What happened

Shares of software-as-a-service company SailPoint Technologies (SAIL) surged higher on Wednesday, climbing as much as 31.5%. As of 11:15 a.m. EST today, shares were still up 22.3%.

The tech stock's sharp gain is likely due to the company's stronger-than-expected third-quarter results. SailPoint, which provides software to help organizations govern the digital identities of employees and other stakeholders, saw strong double-digit revenue growth as it continued to benefit from its transition to a subscription-based model.

A chart showing a stock price rising sharply.

Image source: Getty Images.

So what

SailPoint's total revenue rose 17% year over year to $110.1 million, beating analysts' average forecast for revenue of $103.4 million. This outperformance was helped by a 39% year-over-year increase in subscription revenue to $70.8 million. The company's earnings per share for the period broke even on an adjusted basis. This was down from adjusted EPS of $0.11 in the year-ago quarter but better than analysts' average forecast for an adjusted loss per share of $0.06. 

CEO Mark McClain said in the company's third-quarter earnings release, "Demand for our [software-as-a-service] and subscription-based identity security offerings continues to be very strong as global enterprises recognize that SailPoint's modern identity security solutions are core to their next-generation technology stack."

Now what

SailPoint guided for fourth-quarter revenue between $112 million and $114 million. Though this was slightly below analysts' average view for fourth-quarter revenue of $114.1 million, investors were likely impressed with the company's overall momentum and management's confidence in its long-term potential. "We believe our best-in-class, cloud-based solutions and the increasingly strategic role identity security now plays has positioned SailPoint well," McClain said. "We look forward to generating high levels of growth for the foreseeable future as we execute against this multibillion market opportunity."