ADBE · 10-Q · 2026Q3 · Full report
Income Tax Rate Changes
ADOBE INC. · 2026-09-22 · Importance 25 · Surprise 32 · From source text
The effective tax rate increased approximately three percentage points year over year in the third quarter and approximately five percentage points for the first nine months of fiscal 2026. The increases primarily reflected lower net tax benefits from non-U.S. operations, higher tax expense related to stock-based compensation and, for the year-to-date comparison, a prior-year benefit from a foreign tax asset. The nine-month income-tax provision increased to $1.59 billion from $1.20 billion. Adobe reported an $799 million valuation allowance on deferred tax assets and expects the 2025 U.S. Tax Act to reduce cash-tax effective rates beginning in fiscal 2026.
Key facts
- Gross liabilities for unrecognized tax benefits excluding interest and penalties were $755 million as of August 28, 2026 and $715 million as of August 29, 2025; if recognized, $576 million and $542 million would decrease the respective effective tax rates. source
- The total valuation allowance for deferred tax assets was $799 million as of August 28, 2026, primarily related to certain U.S. state and federal credits and capital loss carryforwards. source
- Our effective tax rate increased by approximately three percentage points for the three months ended August 28, 2026 compared to the three months ended August 29, 2025, primarily due to a decrease in the net tax benefit from effects of non-U.S. operations and an increase in the net tax expense related to stock-based compensation. source
- Our effective tax rate increased by approximately five percentage points for the nine months ended August 28, 2026 compared to the nine months ended August 29, 2025, primarily due to a decrease in the net tax benefit from effects of non-U.S. operations, an increase in the net tax expense related to stock-based compensation, and an increase in the anticipated benefit from a foreign tax asset in the prior year. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| net_income | positive | contingent | +0.6% | Gross liabilities for unrecognized tax benefits excluding interest and penalties were $755 million as of August 28, 2026 and $715 million… |
| liability | negative | realized | -0.1% | Gross liabilities for unrecognized tax benefits excluding interest and penalties were $755 million as of August 28, 2026 and $715 million… |