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Red Hat slides on low guidance

Jordan Novet

Red Hat stock fell by more than 10 percent on Thursday after the company reported better-than-expected earnings for the first quarter of its 2019 fiscal year but lower-than-expected guidance. Executives will hold a conference call with analysts at 5 p.m. Eastern time.

Here's how the company performed:

  • Earnings: Excluding certain items, 72 cents per share, vs. 69 cents per share as expected by analysts, according to Thomson Reuters.
  • Revenue: $813.5 million, vs. $807.5 million as expected by analysts, according to Thomson Reuters.

As a whole, the enterprise software company said in a statement that revenue rose 20 percent year over year in the quarter.

Most of Red Hat's revenue comes from subscriptions, and they yield more gross profit than training and services at the company. Subscription revenue in the quarter grew 19.3 percent, coming in at $711.5 million. Analysts were expecting $713 million in subscription revenue, according to Thomson Reuters.

In the first quarter of the 2019 fiscal year Red Hat announced an expanded partnership with Juniper, announced it was working with Microsoft to bring the Red Hat OpenShift software to Microsoft's Azure cloud and said Al Zollar of private equity firm Siris Capital Group joined its board.

In terms of guidance, Red Hat said in the fiscal second quarter it's expecting 81 cents in earnings per share, excluding certain items, on $822 million to $830 million in revenue. The consensus estimates among analysts polled by Thomson Reuters were 89 cents in earnings per share, excluding certain items, on $854.9 million in revenue for the period.

For the full fiscal year, Red Hat said it's expecting to post $3.44 to $3.48 in earnings per share, excluding certain items, on $3.38 billion to $3.41 billion in revenue. Analysts were looking for $3.42 in earnings per share, excluding certain items, on $3.45 billion in revenue, according to Thomson Reuters.

Chief financial officer Eric Shander said in the statement that the company changed its full-year revenue guidance by $50 million "solely" because of foreign exchange rates.

Red Hat stock is up about 38 percent since the beginning of 2018.

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