What Happened: Shares of subscription management platform Zuora (NYSE:ZUO) jumped 5.9% in the morning session after the company reported a "beat and raise" quarter. Third quarter revenue outperformed Wall Street's expectations despite a calculated billings miss. Non-GAAP operating profit and free cash flow also exceeded expectations. Management observed "several expansions with multi-year commitments that drove a 20% year-over-year increase in our total RPO." These favorable trends also led to a 1% uptick in the net revenue retention rate compared to the previous quarter.
Moving ahead, while revenue guidance for the next quarter was roughly in line analysts' expectations, full year guidance was raised for key line items like revenue, non-GAAP operating profit, and free cash flow. Zooming out, it was a strong quarter, showing that the company is staying on track despite ongoing macro headwinds.
Is now the time to buy Zuora? Find out by reading the original article on StockStory.
What is the market telling us: Zuora's shares are very volatile and over the last year have had 22 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 9.5% on the news that the company reported second-quarter revenue that narrowly missed Wall Street's estimates. On the other hand, earnings per share beat and gross margin improved.
Looking ahead, next quarter's revenue guidance missed Wall Street's estimates. Similarly, full-year revenue guidance was lowered and came in below expectations. Investors should note that this drop stems from lower-than-expected professional services revenue, which is a lower margin than the company's subscription revenue. Thus, Zuora is still raising its adjusted operating income and EPS guidance for the full year.
Overall, the market was likely looking for stronger topline growth, an area in which Zuora did not meet expectations.
Zuora is up 42.3% since the beginning of the year, but at $9.25 per share it is still trading 21.7% below its 52-week high of $11.81 from June 2023. Investors who bought $1,000 worth of Zuora's shares 5 years ago would now be looking at an investment worth $486.07.
