Adobe (ADBE.O) released another strong financial report on Thursday, with sales and profits for the August quarter exceeding most expectations.

But the guidance for the November fiscal year was slightly below Wall Street's average expectations. In after-hours trading on Thursday, the stock price fell by 9.5% to $531. Software stocks have had more intense reactions to any disappointments in this earnings season.

During the conference call, when asked why the guidance for the November quarter implied the lowest level of sequential quarterly growth in Adobe’s history, CEO Shantanu Narayen stated that the recently reported quarter's performance was very strong.

Some large transactions had just been completed before the end of the third quarter.

"The performance in the third quarter was slightly stronger than what you expected," said CFO Dan Durn.

After the market closed on Thursday, the company reported a cash profit per share of $4.65 (excluding stock compensation and other expenses) and revenue of $5.4 billion. This represents an 11% increase in revenue from the same period last year. Consensus estimates were for earnings of $4.53 per share and revenue of $5.37 billion.

Sales for Adobe's largest category (including products for digital media creation) increased by 11% year-on-year to $4 billion. This figure is in line with analysts' predictions.

One focus for investors is the new subscription count of digital media products. This growth is $0.55 billion, far exceeding Adobe's guidance of $0.46 billion, and even surpassing the satisfactory level of $0.49 billion in May.

This graphic software company is widely favored by analysts, and its stock price rebounded strongly in June. Morgan Stanley's Mark Murphy added the stock to his watchlist this month.

In the first half of this year, Adobe's stock price fell by a third, following a slowdown in its February financial quarter. The recovery in May has again made the stock popular. The closing price on Thursday was $584.55, up about 4% since the beginning of the year, still lagging behind the 17% increase in the S&P 500 index. This is 32 times the cash profit forecast for this fiscal year ending in November, and 29 times the estimate for November 2025.

In Thursday's earnings report, Adobe's guidance for the next quarter's revenue is between $5.5 billion and $5.55 billion, with a cash profit of between $4.63 and $4.68 per share. These figures are actually lower than the average forecast on Wall Street of $5.6 billion in revenue and $4.67 earnings per share.

In the highly anticipated new subscription indicator for digital media, Adobe's forecast for November is the same as the $0.55 billion in August. Wall Street had previously estimated that November's figure would be around $0.565 billion.

"We believe this is a key indicator that has led to the stock price falling in after-hours trading," said ISI Evercore analyst Kirk Materne on Thursday.

In an interview with Barron's, the CFO pointed out that Adobe exceeded expectations for subscription growth in May and August. The guidance for August was $0.46 billion, and Adobe achieved $0.55 billion in subscription growth revenue.

Therefore, investors may not need to worry about the guidance for November not being higher.

When asked by Barron's how much of the Q3 revenue growth came from price increases, Durn said that new subscriptions were the biggest contributor to the revenue growth, followed by sales of other Adobe products to customers. Price contribution to revenue growth ranked third.

Supporters of Adobe stocks believe that Adobe will be one of the first profitable software companies in the generation of artificial intelligence, allowing artists to create images, videos, and animations using its technology.

In its financial report, Adobe previewed video generation improvements for its Firefly GenAI product. Durn stated that the pace of innovation is faster than ever before.

"Adobe is exploring its GenAI innovation," wrote Gregg Moskowitz of Mizuho Securities in his earnings preview. "GenAI will drive higher platform adoption and profitability in the foreseeable future, and will also drive the development of the entire industry."