Shares of fast-growing HashiCorp Inc. moved higher today after the company reported solid earnings and followed with encouraging guidance that came in above expectations.

The company reported a second-quarter loss before certain costs such as stock compensation of 17 cents per share, well ahead of the analysts’ consensus estimate of a 31-cent loss. Revenue for the period shot up 52%, to $113.9 million, easily beating Wall Street’s target of $102.3 million. It all added up to a net loss of $74.8 million in the quarter, much higher than the $24.9 million loss the company registered a year ago.

Still, the results generally were seen as good, and the company believes there’s more to come. For the third quarter, HashiCorp said it’s looking at a loss of between 30 and 32 cents per share on sales of $110 million to $112 million. In contrast, Wall Street analysts have forecast a 34-cent loss per share on revenue of $106.3 million.

Shareholders may have been fearing the worst for HashiCorp, as the company’s stock lost more than 14% of its value during the regular trading session. However, the report appears to have almost completely erased any doubts over the company’s immediate prospects. In the extended trading session, HashiCorp’s stock gained just over 13%, recovering most of the day’s losses.

There’s good reason to believe in HashiCorp, since it’s a fast-growing company that provides automation tools for information technology infrastructure. Although the IT hardware sector has been hard hit this year, software has held up much better, as seen by the strong results of cloud computing giants like Amazon Web Services Inc., Microsoft Corp. and Alphabet Inc.

HashiCorp is popular because its flagship product, Terraform, enables what’s known as “infrastructure-as-code,” which allows system administrators to write scripts that automate the configuration of their cloud and on-premises IT infrastructure. It’s a much easier alternative to navigating through various consoles and configuring systems manually. Terraform removes the need to configure and adjust hundreds of settings, saving admins days of work in some cases, the company says, while also reducing the risk of human error leading to problems.

HashiCorp Chief Executive Dave McJannet (pictured) said enterprises continue to invest in the cloud, since that’s critical to their long-term business goals. “Our second quarter of fiscal 2023 results reflect the strength of this trend,” he said. “We remain focused on enabling our customers with new enhancements to our product suite, including compliance features for Terraform, zero-trust identity management on the HashiCorp Cloud Platform with Boundary, and further integration among our products to support the adoption of platform teams.”

HashiCorp reeled off a bunch of impressive numbers, noting that it ended the quarter with 3,612 paying customers, up from 3,240 at the end of the previous quarter. Of those customers, 734 now generate at least $100,000 in annual recurring revenue, up from 704 three months ago. Altogether, those big customers accounted for 88% of HashiCorp’s revenue.

The company also reported subscription revenue of $10.6 million in the quarter, up from just $3.7 million a year earlier. Meanwhile, its net dollar retention rate, which measures how much revenue it squeezes out of its existing customer base, rose to 134%, up from 133% in the previous quarter.

Holger Mueller of Constellation Research Inc. said HashiCorp did well to grow at a rate that’s generally faster than most other companies are doing, fueled by the need of enterprises to manage their cloud infrastructure more easily. “The challenge for HashiCorp now is that while its revenue is growing fast, it’s still growing less than its losses,” the analyst said. “So the management will have to find a solution to this trend. With stronger economic headwinds on the horizon, the sooner they do that the better.”

The quarter just gone was a busy one for the company as it held its annual user conference, HashiConf 2022, in Amsterdam, where it announced multiple major updates to its technology platforms. These included a new Drift Detection feature in Terraform Cloud, which provides alerts to admins if their IT infrastructure configuration changes as a result of tweaked settings.

The company also announced the availability of HashiCorp Cloud Platform Consul on Microsoft Azure, and it launched a preview of HashiCorp Boundary, a managed service for standardizing secure remote access to critical infrastructure.

Photo: HashiCorp/YouTube