What happened
Shares of Extreme Networks (EXTR 2.38%), a cloud-based networking management company, were tumbling today after the company reported its third-quarter financial results. Despite beating analysts' consensus estimates for both earnings and revenue, investors appeared to be disappointed with management's outlook.
The tech stock plummeted by as much as 20% today and was down by 14.5% as of 1:32 p.m. ET.
So what
Extreme Networks reported sales of $285.5 million in the quarter, up 13% year over year, which was higher than Wall Street's consensus estimate of $280.8 million. Additionally, the tech company's non-GAAP earnings per share of $0.21 easily outpaced analysts' consensus estimate of $0.18 per share.
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Extreme's CEO, Ed Meyercord, said in a press release that the company is in a "strong competitive position" and is expanding its market share. He also said, "The robust spending environment for enterprise networking and 5G infrastructure is contributing to unprecedented bookings growth at Extreme."
But despite the company's strong third-quarter results, it was Extreme Network's fourth-quarter guidance that investors latched on to today.
Management said that sales will be in a range between $265 million and $275 million, which is far below analysts' average estimate of $304.8 million for the fourth quarter.
The company's earnings-per-share guidance for the upcoming quarter didn't spur investor optimism, either. Management's guidance of $0.12 to $0.18 per share was below Wall Street's expectation of $0.22 per share.
Now what
Management said that while it's confident revenue will grow between fiscal 2023 and 2025, it also added that "near term supply chain constraints have worsened and will persist" through 2023.
All of which means that Extreme Network shareholders may want to keep a close eye on any supply chain issues that the company mentions in the upcoming quarters.
