What happened
Shares of networking equipment maker Extreme Networks (EXTR -0.68%) are having a rough morning after it delivered mixed second-quarter earnings report, falling as much as 14.2% as of 11:17 a.m., EST.
So what
In Q2, Extreme Networks sales rose 56% year over year to $231 million. On the bottom line, adjusted earnings increased from $0.12 to $0.14 per share. Your average analyst had been looking for earnings of $0.13 per share on sales near $242 million.
Non-GAAP earnings stopped at the top end of management's guidance for the quarter, but sales fell $5 million below the bottom end of that guidance range.
Looking ahead, the midpoints of Extreme's guidance for the third quarter are running ahead of Wall Street's current projections.
Image source: Getty Images.
Now what
Extreme Networks' financial results are tough to estimate, because so much of its top-line growth was built on a series of acquisitions in 2017. Some of these deals closed recently enough that Q3 will be Extreme's first full period as a completely consolidated business since the end of 2016.
The company is also in the enviable position of being able to pick and choose its customers, focusing on larger and more lucrative deals. In a call with analysts, CEO Ed Meyercord noted that it "turned away a considerable amount of low-margin business" in the second quarter, preferring to deliver strong profits over meeting its revenue targets.
Share prices have more than doubled over the last 52 weeks, even including the impact of today's sudden plunge. So it's not a complete surprise to see the stock falling on a mostly solid report with some flaws.
