Shares of the enterprise data management firm Informatica LLC made big gains in extended trading today after it reported strong fourth-quarter results and provided positive guidance for the current quarter and full year.

The company’s stock had already risen by more than 2% prior to the report, before shooting up by another 18% after-hours.

In its earnings report, Informatica said that it delivered a profit before certain costs such as stock compensation of 32 cents per share, beating Wall Street’s forecast of a 30-cent-per-share profit. Revenue for the period rose 12% from a year earlier, to $445 million, well ahead of the Street’s consensus estimate of $432 million. All told, Informatica delivered a net income of $64.26 million, rising from a loss of $4.38 million one year earlier.

The company also reported annual recurring revenue of $1.13 billion, up 14% from the same period a year ago and also above the Street’s forecast of $1.098 billion. Another closely watched number is Informatica’s cloud subscription ARR, which ended the quarter at $617 million, up by 37% and ahead of the Street’s target of $609 million.

Informatica’s flagship product is its Intelligent Data Management Cloud, which is used by enterprises to transfer data between disparate systems. That’s difficult for companies to do by themselves, as different applications tend to store data in various formats, so the information must be adapted to the correct format for each app before it can be used.

This is what Informatica’s platform does, enabling users to take data from their sales logs, for example, and analyze it in another system in order to gain insights into customer buying habits. The platform also helps sync information between different systems, for example if two subsidiaries need to share product pricing information.

Informatica Chief Executive Amit Walia (pictured) hailed the company’s strong results, saying it outperformed all growth and profitability guidance metrics, surpassing $1 billion in subscription revenues for the first time. “Our momentum is driven by demand for our AI-powered IDMC platform and category leadership in data management as a mission-critical component of the modern data stack,” Walia said.

Walia told Barron’s in an interview shortly after the earnings call that the company had executed well on its plan to only sell cloud-based versions of its products to new customers. He also claimed that the growing interest in generative artificial intelligence bodes extremely well for the company.

“There is no AI without data management,” he insisted. “Customers have to set up modern data stacks to do generative AI.”

The company achieved a notable milestone in the quarter, breaking the $1 billion in annual revenue barrier for the first time, and its software-based sales are now more than double that of its maintenance and professional services revenue, meaning the company has become more valuable than before, said Holger Mueller of Constellation Research Inc.

However, Mueller said Informatica still has challenges to overcome: “What is weighing heavily on the company is its interest expenses, which at roughly 10% of its revenue are dragging the company into the red,” he said. “It more than doubled its loss per share from a year earlier, and so this is a key question for Amit Walia and his team to address in the coming full-year. At the same time, Informatica will be required to keep its innovation engine ticking over and build more strategic partnerships to take advantage of opportunities such as AI.”

Informatica’s optimism around AI may be one of the reasons for its encouraging guidance. On the call, executives said the company is looking at first-quarter sales of between $375 million and $395 million, the midpoint of which is just shy of the Street’s forecast of $389 million.

The company is also forecasting subscription-based ARR of between $1.135 billion and $1.155 billion, ahead of the Street’s forecast of $1.127 billion. Cloud-based ARR is forecast to hit between $645 million and $655 million, roughly in line with the $650.3 million analyst target.

The company also forecast operating income of between $97 million and $117 million in the current quarter, the midpoint of which is just above the consensus call of $106 million.

Looking ahead to the full year, the company said it’s eyeing revenue of between $1.685 billion and $1.705 million, which would represent an increase of 6.3% at the midpoint, consistent with its revenue growth in fiscal 2023. Wall Street is looking for annual sales of $1.68 billion. The company also forecast total ARR of $1.718 billion and $1.772 billion, just ahead of the consensus at $1.71 billion.

Prior to today’s after-hours movement, Informatica’s stock was up 7% in the year to date and 65% over the last 12 months.

Photo: SiliconANGLE