What happened
In its second earnings report as a publicly traded company, shares of Informatica (NASDAQ: INFA) plunged as investors seemed to be disappointed with the company's fourth-quarter results and guidance, although they were more or less in line with expectations.
As of 2:26 p.m. ET, the stock was down 30%. Trading was briefly paused this morning due to volatility.
Image source: Getty Images.
So what
Informatica, which provides cloud-based enterprise data management software, delivered solid results in the fourth quarter. Revenue increased 8% to $406.7 million, ahead of its own guidance and beat estimates at $396.4 million. Annual recurring revenue (ARR), which tends to be smoother than quarterly revenue, rose 17% to $1.4 billion, and customers with $1 million or more in ARR increased 47% to 153.
Further down the income statement, the company posted adjusted operating income of $95.1 million, though it was unprofitable on a GAAP basis, and adjusted earnings per share slipped from $0.21 to $0.20, which missed estimates by a penny.
CEO Amit Walia said:
We finished our fiscal year with a strong performance from continued cloud growth and expansion of the Intelligent Data Management Cloud platform globally across many major industries. We saw significant customer momentum in our fourth quarter. 59% of total ARR is from subscriptions, with growth coming from new subscription customers and cross-sell from existing customers.
Now what
Informatica's guidance for the first quarter and full year was in line with expectations. For the current quarter, the company sees revenue increasing 8% to $357 million-$367 million, which compares to the average estimate at $362.3 million. For 2022, it called for 10% top-line growth to $1.585 billion-$1.605 billion, slightly ahead of the consensus at $1.58 billion. The company also forecast flat free cash flow growth, and a slight decline in adjusted operating income.
The weak bottom-line guidance may offer the best explanation for today's sell-off as the business is growing only moderately on the top line and it doesn't expect profit growth. Analysts meanwhile expected 14% growth in adjusted EPS.
There are times when Wall Street estimates don't properly reflect the market's sentiment, and that seems to be partly what's happening here. Additionally, the broader sell-off in cloud stocks is likely weighing on Informatica today as well.
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