What happened

Shares of Agrify (AGFY 4.20%) are dropping on Wednesday after the company reported disappointing earnings results for the third quarter. The stock was down as much as 24.3% today, and as of 11:16 a.m. EST, it was down 20%.

So what

On Wednesday, Agrify reported its earnings results for the third quarter. The company, which sells technology-empowered indoor growing systems for cannabis, increased revenue 460% year over year to $15.8 million in the quarter, with total backlog up to $117.5 million. The company is not yet profitable, posting a net loss of around $10 million in the quarter.

An indoor cannabis farm.

Image source: Getty Images.

For the full year, Agrify is guiding for $60 million to $62 million in revenue, up significantly from its previous guidance of $48 million to $50 million. This seems like good news for the business, so it is unclear why investors were so disappointed in the third-quarter report. The possible reason is that the company announced that its chief operating officer and chief financial officer are leaving the company. Executive turnover is usually not a good thing for a business, so investors likely didn't enjoy seeing this news.

Now what

Agrify is growing quickly, but it is not very profitable at the moment. In fact, the company does not even generate a positive gross profit, let alone net profit, right now. This doesn't mean that it is going to be a poor investment from here, but that it is one that comes with a lot of risks. If you are invested in Agrify, you need to expect revenue to continue growing at a high rate and profit margins to expand, if this investment is going to work out over the long haul.