Why Couchbase Stock Is Plummeting Today

What happened

Shares of Couchbase (BASE -1.91%) are sinking in Wednesday's trading. The database software company's stock was down roughly 23% as of 2 p.m. ET, according to data from S&P Global Market Intelligence.

Couchbase's first-quarter results topped the market's expectations on both the top and bottom lines. The company managed to post non-GAAP (adjusted) earnings per share of $0.27 on revenue of $41 million. Meanwhile, the average analyst estimate had called for a per-share loss of $0.32 on revenue of $39.8 million. 

So what

Couchbase's subscription revenue rose 21% year over year in the first quarter to reach $38.5 million. This performance helped push overall revenue 18% year over year in the period, and annual recurring revenue (ARR) at the end of the term stood at $172.2 million. The company posted an adjusted gross margin of 86.4% in the period, down from 87.3% in the prior-year period, and its loss from operations expanded to $22.5 million from $19 million in the prior-year quarter. 

Now what

For the second quarter, management is guiding for an adjusted operating loss between $10.1 million and $10.9 million on revenue between $41.2 million and $41.8 million. Annual recurring revenue is projected to be between $176 million and $179 million at the end of the period. Meanwhile, the average analyst estimate had targeted revenue of $43.3 million for the current quarter. 

For the full year, Couchbase is targeting an adjusted operating loss between $39 million and $43 million on revenue between $171.7 million and $174.7 million. ARR at the end of the year is expected to be between $191.5 million and $195.5 million. The company actually increased its ARR target while lowering its expected operating loss, but the midpoint of the guidance range still fell short of the market's expectations. The average Wall Street target came in at $173.4 million.

While the company's Q1 results weren't bad by any stretch, it appears that investors were looking for a greater impact from Couchbase's Capella database-as-a-service offering.