What happened

Shares of Red Hat (NYSE:RHT) crashed on Friday, following Thursday night's release of the open-source software vendor's first-quarter results. The stock opened Friday's trading session 14.6% lower, recovered to a 10.1% decline near 11:20 a.m. EDT, and was trading at a 12.5% negative return near 2:30 p.m. EDT.

So what

Red Hat's first-quarter sales rose 20% year over year to land at $814 million. Earnings increased by 24%, stopping at $0.72 per diluted share. Your average Wall Street analyst would have settled for earnings near $0.69 per share on revenues of roughly $807 million. For those keeping score at home, the high end of management's first-quarter guidance called for earnings of $0.68 per share and sales of $810 million. Red Hat exceeded all of these targets.

Closeup on the first of three red fedoras hanging on hooks in a white hallway.

Image source: Red Hat.

Investors found other reasons to worry, though. Second-quarter earnings and revenue guidance targets came in below Wall Street's consensus projections, along with soft billings in the first quarter. That was enough to trigger a 10% to 14% haircut today.

Now what

This stock had been on a roll, making it more vulnerable to quick market corrections. Coming in to this report, Red Hat shares had gained 68% over the previous 52 weeks. After the sharp sell-off, we Red Hat investors have still enjoyed market-beating one-year gains of 47%.

It's not surprising to see the market focusing on whatever weaknesses it could find in a fundamentally strong report, but this looks more like a buying opportunity than a call to retreat from Red Hat's stock. After all, the soft second-quarter guidance was posted along with higher full-year targets.

Management sees a strong second half coming. You heard it here first.

Anders Bylund owns shares of Red Hat. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.