For Immediate Release
Adobe Systems Reports Second Quarter Fiscal 2003 Results

Adobe Acrobat Release Drives 43 Percent Year-Over-Year Revenue Growth in ePaper Business

SAN JOSE, Calif. June 12, 2003 (NASDAQ: ADBE) Adobe Systems Incorporated, the leader in network publishing, today reported financial results for its second quarter ended May 30, 2003 that came in at the high end of the Company's prior revenue and earnings per share target ranges.

In the second quarter of fiscal 2003, Adobe achieved revenue of $320.1 million, compared to $317.4 million reported for the second quarter of fiscal 2002 and $296.9 million reported in the first quarter of fiscal 2003. Adobe's revised second quarter revenue target range was $305 to $320 million, up from its prior target range of $300 to $315 million.

GAAP diluted earnings per share for the second quarter of fiscal 2003 were $0.27. Pro forma diluted earnings per share for the second quarter of fiscal 2003, which does not include an investment loss from the Company's venture program, were $0.28. Adobe's GAAP and pro forma second quarter earnings target range was $0.24 to $0.28 per share, up from its prior target range of $0.24 to $0.27.

"The release of Acrobat 6.0 in Q2 helped drive record revenue in our ePaper business, and signals the beginning of a strong product cycle," said Bruce Chizen, president and CEO of Adobe Systems. "This month we're celebrating 10 years of Acrobat and PDF. From communicating business critical information across the enterprise to sharing photos with friends and family, Acrobat and PDF have clearly become synonymous with the reliable delivery of digital information."

GAAP net income was $64.2 million for the second quarter of fiscal 2003, compared to $54.3 million reported in the second quarter of fiscal 2002, and $54.2 million in the first quarter of fiscal 2003.

Pro forma net income, which does not, as applicable, include amortization of goodwill and purchased intangibles, restructuring and other charges, acquired in-process research and development, and investment losses, was $66.7 million for the second quarter of fiscal 2003, compared to $67.4 million in the second quarter of fiscal 2002, and $58.9 million in the first quarter of fiscal 2003.

GAAP diluted earnings per share for the second quarter of fiscal 2003 were $0.27, based on 239.2 million weighted average shares. This compares with GAAP diluted earnings per share of $0.22 reported in the second quarter of fiscal 2002, based on 247.7 million weighted average shares, and GAAP diluted earnings per share of $0.23 reported in the first quarter of fiscal 2003, based on 235.3 million weighted average shares.

Adobe's GAAP operating income was $91.5 million in the second quarter of fiscal 2003, compared to $90.8 million in the second quarter of fiscal 2002 and $80.5 million in the first quarter of fiscal 2003. As a percent of revenue, GAAP operating income for the second quarter was 28.6 percent, compared to 28.6 percent in the second quarter of fiscal 2002 and 27.1 percent in the first quarter of fiscal 2003.

Adobe's pro forma operating income, which does not, as applicable, include the amortization of goodwill and purchased intangibles, restructuring and other charges, and acquired in-process research and development, was $91.5 million in the second quarter of fiscal 2003, compared to $96.4 million in the second quarter of fiscal 2002 and $80.5 million in the first quarter of fiscal 2003. As a percent of revenue, pro forma operating income for the second quarter was 28.6 percent, compared to 30.4 percent in the second quarter of fiscal 2002 and 27.1 percent in the first quarter of fiscal 2003.

For the third quarter of fiscal 2003, the Company announced that it is targeting revenue at $300 to $315 million, a gross margin of 92 to 93 percent, and GAAP and pro forma operating margin ranges of 24 to 27 percent.

As a percent of revenue, Adobe is targeting third quarter expenses as follows:

Research & Development - approximately 22 to 23 percent
Sales & Marketing - approximately 34 to 35 percent
General & Administrative - approximately 10 percent

In addition, Adobe is targeting its share count range to be between 243 and 245 million shares in the third quarter of fiscal 2003. The Company also is targeting other income to be approximately $3 million, and a tax rate of 30 percent. These targets lead to GAAP and pro forma target ranges of $0.22 to $0.25 earnings per share in the quarter.

For fiscal 2003 on an annual basis, the Company continues to target GAAP and pro forma operating margins of at least 28 percent.

The Company currently believes that targeted pro forma earnings per share and pro forma operating margin results will not differ materially from targeted GAAP results.

The Company also said that it plans to release several of its Creative Professional applications in the fourth quarter of the year.

The Adobe Board of Directors declared this quarter's cash dividend of $0.0125 per share, payable on July 7, 2003 to stockholders of record as of June 23, 2003.

Forward Looking Statements Disclosure
This press release contains forward looking statements, including those related to revenue, earnings per share, and product releases, 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: general economic or political conditions in any of the major countries in which we do business, introduction of new products by existing and new competitors, delays in development or shipment of our new products or major new versions of existing products, difficulties in transitions to new markets, including the enterprise, government, corporate business and consumer markets, changes to our distribution channel, inability to attract and retain key personnel, lack of market acceptance of new products and upgrades, changes in demand for application software, computers and printers, sales price adjustments, intellectual property disputes and litigation, the impact of SARS on our business and the economy, industry transitions to new business models, renegotiation or termination of royalty or intellectual property licensing arrangements, changes in accounting rules, and market risks associated with our equity investments. For further discussion of these and other risks and uncertainties, individuals should refer to the Company's SEC filings, including the 2002 annual report on Form 10-K and quarterly reports on Form 10-Q filed in 2003. The Company does not undertake an obligation to update forward looking statements.

About Adobe Systems Incorporated
Founded in 1982, Adobe Systems Incorporated (www.adobe.com), the leader in network publishing, offers a comprehensive line of software for enterprise and creative professional customers. Its products enable customers to create, manage and deliver visually rich, compelling and reliable content. Based in San Jose, Calif., Adobe is one of the world's largest software companies.

Condensed Consolidated Statements of Income
(PDF: 68K)

Condensed Consolidated Balance Sheets
(PDF: 50K)

Condensed Consolidated Statements Of Cash Flows
(PDF: 76K)

Pro Forma Results
(PDF: 64K)

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2003 Adobe Systems Incorporated. All rights reserved. Adobe, Acrobat and the Adobe logo are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.

Press/Analyst Contacts
Investor Relations Contact:
Mike Saviage
Adobe Systems Incorporated
408 536.4416
ir@adobe.com

Public Relations Contact:
Holly Campbell
Adobe Systems Incorporated
408 536.6401
campbell@adobe.com