What happened

By most measures the stock should be up. Adobe (ADBE 3.65%) topped its third-quarter earnings and revenue estimates. And guidance for the quarter now underway suggests the company's growth trend remains intact. Nevertheless, as of 11:03 a.m. ET Friday, Adobe shares are down to the tune of 4%, with investors less than enthused about its relatively muted fiscal Q4 expectations.

So what

Adobe turned $4.89 billion worth of revenue into a non-GAAP (adjusted) per-share profit of $4.09 during the three-month stretch that ended in early September. That's better than the $4.13 billion and $3.40 per share of a year ago, as well as better than analysts' expectation for a top line of $4.87 billion and earnings of $3.98 per share. Note that year-over-year earnings growth of 20% more than doubled revenue growth of 10%, boosted by the repurchase of 2.1 million shares during fiscal Q3.

Perhaps just as important is that the bulk of the company's continued growth stems from sales of subscriptions to cloud-based versions of its software. Adobe's annualized recurring (subscription-based) revenue rate for its Digital Media software now stands at $14.6 billion, lifted by the record-breaking addition of $464 million worth of new, annually recurring business. Meanwhile, Adobe's Digital Experience arm generated sales of $1.23 billion during the quarter (up 11%), with $1.10 billion of that being subscription-based.

The stock's slumping anyway, for a couple of related reasons.

The first of these reasons is guidance. Although the $5.0 billion midpoint of the company's sales guidance for the current quarter is in line with analysts' estimates while the expectation for earnings of between $4.10 and $4.15 per share is better than the consensus of $4.06, investors were hoping for an even stronger outlook. They're also discouraged by the apparent lack of pricing power for its new artificial intelligence–powered software features, as was intimated during the Q3 earnings conference call.

And the second reason Adobe shares are sliding today? They were headed into Thursday's post-close report with a big disadvantage. That is, they were already up more than 100% from October's low. That's a tough act to follow within anything less than amazing guidance.

Now what

If you currently own it or were mulling a new position in Adobe stock, don't sweat Friday's stumble. It was very likely to happen no matter what sort of guidance the company offered. In addition to the stock's short-term overbought condition, the market itself is struggling today. That backdrop makes it easier to see Adobe's glass as being half-empty rather than half-full. Indeed, this stock could sink even further. This isn't a great time of year for stocks anyway.

Just don't tarry too long if you're waiting to jump in at a low. Although its Q4 guidance wasn't thrilling, its outlook still calls for top-line year-over-year growth of more than 8% and earnings growth of more than 14%. In this challenging economic environment, that's actually rather impressive, not to mention a little unusual.