Q4 revenue prospects are not prominent, AI profitability is improving, Adobe (ADBE.US) fell nearly 9% after hours.

Adobe (ADBE.US) said in a statement on Thursday that in the fourth quarter ending in November, revenue is expected to reach $5.5 billion to $5.55 billion, below market expectations of $5.6 billion. Excluding certain items, earnings per share are projected to be $4.63 to $4.68, compared to market estimates of $4.68. This has led to disappointment among some investors as they feel that the company's AI tools are not driving sales, causing the stock to drop nearly 9% after hours. The stock has declined 1.7% so far this year. One key metric receiving attention is Adobe's new Creative Cloud software business, with estimated net annual recurring revenue of $550 million in the fourth quarter, falling short of market expectations of $561.1 million. In the third quarter, the company reported a 11% year-on-year revenue growth to $5.41 billion, surpassing Wall Street's expectation of $5.37 billion. Excluding certain items, earnings per share were $4.65, higher than Wall Street's projection of $4.53. Adobe, known for its creative professional software, has been integrating AI capabilities into its applications, such as embedding its proprietary AI model Firefly into products like Photoshop and Illustrator. The company is also working on developing similar technology for its 3D and video editing software. However, in recent months, Wall Street has become increasingly concerned that AI may weaken the businesses of traditional software companies such as Adobe, Salesforce, Inc. (CRM.US), and Workday (WDAY.US). Wells Fargo & Company analyst Michael Turrin mentioned in an interview that investors were expecting to see the impact of AI on Adobe's financial performance in the second half of the year. He suggested that the market may have been anticipating an improvement in the fourth quarter forecast. One way Adobe is seeking a return on investment for its AI capabilities is by raising prices for its creative software, which may take several quarters or years to roll out to customers. Australian-based online design company Canva Inc. is often seen as Adobe's biggest competitive threat, as they have introduced new AI features and significantly raised prices for enterprise users earlier this month.