What happened

HashiCorp (HCP 9.71%) shareholders are having a rough day. The stock was down by 23% as of 12:30 p.m. ET Thursday, compared to a modest increase in the S&P 500. The slump put the cloud software specialist's stock back in negative territory for the year, down 3% while the wider market is up 12%.

That decline was powered by a lukewarm reception on Wall Street to HashiCorp's slowing growth trends in its most recent quarter.

So what

The company delivered its fiscal Q1 2024 results before the session opened. For the period, which ended April 30, sales rose 37% to $138 million. That result beat management's early March forecast that called for sales of between $132 million and $134 million. Its earnings results similarly edged past the cautious outlook that management issued a few months ago.

However, the company described gathering headwinds on its growth results in recent weeks as enterprises slowed their software and IT spending. "We saw pressure in the buying process," CEO Dave McJannet said in the press release. These challenges convinced management to undertake a cost-cutting program while reducing expectations for the fiscal year.

Now what

Sales are now on track to land between $564 million and $570 million in fiscal 2024, executives said. The previous guidance range was $591 million to $595 million.

On the bright side, HashiCorp believes cost cuts, including layoffs amounting to 8% of its workforce, will result in less of an operating loss this year than previously predicted. And the software-as-a-service company affirmed its goal of achieving profitability by late fiscal 2025. At the same time, management said it was encouraged by the growth in the number of larger contract clients that spend more than $100,000 per year on its services.

The update underscores how sensitive HashiCorp's business is to the wider selling environment for enterprises transitioning their digital operations to the cloud. Sales trends will remain volatile, and could slow further, as IT managers become more cautious about making new spending commitments.