expense all matter before advance collections become investor cash. The FY2025 baseline also predates Semrush and the subsequent reporting-segment change.
Revenue, expenses and profit on one annual basis
Historical Adobe consolidated comparison, $ millions: FY2024 ended 2024-11-29 and FY2025 ended 2025-11-28. These annual periods are separate from the later interim observation below.
| Measure | FY2024 | FY2025 |
|---|---|---|
| Revenue | 21,505 | 23,769 |
| Cost of revenue | 2,358 | 2,551 |
| Gross profit | 19,147 | 21,218 |
| Research and development | 3,944 | 4,294 |
| Sales and marketing | 5,764 | 6,488 |
| General and administrative | 1,529 | 1,573 |
| Acquisition termination fee | 1,000 | 0 |
| Amortization of intangibles within operating expenses | 169 | 157 |
| Operating income | 6,741 | 8,706 |
| Net income | 5,560 | 7,130 |
Source: FY2025 annual financial statements. Annual values are reported unless a row is marked derived.
Part of the annual operating-profit comparison reflects the prior-year $1,000 million acquisition termination fee, not just recurring subscription performance. Preserve that reported row, then make any normalization explicit. Development and customer-acquisition expense do not disappear because cash property purchases are small. Do not add the amortization row back twice when reconciling an operating-profit starting point.
Keep the historical segment definitions dated
| FY2025 reporting basis: revenue, $ millions | FY2024 | FY2025 |
|---|---|---|
| Digital Media | 15,864 | 17,649 |
| Digital Experience | 5,366 | 5,864 |
| Publishing and Advertising | 275 | 256 |
Source: Annual business disclosures and financial notes. Annual values are reported unless a row is marked derived.
The annual filing says these segments are combined into one operating and reportable segment from FY2026. The old split remains useful for the dated historical comparison, but is not a newly disclosed current segment forecast. Customer-group and segment views overlap and must not be added together. A combined-business case needs a bridge for acquisition contribution as well as reporting changes.
Reconcile reported cash before forecasting investor cash
| Measure | FY2024 | FY2025 |
|---|---|---|
| Operating cash | 8,056 | 10,031 |
| Cash property purchases: positive deduction | 183 | 179 |
| Cash after those property purchases: derived | 7,873 | 9,852 |
| Stock-compensation adjustment: already included in operating cash | 1,833 | 1,942 |
| Deferred-revenue adjustment: already included in operating cash | 309 | 771 |
Source: Annual cash-flow statement and related notes. Annual values are reported unless a row is marked derived.
Operating cash less physical property investment is $9,852 million in 2025. The stock-compensation and deferred-revenue adjustments are already inside the $10,031 million starting cash flow. Adding them again would overstate cash. Advance billing can improve collections without delivering an extra year of service or reducing the cost of employee compensation.
The later interim period stays separate
| Observation | Period-specific evidence |
|---|---|
| Reported interim basis | Q3 FY2026 covers 2026-05-30 through 2026-08-28 and was released 2026-09-10. Revenue was $6,760 million in this quarter. |
| Interpretation boundary | The newer quarter follows the Semrush closing. Acquired revenue and collection timing need a dated consolidation bridge; neither annual cash conversion nor the stock-compensation add-back proves the acquired business's cash return. |
Source: official interim reporting. The dated quarter is not annualized here and is not added to either full-year column. Later reporting must be checked before refreshing the valuation date.
Turn the statements into a DCF operating case
Use a subscription schedule for customers, renewal value, service delivery and invoices. Reconcile operating profit to cash with operating taxes, noncash costs, capitalized items and operating balances. Remaining performance obligations or recurring-revenue run rates are contract measures, not extra cash to add to operating cash. In equity value, maintain one consistent compensation/dilution policy. Model Semrush acquisition funding and integration separately from recurring subscription reinvestment; no acquired cash return is inferred from the pre-acquisition year.
| Driver | Evidence to carry into the forecast | Downside condition to test |
|---|---|---|
| Renewal economics | Paid contracts, realized revenue and service costs | Weaker renewals are concealed by advance billings |
| AI product adoption | Incremental paid demand and incremental delivery/development cost | Usage expands without a sufficient retained contribution |
| Combined-business transition | Semrush contribution, purchase funding and integration timing | Historical Adobe margins are applied to a different perimeter |
Compare unchanged demand with delayed collections against lower renewal demand with unchanged near-term staffing commitments. These produce different earnings and liquidity effects. Base terminal cash on a sustainable service and reinvestment case, after the reporting and acquisition bridge; no growth, discount rate, implied multiple or product capability is supplied as an established fact.
Use the Adobe financial analysis for the broader operating context, the company forecast to state the operating assumptions, and the DCF calculator only after defining the investor cash stream. Keep the statement definitions, reporting dates and your own assumptions visible when comparing valuation cases.
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