Adobe (ADBE.US) fell nearly 9% after hours as the Q4 revenue outlook did not highlight the improvement in AI profitability.

Adobe (ADBE.US) said in a statement on Thursday that it expects revenue to be $5.5 billion to $5.5 billion in the fourth quarter ending in November, below the market's expectation of $5.6 billion. Adjusted EPS is expected to be $4.63-4.68, below the market's expectation of $4.68, which disappointed some investors who had expected its AI tools to drive sales, sending the stock down nearly 9% after hours. The stock has fallen 1.7% this year. One of the most closely watched new metrics for Adobe's creative software business, digital media net annual recurring revenue, is expected to reach $550 million in the fourth quarter, below the market's expectation of $561.1 million. In the third quarter, the company's revenue grew 11% year-on-year to $5.41 billion, topping Wall Street's expectation of $5.37 billion. Adjusted EPS was $4.65, topping Wall Street's expectation of $4.53. Adobe, known for its creative professional software, has been adding AI features to its applications, such as embedding its proprietary AI model Firefly into Photoshop and Illustrator products. The company is also working on similar technology for its 3D and video editing software. But Wall Street has grown increasingly concerned in recent months that AI could undermine the business of traditional software companies such as Adobe, Salesforce (CRM.US) and Workday (WDAY.US). Michael Turrin, an analyst at Wells Fargo, said in an interview that investors had expected AI to start showing up in Adobe's financial results in the second half of this year. He said the market may have been expecting an improvement in the fourth-quarter forecast. One way Adobe is seeking to monetize its AI features is by raising the price of its creative software, which may take several quarters or years to roll out to customers. Canva Inc., an online design company based in Australia, is often seen as Adobe's biggest competitive threat. The company has rolled out new AI features and significantly raised its prices for enterprise users earlier this month.