AMPL

Why Amplitude Stock Was Falling This Week

Shares of Amplitude (NASDAQ: AMPL) were slipping this week after the cloud software stock posted disappointing results in its fourth-quarter earnings report and offered weak guidance for 2024.

Amplitude, which specializes in digital product data analytics, helps companies gain insights about the way customers use their products so they can improve them and increase the return on their investment.

As of Thursday's close, Amplitude stock was down 16.2%, according to data from S&P Global Market Intelligence.

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Image source: Getty Images.

Amplitude gets caught on a downslope

Amplitude said revenue in the quarter rose 9% to $71.4 million, which matched estimates, though investors would like to see faster growth from a company that still isn't profitable on a generally acceptable accounting principles (GAAP) basis.

Further down the income statement, Amplitude also saw some improvement as its GAAP operating loss narrowed from $25.8 million to $21.5 million, and it reported free cash flow of $1.5 million, up from a loss of $5.9 million in the quarter a year ago.

On an adjusted basis, the company posted a per-share profit of $0.04, which was better than a per-share loss of $0.03 in the quarter a year ago and beat estimates by a penny.

Amplitude also saw a 37% increase in paying customers to 2,723, indicating substantial interest in its services, which should pay off down the road. The company continued to expand its product suite with the launch of Session Replay, a tool that allows companies to see what clicks and steps users took as they engaged with their app or website.

CEO Spenser Skates said: "Amplitude closed 2023 strong. It was our biggest year ever for product innovation, and we ended Q4 with a record number of new enterprise logo wins."

What 2024 holds for Amplitude

Investors also seemed disappointed with Amplitude's guidance for the new year as it's calling for revenue of $291.5 million to $294.5 million -- 6% growth at the midpoint and worse than the consensus of $297.4 million. On the bottom line, it expects adjusted earnings per share of $0.06 to $0.08, in line with the $0.06 it reported in 2023, but below estimates for $0.12.

The company faces a difficult round of three-year contract renewals in the first half of the year, which date back to the height of the COVID-19 pandemic when demand for software was surging. Since then, Amplitude and a number of other tech stocks have struggled, and the company expects some customers to roll off then.

However, management sees a reset in the business in the second half of the year, at which point it will be on a steadier growth path. A reacceleration of revenue growth could help drive a comeback in the stock, but investors will have to be patient.

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Jeremy Bowman has positions in Amplitude. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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