What happened

Shares of New Relic (NYSE:NEWR) tumbled on Wednesday after the cloud software company reported its fiscal first-quarter results. While New Relic beat analyst expectations across the board, the stock was down 26% at noon EDT today.

So what

New Relic reported first-quarter revenue of $162.6 million, up 15.3% year over year and $3.65 million higher than the average analyst estimate. Adjusted earnings per share came in at $0.15, down from $0.19 in the prior-year period but $0.12 higher than analysts were expecting. The GAAP net loss nearly doubled to $0.50 per share.

Man holding his head looking at declining charts.

Image source: Getty Images.

Some of New Relic's numbers weren't so great. The company's dollar-based net expansion rate, which measures how much existing customers are expanding usage of New Relic's products, fell to 100% in the first quarter from 116% in the previous quarter. A 100% expansion rate means that customers aren't expanding usage at all on a net basis.

For the second quarter, the company expects to grow revenue by 12% year over year to a range of $163 million to $164 million. It expects adjusted EPS between a loss of $0.03 and a profit of $0.02.

Now what

New Relic announced a new iteration of its New Relic One platform last week, but at least two analysts are skeptical that the platform revamp will deliver for the company. J.P. Morgan downgraded the stock from overweight to neutral on Wednesday, citing a "radical change in strategy" that may or may not work out. Meanwhile, Rosenblatt dropped its price target from $65 to $60 due to meaningful transition risks.

While New Relic beat analyst expectations in the first quarter, it wasn't enough to prevent a steep decline for the stock. Including Wednesday's rout, shares of New Relic are down about 17% since the start of the year.