What happened

Shares of software-as-a-service company New Relic (NEWR) skyrocketed on Tuesday, rising as much as 40.2%. When the market closed, the shares were up 38.5%.

The tech stock gained so much ground because the company, which provides a platform for engineers to build and operate software, reported strong fiscal second-quarter results after the end of the trading day on Monday.

A chart showing a stock price rising sharply.

Image source: Getty Images.

So what

For the fiscal period, which ended Sept. 30, New Relic's revenue rose 18% year over year to $196 million, crushing analysts' consensus forecast for revenue of $182.2 million. Its adjusted loss of $0.10 per share was narrower than the consensus estimate for a loss of $0.13 per share.

"This quarter marks the completion of our business turnaround and the beginning of a new chapter of growth for New Relic," said CEO Bill Staples in the earnings release.

During the period, the number of active customer accounts increased by 200 quarter over quarter to 14,300. Further, the share of revenue coming from active customer accounts contributing more than $100,000 in annualized revenue rose to 81%.

Now what

New Relic said it expects even higher revenue in its fiscal Q3. Management is guiding for revenue in the $198 million to $202 million range for the period. That would translate to year-over-year growth of 19% to 22%.

The strong quarterly results and the robust guidance are in part due to the company's turnaround efforts.

"We recently laid out five strategic priorities to guide our company forward, and we are pleased with the progress we've already made in advancing these objectives," said Staples in the earnings release. "Today, New Relic has a strong foundation for the future, as we continue our work to help millions of developers and engineers build better software by making observability a daily part of a data-driven engineering approach, across the entire software lifecycle."