For Immediate Release
Adobe Systems Reports Strong Third Quarter Fiscal 2003 Results

Company Exceeds Q3 Revenue and Earnings Targets with 62 Percent ePaper Revenue Growth

SAN JOSE, Calif. September 10, 2003 (NASDAQ: ADBE) Adobe Systems Incorporated, the leader in network publishing, today reported financial results for its third quarter ended August 29, 2003 that exceeded the Company's prior revenue and earnings per share target ranges.

In the third quarter of fiscal 2003, Adobe achieved revenue of $319.1 million, compared to $284.9 million reported for the third quarter of fiscal 2002 and $320.1 million reported in the second quarter of fiscal 2003. On a year-over-year basis, this represents 12 percent growth. Adobe's third quarter revenue target range was $300 to $315 million.

GAAP diluted earnings per share for the third quarter of fiscal 2003 were $0.27. Pro forma diluted earnings per share, which does not include an investment loss from the Company's venture program and a partial reversal of a prior restructuring charge, were $0.28. Adobe's GAAP and pro forma third quarter earnings target range was $0.22 to $0.25 per share.

"Our exceptional Q3 performance was driven by year-over-year growth of 62 percent in our ePaper business," said Bruce R. Chizen, president and CEO of Adobe Systems. "As we look to Q4 and beyond, we are optimistic about the growth opportunities across our overall business."

GAAP net income was $64.5 million for the third quarter of fiscal 2003, compared to $47.2 million reported in the third quarter of fiscal 2002, and $64.2 million in the second quarter of fiscal 2003. On a year-over-year basis, GAAP net income grew 37 percent.

Pro forma net income, which does not, as applicable, include amortization of goodwill and purchased intangibles, restructuring and other charges, and investment losses, was $66.3 million for the third quarter of fiscal 2003, compared to $52.5 million in the third quarter of fiscal 2002, and $66.7 million in the second quarter of fiscal 2003. On a year-over-year basis, pro forma net income grew 26 percent.

GAAP diluted earnings per share for the third quarter of fiscal 2003 were $0.27, based on 240.5 million weighted average shares. This compares with GAAP diluted earnings per share of $0.19 reported in the third quarter of fiscal 2002, based on 243.4 million weighted average shares, and GAAP diluted earnings per share of $0.27 reported in the second quarter of fiscal 2003, based on 239.2 million weighted average shares.

Adobe's GAAP operating income was $92.2 million in the third quarter of fiscal 2003, compared to $69.5 million in the third quarter of fiscal 2002 and $91.5 million in the second quarter of fiscal 2003. As a percent of revenue, GAAP operating income in the third quarter of fiscal 2003 was 28.9 percent, compared to 24.4 percent in the third quarter of fiscal 2002 and 28.6 percent in the second quarter of fiscal 2003.

Adobe's pro forma operating income, which does not, as applicable, include the amortization of goodwill and purchased intangibles, and restructuring and other charges, was $91.8 million in the third quarter of fiscal 2003, compared to $73.0 million in the third quarter of fiscal 2002 and $91.5 million in the second quarter of fiscal 2003. As a percent of revenue, pro forma operating income for the third quarter was 28.8 percent, compared to 25.6 percent in the third quarter of fiscal 2002 and 28.6 percent in the second quarter of fiscal 2003.

For the fourth quarter of fiscal 2003, the Company announced that it is targeting revenue of $330 to $350 million, a gross margin of approximately 93 percent, and GAAP and pro forma operating margin ranges of 31 to 32 percent.

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

Research & Development - approximately 20 to 21 percent
Sales & Marketing - approximately 32 percent
General & Administrative - approximately 9 percent

In addition, Adobe is targeting its share count range to be between 243 and 245 million shares in the fourth 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 earnings per share target ranges of $0.30 to $0.32 in the quarter.

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 make several major product announcements on September 29, 2003 at a customer event in New York City. A simultaneous Webcast of the keynote presentation from the event will be made available over the Internet from Adobe.com. Additional details regarding this event will be announced in advance of the event taking place.

The Adobe Board of Directors declared this quarter's cash dividend of $0.0125 per share, payable on October 7, 2003 to stockholders of record as of September 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, 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, 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: 193K)

Condensed Consolidated Balance Sheets
(PDF: 84K)

Condensed Consolidated Statements Of Cash Flows
(PDF: 142K)

Pro Forma Results
(PDF: 116K)

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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