These 2 Tech Stocks Took It on the Chin Late Wednesday

Stock markets were mixed on Wednesday, as the Nasdaq Composite (^IXIC -0.12%) and S&P 500 (^GSPC -0.21%) pulled back from recent advances. Despite nearing levels that would signal a symbolic end to the bear market, market indexes still reflect a lot of uncertainty about what will happen with the broader economy. Yet a recovery in some areas, particularly banking, helped give the Dow Jones Industrial Average (^DJI 0.17%) a modest boost.

Data source: Yahoo! Finance.

Tech stocks have gotten a huge bounce in 2023 after performing terribly last year. However, the big gains have ramped up expectations for underlying tech businesses, and that's made it increasingly difficult for some companies to live up to what shareholders want to see.

That proved to be the case for Smartsheet (SMAR -0.35%) and HashiCorp (HCP 0.98%), both of which suffered severe declines in after-hours trading late Wednesday. Here are the details from the two companies' latest financial reports.

Smartsheet paints a cloudy outlook

Shares of Smartsheet were down 14% in after-hours trading on Wednesday, adding to a 5% decline in the regular trading session. The work management software platform provider reported fiscal first-quarter financial results for the period ended April 30 that showed continuing growth, but its outlook didn't look as rosy as most had hoped for.

Smartsheet's numbers for the quarter seemed solid. Sales of $220 million were up 31% year over year, lifted largely by a 33% rise in subscription-based revenue.

The company reversed a year-earlier loss, reporting adjusted net income of $25 million that worked out to $0.18 per share. Free cash flow also went positive in the quarter, in contrast to last year's modest outflows.

Several of Smartsheet's business metrics also looked favorable. Dollar-based net retention rates of 123% showed that existing customers kept spending on the platform. Smartsheet saw its number of customers spending $50,000 or more on the platform annually rise to 3,343, up by a third from 12 months earlier.

However, investors weren't happy to see Smartsheet project that full-year fiscal 2024 revenue would likely rise only 23% to 24%, coming in at between $943 million and $948 million. Adjusted earnings of $0.37 to $0.44 per share also implied that the company has already seen much of the profit it's likely to make for the year. Even as CEO Mark Mader made sure to mention Smartsheet's intent to expand its AI-based capabilities, shareholders nevertheless want that to result in immediate growth prospects.

HashiCorp could see sales slow sharply

The story was much the same at HashiCorp, whose shares fell 24% after hours. The infrastructure automation specialist reported fiscal first-quarter financial results for the period ended April 30, and it also failed to make good on high hopes for its revenue projections for the whole year.

Again, HashiCorp's actual numbers for the quarter had some attractive points. Revenue of $138 million rose 37% year over year. Remaining performance obligations soared 46% to $635 million, showing a healthy pipeline of future prospects for the tech company.

HashiCorp wasn't able to make a profit, but adjusted net losses of $12.7 million narrowed considerably from year-ago levels. Those losses amounted to $0.07 per share.

However, some of HashiCorp's internal metrics showed signs of slowing growth. Total client counts were up by about 1,150 year over year to 4,392, but the number of customers generating more than $100,000 in annual recurring revenue rose by just 18% to 830. Net dollar retention rates dropped from 133% a year ago to 127% in the quarter.

HashiCorp's forecasts were even more troubling, as the company sees full-year revenue of between $564 million and $570 million and an adjusted loss of $0.24 to $0.27 per share. That implies sales growth of just 19%, and that's not fast enough to cut it in an environment in which tech investors see opportunities for explosive revenue gains in the years to come.