What: Shares of enterprise data management company Hortonworks (NASDAQ:HDP) slumped on Thursday following the company's third-quarter earnings report. Despite beating analyst estimates on all fronts and providing in-line guidance, shares closed down 18.7% on Thursday.
So what: Hortonworks reported quarterly revenue of $33.1 million, up 159% year-over-year and about $2.4 million higher than analysts were expecting. Deferred revenue rose to $90.1 million, up 89% over the past year, while gross billings of $43.8 million rose 104% year-over-year.
Non-GAAP net income was a loss of $32.5 million, or $0.74 per share, compared to a loss of $30.9 million during the same period last year. Analysts were expecting a non-GAAP loss of $0.83 per share. On a GAAP basis, the company lost $44.5 million, or $1.01 per share.
Hortonworks expects revenue to be between $32 million and $34 million during the fourth quarter, up 98% year-over-year at the midpoint of that range, and in-line with the average analyst estimate of $33.2 million.
Now what: Despite Hortonworks' positive results, the stock tumbled on Thursday, with shares carving out a new 52-week low in the process. After multiple quarters of Hortonworks handily beating analyst estimates for guidance, investors may have been expecting too much from the company.
Hortonworks trades at a lofty valuation, with the stock trading at about 7.5 times expected 2015 revenue prior to the decline on Thursday. With the company posting big losses on both a GAAP basis and a free cash flow basis, revenue growth is the main driver of the stock price. And while the company appeared to deliver during the third quarter, investors saw it differently.
Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.