What happened

Shares of Medallia (NYSE:MDLA) have plummeted today, down by 11% as of 12:50 p.m. EST, after the company reported third-quarter earnings. The results topped expectations, yet investors were still disappointed.

So what

Revenue in the third quarter was $121 million, ahead of the $116.9 million in sales that Wall Street analysts were looking for. That top line included subscription revenue of $96.9 million. That resulted in adjusted net income of $1.1 million, or $0.01 per share. The consensus estimate had called for an adjusted net loss per share of $0.01. The enterprise software-as-a-service (SaaS), which leverages artificial intelligence to gauge customer experiences, finished the quarter with $657.1 million in cash.

Medallia software interface

Image source: Medallia.

"We added the most new customers in any quarter. Our wins included major enterprise brands across verticals and geographies," CEO Leslie Stretch said in a statement. "We added more than a dozen new go-to-market partners and hired more strong talent to support our growth."

Now what

Medallia's outlook also came in strong, with revenue in the fiscal fourth quarter expected in the range of $123.5 million to $125.5 million. That should include subscription revenue of $100.5 million to $101.5 million. Analysts are currently modeling for $122.8 million in sales next quarter.

On the conference call with analysts, CFO Roxanne Oulman provided additional details, forecasting adjusted operating income of $200,000 to $700,000. Medallia expects to spend $5 million in capital expenditures to upgrade its data centers.