Dan Durn
Chief Financial Officer and Executive Vice President, Finance, Technology Services and Operations at Adobe
Thanks, Anil. Today, I'll start by summarizing Adobe's performance in Q3 fiscal 2022, highlighting growth drivers across our businesses, then I'll discuss the announced acquisition of Figma and I'll finish with financial targets. Adobe delivered a solid Q3, continuing to demonstrate that our products are mission critical to our customers' success in any macro environment, from the millions of individuals who use our offerings to create digital content to the small businesses that run their document workflows on Adobe to the large enterprises that have transformed how they interact with their end users by providing personalization at scale.
Q3 business and financial highlights included record revenue of $4.43 billion, GAAP diluted earnings per share of $2.42, and non-GAAP diluted earnings per share of $3.40, Digital Media revenue of $3.23 billion, net new Digital Media ARR of $449 million, Digital Experience revenue of $1.12 billion, cash flows from operations of $1.70 billion, RPO of $14.11 billion exiting the quarter and repurchasing approximately 5.1 million shares of our stock during the quarter.
In our Digital Media segment, we achieved 13% year-over-year revenue growth in Q3 or 16% in constant currency. We exited the quarter with $13.40 billion of Digital Media ARR. We saw expected summer seasonality in the quarter, with the overall acquisition and engagement environment for offerings remaining strong. We achieved creative revenue of $2.63 billion, which represents 11% year-over-year growth or 14% in constant currency. We added $330 million of net new creative ARR in the quarter.
Third quarter creative growth drivers included momentum in small and medium businesses with our Teams offering where we continue to drive strong new customer acquisition, and are seeing engagement and retention at all-time highs, strong growth in our Illustrator and in-design businesses, demand for our flagship photography, imaging and video applications, Adobe Stock where we continue to drive strong book of business growth and momentum in our new growth initiatives such as Frame.io and Substance, each of which grew ending ARR greater than 50% year-over-year exiting the quarter.
Adobe achieved Document Cloud revenue of $607 million, which represents 23% year-over-year growth or 25% in constant currency. We added $119 million of net new Document Cloud ARR in the quarter, our strongest Q3 to date. Third quarter Document Cloud growth drivers included accelerated adoption of PDF and Adobe Reader across multiple surfaces, growth of Acrobat Web fueled by online searches for PDF and document actions, strong performance of Acrobat and Adobe Sign, performance of our reseller channel continuing to drive new Document Cloud subscriptions, particularly with small and medium businesses, and continued seat expansion in the enterprise. In August, we began to roll out the new Acrobat integrated with Sign offering, which included updated pricing.
Turning to our Digital Experience segment. In Q3, we achieved revenue of $1.12 billion, which represents 14% year-over-year growth or 15% in constant currency. Digital Experience subscription revenue was $981 million. Third quarter Digital Experience growth drivers included strong retention, upsell and enterprise bookings in the quarter across our solutions, particularly in the U.S., success closing numerous million-dollar deals as well as larger transformational deals that span our portfolio of solutions, continued momentum with our foundational Adobe Experience platform and Real-time CDP business with our book of business for platform and AEP-native applications more than doubling year-over-year exiting the quarter, success integrating our solutions with workflow, including Workfront, which grew revenue greater than 35% year-over-year in the quarter and higher customer demand for Professional Services as enterprises focus on implementations and value realization.
In Q3, we focused on making disciplined investments to drive growth, including a strong class of university hires and marketing campaigns to raise awareness of new and flagship offerings. We continued to have world-class operating margins and drove strong EPS performance in the quarter. Adobe's effective tax rate in Q3 was 22% on a GAAP basis and 17.5% on a non-GAAP basis. The GAAP tax rate came in lower, primarily due to benefits associated with share-based payments. The non-GAAP tax rate came in lower, primarily due to additional U.S. income tax credits. RPO exiting the quarter was $14.11 billion, growing 12% year-over-year or 15% when factoring in a 3% foreign exchange headwind.
Our ending cash and short-term investment position exiting Q3 was $5.76 billion, and cash flows from operations in the quarter were $1.70 billion, up 20% year-over-year. In Q3, we repurchased approximately 5.1 million shares at a cost of $1.80 billion including shares received for the final settlement of our ASR entered into in December 2021. We currently have $8.3 billion remaining of our $15 billion authorization granted in December 2020, which goes through 2024. As Shantanu and David mentioned, we are thrilled about the opportunity to acquire Figma, which will accelerate Adobe's strategy.
Under the definitive agreement, we've agreed to acquire Figma for approximately $20 billion comprised of approximately half cash and half stock, subject to customary adjustments. Approximately 6 million additional restricted stock units will be granted to Figma's CEO and employees that will vest over four years subsequent to closing. The transaction is expected to close in 2023, subject to regulatory approvals. We plan to finance the cash portion of the consideration with cash on hand, and if necessary, a term loan to be paid down from our operating cash flows following the closing.
Figma's products address a $16.5 billion market opportunity, and the company has an impressive financial profile. This year, they are expected to add $200 million of net new ARR, surpassing $400 million total ARR by the end of the year with greater than 150% net dollar retention. They have a disciplined, efficient operating model with gross margins of approximately 90% and positive operating cash flows.
Figma has strong business momentum, a large and expanding customer base, and we are incredibly excited about what we can bring to this combination from a financial perspective. While this transaction is primarily about creating new markets, expanding adjacent opportunities and accelerating growth, we are committed to maintaining Adobe's strong profitability and maximizing EPS for investors. In year one and two after closing, the transaction will be dilutive to Adobe's non-GAAP EPS, and we expect it to be breakeven in year three and accretive at the end of year three.
While the transaction has not yet closed, I want to provide color on the path to non-GAAP EPS accretion as a combined company exiting year three, assuming Adobe's operating margin for the second half of fiscal 2022 as the baseline. The combination will accelerate top line growth for both Adobe and Figma based on three primary drivers. One, we extend Figma's reach to our customers and through our global go-to-market footprint; two, Figma accelerates the delivery of new Adobe offerings on the web to the next generation of users; and three, we jointly introduced new offerings to market as we unlock the possibilities of collaborative creativity.
Clearly, the explosive revenue growth of Figma, combined with their efficient operating model, would result in an expanding stand-alone operating margin. Figma's innovative technology platform will accelerate our R&D road map, including the delivery of our Creative Cloud technologies on the web, which will allow Adobe to focus and manage our future R&D investments. We will quickly pay down any term loan, if necessary, after close and then resume stock repurchase to reduce Adobe's share count. While the transaction is pending, at a minimum, we expect to maintain share repurchases sufficient to offset the dilution of equity issuances to Adobe employees.
We will now provide Q4 targets, which factor in the overall macroeconomic environment, FX headwinds as the U.S. dollar has continued to strengthen against foreign currencies, and typical year-end seasonal strength in demand for our offerings. As a result, for Q4, we are targeting total Adobe revenue of approximately $4.52 billion, net new Digital Media ARR of approximately $550 million, Digital Media segment revenue growth of approximately 10% year-over-year or 14% in constant currency, Digital Experience segment revenue growth of approximately 13% year-over-year or 15% in constant currency, Digital Experience subscription revenue growth of approximately 13% year-over-year or 15% in constant currency, tax rate of approximately 23% on a GAAP basis and 17.5% on a non-GAAP basis, and GAAP earnings per share of approximately $2.44 and non-GAAP earnings per share of approximately $3.50.
In summary, Adobe continues to drive performance across Creative Cloud, Document Cloud and Experience Cloud, while making transformational investments in strategic growth initiatives. I look forward to sharing more about our growth opportunities next month in Los Angeles at Adobe's Financial Analyst Meeting.
Shantanu, back to you.
