Risk factor changes · ADBE

What changed in Adobe's risk factors

Item 1A (Risk Factors) of Adobe's FY2025 10-K compared with its FY2024 10-K, sentence by sentence.

Newer: 10-K filed 2026-01-15 · Older: 10-K filed 2025-01-13

New in the latest 10-K 33

• For example, artificial intelligence ( AI ), including generative and agentic, enables users of all skill levels to create and provide new ways of marketing, creating and editing content and interacting with documents.
• Our numerous competitors include companies of various sizes and both public and private companies, including large, global companies and smaller companies with more specialized focuses, new entrants, and AI or cloud-native companies.
• Our competitors may deploy technical, marketing and financial resources more easily and effectively.
• Our competitors may develop or acquire additional products, services or solutions that are similar to ours or that achieve greater or faster acceptance.
• Our competitors or other third parties may develop AI solutions more rapidly or successfully, including but not limited to different data training strategies or proprietary access to data and, as a result, other AI solutions may achieve greater and faster adoption.
• For example, we face increasing competition from companies offering generative and agentic AI solutions, including but not limited to prompt-based and multi-modal creation and editing, document productivity and understanding, ad distribution and creation, and purpose-built AI agents.
• For example, the U.S.
• AI regulatory framework remains in development and has been introduced at the federal level through executive orders and legislation has been introduced and enacted at the state level.
• Some of our operations are subject to the EU AI Act and depending on how the EU AI Act is implemented and interpreted, we may have to adapt our business practices, contractual arrangements and services to comply with such obligations.
• Non-compliant companies under the EU AI Act may be subject to administrative fines.
• The use and availability of third-party AI models in our solutions could result in scrutiny and legal liability, including intellectual property infringement claims.
• Such claims or scrutiny could cause reputational harm and loss of customers, and adversely impact our business and financial results.
• We may not realize the anticipated benefits of acquisitions, investments or other strategic transactions, and they may disrupt our business and adversely affect our business and financial results.
• We have acquired and may continue to acquire businesses, products, talent and technologies as part of our business strategy.
• Any of these factors may adversely affect our business and financial results.
• Some of our solutions include third-party open-source software, which may contain security vulnerabilities that may be exploited, potentially compromising our solutions.
• Increasing use of AI in our internal systems and solutions may create new attack methods.
• Our solutions are incorporated into the supply chain of a large number of companies worldwide and, as a result, if our solutions experience a compromise, a large portion or, in some instances, all of our customers and their data for a given solution could be simultaneously affected.
• The potential liability and associated consequences we could suffer as a result of such a large scale event could be significant, and materially and adversely impact our business.
• There can be no assurance that we have the capability to detect all vulnerabilities or new attack methods and our internal security controls may not keep pace with quickly evolving threats.
• Treasury securities, time deposits and other investments.
• Certain other countries in which we do business have also established specific legal requirements for cross-border transfers of personal information and data localization.
• We may be subject to certain aspects of the EU s Digital Services Act, which imposes additional legal requirements on certain types of digital service providers, including online platforms and content sharing sites.
• Moreover, some of our customers are subject to the EU s Digital Operational Resilience Act and similar UK regulatory requirements on operational resilience.
• There may be certain aspects of the EU s Data Act that could apply to certain types of cloud services providers and require them to facilitate data portability (e.g., switching between services), as well as certain requirements concerning cross border international transfers of, and governmental access to, non-personal information outside of the European Economic Area.
• Further, the U.S.
• Department of Justice issued a rule entitled Preventing Access to U.S.
• Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons, which placed additional restriction on certain data transactions involving countries of concern and covered individuals that may impact certain business activities, and has impacted the transfer of data in connection with certain transactions.
• These changes may impact the duration of customer relationships and result in additional compliance and operational costs, which may adversely impact our business.
• An increase in our effective tax rate would reduce our profitability.
• Additionally, we are subject to complex regulatory requirements and executive orders, including those related to procurement; export controls; employment; security; and other evolving government-specific contractual requirements.
• If our goodwill or intangible assets become impaired, then we could be required to record a significant charge to earnings.
• Exposure to climate-related events that may harm our business may continue to increase in intensity.

Reworded 132

Removed words are struck through; added words are highlighted.

• Risks Related to Our Ability to Grow Our Business We may be unsuccessful at innovating in response to rapid technological or industry changes to meet customer needs, which could cause our operating business and financial results to suffer. suffer materially.
• We must continually introduce new, new and enhance existing, products, services and existing solutions to retain customers and attract new customers.
• Developing new products, services and solutions is complex, requires significant investment and operational costs and may not be profitable, and our investments in new technologies are speculative and may not yield the expected business or financial benefits.
• The commercial success of new or enhanced products, services and solutions depends on a number of factors, including timely and successful development; effective distribution and marketing; market acceptance; compatibility with existing and emerging standards, platforms, software delivery methods and technologies; accurately predicting and anticipating customer needs and expectations and the direction of technological change; identifying and innovating in the right technologies; and differentiation from other products, services and solutions.
• If we fail to anticipate or identify technological, creative creative, productivity or marketing trends or fail to devote appropriate resources to adapt to such trends, our business could be harmed.
• While we have released continue to release new generative artificial intelligence products, such as Adobe Firefly, AI solutions and are focused to focus on enhancing the artificial intelligence ( AI ) capabilities of our products solutions and incorporating AI across existing products, services and solutions, there can be no assurance that our new or enhanced products solutions and AI innovations will be successful, adopted or monetizable or that we will innovate effectively to keep pace with the rapid evolution of AI across our offerings. solutions.
• If we do not successfully innovate, adapt to rapid technological or industry changes and meet customer needs, our business and our financial results may be materially harmed.
• Issues Social, ethical and operational issues relating to the development and use of AI, including generative AI and agentic AI, in our offerings solutions may result in reputational harm, liability and adverse financial results. additional costs.
• We are increasingly incorporating AI technologies, developed by us and by third parties, into many of our offerings. solutions.
• If our AI development, deployment, content labeling or governance is ineffective or inadequate, it may result in incidents that impair the public acceptance of AI solutions or cause harm to individuals, customers or society, or result in our offerings solutions not working as intended or producing unexpected outcomes.
• For example, Additionally, obligations under the EU AI Act was adopted in 2024 have gone into effect and will continue to be implemented in phases through 2030, and other jurisdictions have passed or are considering similarly focused legislation.
• These regulations and the evolving AI regulatory environment may, among other impacts, result in inconsistencies among AI regulations and frameworks across jurisdictions, increase our compliance, governance and research and development costs, increase our exposure to investigations, proceedings and claims related to our AI models and increase liability related to the use of AI by our customers or users that are beyond our control.
• While we have taken a responsible approach to the development and use of AI, such as in our Adobe Firefly offerings, there There can be no guarantee that future AI regulations or standards will not adversely impact us or conflict with our approach to AI, AI development and use, including affecting our ability to make our AI offerings solutions available without costly changes, delaying or halting development of AI offerings, solutions, requiring us to change our AI development practices, monetization strategies and/or indemnity protections and subjecting us to additional compliance requirements, regulatory action, competitive harm, reputational harm and/or legal liability.
• To the extent Additionally, as we rely on offer more third-party AI models in our products, services and solutions, we will face risks inherent in how those third-party AI models used in our solutions have been developed and deployed, including situations in which the third party may lack a proper license or consent for the training data used for their model.
• Developing, testing and deploying AI systems and third-party AI models may also continue to increase the cost of our offerings, solutions, including due to the nature of the computing costs 23 Table of Contents involved in such systems.
• These costs could adversely impact our margins as we continue to make significant investments in AI development, add AI capabilities and third-party AI models to our offerings solutions and scale our AI offerings solutions without assurance that our customers and users will adopt them.
• Further, as with any new offerings solutions based on new and rapidly evolving technologies, consumer reception and monetization pathways are uncertain, our strategies may not be successful and our business and financial results could be adversely impacted.
• New AI offerings and technologies could solutions may continue to modify workforce needs, result in negative publicity about AI publicity, reputational harm, liability and decrease decreased demand for our existing products, services and solutions, all of which could adversely impact our business.
• We participate in rapidly evolving and intensely competitive markets, and, if we do not compete effectively, our operating business and financial results could materially suffer.
• The markets for our products, services and solutions are rapidly evolving and intensely competitive.
• We expect competition to continue to intensify.
• Our numerous competitors range in size from diversified global include companies with significant sales and research and development resources, broad brand awareness, long operating histories or access to large customer bases to small companies whose specialized focuses may allow them to more easily and effectively deploy technical, marketing and financial resources. bases.
• Our competitors may develop or acquire products, services or solutions that are similar to ours or that achieve greater or faster acceptance, may undertake faster and more far-reaching and successful product development efforts or marketing campaigns or campaigns, may adopt more aggressive pricing policies. policies or may more effectively appeal to customers.
• As a result, current and potential customers may select the products, services or solutions of our competitors.
• New industry standards, evolving distribution and sales models, limited barriers to entry, short product life cycles, customer price sensitivity, global market economic conditions and the frequent entry of new products solutions or competitors may increase downward pressure on pricing and gross margins and adversely affect our renewal, upsell and cross-sell rates as well as our ability to attract new customers.
• In addition, we expect to face more competition as AI continues to advance and be integrated into the markets in which we compete. compete and to change the software industry.
• Other companies have, or have in the future past, and may obtain, proprietary rights that would in the future prevent, limit or interfere with our ability to make, use or sell third-party models in our AI offerings. solutions.
• If we are not able to provide products, services and solutions that compete effectively, we could experience reduced sales sales, which could materially and adversely impact our business could be adversely affected. and financial results.
• For additional information regarding our competition and the risks arising out of the competitive environment in which we operate, see the section titled Competition contained in Part I, Item 1 of this report. 17 Table of Contents Issues relating to the development and use of AI in our solutions may result in reputational harm, liability and adverse business and financial results.
• We have experienced, and may in the future experience, reputational harm harm, reduced customer demand and customer attrition from, among other things, the introduction of new products, features, services, or terms that do not meet customer expectations; our position on or approach to new and evolving technologies, including AI; backlash from customers, the creative community, government entities or other stakeholders that disagree with our product offering decisions or public policy, social, ethical or political positions; significant litigation or regulatory or government actions that negatively reflect on our business practices; data security breaches or compliance failures; and public scrutiny or negative publicity, including being the target of media and social media campaigns, criticizing our actual or perceived actions or inactions, policies, terms, agreements, dispute resolution requirements, handling of user privacy, data practices or content.
• Further, our Our brands may be negatively affected by the actual or perceived failure to meet our sustainability commitments or appropriately respond to climate concerns; and uses of our products, services or solutions, particularly our AI offerings, solutions, in ways that are out of our control, such as to create or disseminate content that is deemed to be misleading, deceptive or intended to manipulate public opinion, or for illicit, objectionable or illegal ends, or by our failure to respond appropriately and in a timely manner to such uses.
• Such Further, such uses of our solutions may result in controversy or claims related to defamation, rights of publicity, illegal content, intellectual property infringement, 18 Table of Contents harmful content, misinformation and disinformation, harmful bias, misappropriation, data privacy, derivative uses of third-party AI and personal injury torts.
• If we fail to appropriately respond to objectionable content created using our products, services or solutions or shared on our platforms, our users may lose confidence in our brands.
• If we fail to maintain, enhance or protect our brands, or if we incur excessive expenses in our efforts to do so, our users trust in us and purchasing decisions and our business and financial results may be adversely affected. 24 Table of Contents We may not realize the anticipated benefits of investments or acquisitions, and they may disrupt our business and divert management s attention.
• Investments Acquisitions, investments and acquisitions other strategic transactions involve numerous risks and uncertainties, the occurrence of which may have an adverse effect on our business.
• These risks and uncertainties include: inability to achieve the expected financial and strategic goals of the investment benefits on a timely basis or acquisition; at all; difficulty in effectively integrating the operations, technologies, products, services, solutions, culture or personnel of the acquired business; personnel; disruption of our ongoing business and distraction of our management and other personnel; challenges to completing or failure to complete an announced investment or acquisition transaction related to the failure to obtain regulatory approval, or the need to satisfy certain conditions precedent to closing such transaction (such as divestitures, ownership or operational restrictions or other structural or behavioral remedies) that could limit the anticipated benefits of the transaction; entry into markets in which we have minimal prior experience and where competitors in such markets have stronger market positions; inability to retain personnel, key customers, distributors, vendors and other business partners of the acquired business; delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings; solutions; incurring higher than anticipated costs to effectively integrate an acquired business, to bring an acquired company into compliance with applicable laws and regulations, additional compensation issued or assumed in connection with an acquisition, to divest products, services or solutions acquired in unsuccessful investments or acquisitions, acquisitions to amortize costs for acquired intangible assets or because of our inability to take advantage of anticipated tax benefits; increased collection times, elevated delinquency or bad debt write-offs related to receivables of an acquired business we assume; difficulty in maintaining controls, procedures and policies during the transition and integration of an acquired business and inability to conclude that our internal controls over financial reporting are effective; potential identified or unknown security vulnerabilities in acquired or integrated entities systems, technologies, or products that expose us to additional security risks or delay our ability to integrate the product acquired products into our offerings; existing solutions; exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition; a transaction; incurrence of additional debt to finance an acquisition, a transaction, which will increase our interest expense and leverage, and/or issuance of equity securities to finance acquisitions, transactions, which will dilute current shareholders percentage ownership and earnings per share; in the case of foreign transactions, the impact of particular economic, tax, currency, political, legal and regulatory risks associated with specific countries; brand or reputational harm associated with our acquisitions, investments or other strategic transactions; and failure to identify significant problems, liabilities or other challenges during due diligence. 19 Table of Contents Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may also be impaired by adverse economic and political events, including trade tensions, and increased global scrutiny and evolving regulatory expectations relating to acquisitions and other strategic transactions.
• Any of these factors may adversely affect our financial condition or results of operations. 25 Table of Contents Risks Related to the Operation of Our Business Service interruptions or failures of our or third-party information technology systems or those of third parties may impair the availability of our products, services and solutions, which may expose us to liability, damage our reputation and harm our future financial results.
• Much of our business, including our online store at adobe.com and adobe.com, our cloud solutions, solutions and various business processes such as our enterprise resource planning system and customer and sales support, relies on hardware and services that are hosted, managed and controlled directly by us or third-party service providers to be available to our customers and users without disruption.
• We do not have redundancy for all our systems, many of our critical applications ( Apps apps ) reside in only one of our data centers, and our disaster recovery planning may not account for all eventualities.
• If any critical third-party service provider of hosting or content delivery services is negatively affected or becomes unavailable to us for any reason, we may not be able to deliver the corresponding products, services or solutions to our customers and users.

Removed since the previous 10-K 21

• For example, generative artificial intelligence technologies enable users of all skill levels to create and provide new ways of marketing, creating content and interacting with documents, which could significantly disrupt industries in which we operate and our existing products, services and solutions and our business may be harmed if we fail to invest or adapt.
• Social, ethical and operational issues relating to the use of AI, including generative AI, in our offerings may result in reputational harm, liability and additional costs.
• Further, our future success depends on our continued ability to effectively appeal to businesses and consumers.
• Our competitors or other third parties may incorporate AI into their offerings more successfully and efficiently than we do and achieve greater and faster adoption, which could impair our ability to compete effectively and adversely affect our business and financial results.
• Further, we expect AI offerings to be highly competitive and rapidly evolving.
• For example, we face increasing competition from companies offering generative AI capabilities, including text-to-image, text-to-video and multi-modal offerings that compete directly with our creative offerings.
• Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may also be impaired by adverse economic and political events, including trade tensions, and increased global scrutiny and evolving regulatory expectations relating to acquisitions and strategic investments.
• Treasury securities, time deposits, U.S. agency securities and asset-backed securities.
• Since the sales cycles for our enterprise offerings are multi-phased and complex, it is often unpredictable when a given sales cycle will close.
• Additionally, our enterprise sales pattern has historically been, and is expected to remain, 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.
• Increasing regulatory focus on privacy and security issues and expanding laws and regulatory requirements could impact our business models and expose us to increased liability.
• Several other countries, including but not limited to the United States, China, Australia, New Zealand, Brazil, Kingdom of Saudi Arabia, Hong Kong and Japan, have also established specific legal requirements for cross-border transfers of personal information and certain countries have also established specific legal requirements for data localization (such as where personal data must remain stored in the country).
• 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.
• Accordingly, amounts reported as annualized recurring revenue, a performance metric which we measure at currency rates that are set at the beginning of each fiscal year and held constant throughout the year, may vary from actual revenue recognized in accordance with generally accepted accounting principles in the United States.
• Climate-related catastrophic events that may harm our business are also increasing in frequency and severity.
• Laws, regulations and policies relating to environmental, social, and governance are expanding globally.
• We may be subject to additional climate-related regulations and reporting requirements in the future, as well as changing market dynamics and stakeholder expectations regarding climate change and our environmental impacts.
• Compliance with such regulations, investments in our environmental, social and governance commitments, may involve significant costs and negatively impact our business, financial condition and results of operations.
• Additionally, we may experience reputational harm from our actual or perceived failure to meet our environmental, social and governance commitments. 33 Table of Contents The occurrence of an epidemic or a pandemic, such as the COVID-19 pandemic, has had, and may in the future, have an adverse effect on our operating results.
• The extent to which epidemics and pandemics impact our financial condition or results of operations will depend on many factors outside of our control and whether there is a material impact on the businesses or productivity of our customers, employees, suppliers and other partners.
• A global pandemic may also intensify the other risks described in this Part I, Item 1A of this report.

Source: SEC EDGAR filings, compared sentence by sentence by EdgarStack. Sentence matching is automated and may pair or split passages imperfectly; check the linked filings before relying on any passage. A software tool, not financial advice. Not affiliated with the U.S. Securities and Exchange Commission.