Shares of Extreme Networks Inc. plunged more than 16% today after the company posted stronger-than-expected quarterly earnings, but shared financial guidance that fell short of the consensus estimate.

Nasdaq-listed Extreme Networks makes switches and routers for data centers. It also sells Wi-Fi equipment that enterprises use to provide wireless connectivity at their offices. Alongside its hardware, the company provides cloud services that help administrators manage their organizations’ network infrastructure.

Extreme Networks’ revenue grew 19% year-over-year, to $353.1 million, during its fiscal first quarter ended Sept. 30. That’s well ahead of the $347 million projected by analysts. The company said its revenue growth was fueled by an increase in large deals worth more than $1 million. 

Another contributor to Extreme Networks’ top-line momentum was its burgeoning software-as-a-service business. The business’ annual recurring revenue grew 30% year-over-year in the first quarter, to $141 million. According to Extreme Networks, one factor behind the sales jump was a set of new SaaS deals it inked with seven managed service providers, which run other organizations’ infrastructure on their behalf.

The flagship component of Extreme Networks’ SaaS portfolio is a cloud platform called ExtremeCloud IQ. It enables administrators to manage their companies’ switches, routers and Wi-Fi networks through a single pane of glass. The platform also promises to ease related tasks such as detecting cybersecurity issues.

Alongside ExtremeCloud IQ’s core feature set, Extreme Network provides a number of specialized modules. One module, CoPilot, can automatically flag technical issues in a network and recommend ways to fix them. There’s also ExtremeCloud IQ Site Engine, which allows administrators to manage equipment from both Extreme Networks and rival suppliers through a centralized interface.

The increased customer demand the company experienced in the first quarter boosted not only its top line but also its earnings. Extreme Networks generated a profit of $46.5 million in the three months through Sept. 30, up from $27.1 million a year earlier. That translated into adjusted earnings of 35 cents per share, three cents more than what analysts expected. 

“Extreme delivered another quarter of double-digit growth as we continued to increase both market and mindshare with new customers, while expanding our presence within our existing base,” said Chief Executive Ed Meyercord.

While the company’s first quarter results handily topped the consensus estimate, its guidance for the current quarter fell short. Extreme Networks is anticipating earnings of 26 to 31 cents per share, while analysts were expecting 37 cents. Its projected revenue range of $312 million to $327 million, meanwhile, fell well short of the $367.95 million that the consensus estimate forecast.

For the full fiscal year, Extreme Networks is projecting revenue growth in the mid- to high single digits. The company stated that it’s committed to achieving double-digit growth in the longer term. Extreme Networks expects that its sales strategy will receive a boost from a planned revamp of its go-to-market organization and an expected improvement in “customer buying patterns.”

Photo: Extreme Networks