Database company Couchbase Inc. delivered second-quarter results that came out just ahead of Wall Street’s estimates today, but its stock took a turn for the worse in extended trading, with investors apparently concerned by a slowdown in its growth rate.

The company reported a loss before certain costs such as stock compensation of six cents per share in the quarter, slightly better than the eight-cent loss expected by Wall Street. Revenue for the period rose 19.6% to $51.6 million, above the consensus estimate of $51 million.

However, it failed to make much inroads in terms of profitability, reporting a net loss of $19.9 million in the quarter, down only slightly from the $20.6 million loss it recorded a year earlier.

Couchbase has emerged as a key player in the enterprise database scene. It’s the creator of the popular Couchbase NoSQL database service that allows enterprises to store large volumes of semistructured data. Its flagship product is the cloud-based Couchbase Capella database-as-a-service product, and it also sells a traditional on-premises version called Couchbase Server, plus a mobile version.

Capella’s main advantage over traditional databases is that it can process both structured and unstructured information at the same time. That can make it a superior choice for certain kinds of applications that need to access both types of data, as it means they can use just one product. The platform can also act as a data cache, meaning users actually get three systems for the price of one.

Couchbase Chief Executive Matt Cain (pictured) said he was pleased with the company’s “hard work and execution” during the quarter.

“We delivered revenue and operating loss results that exceeded the high end of our outlook, generated strong new business and new logos, and saw a meaningful increase in our Capella mix,” he said. “I remain highly confident in our outlook and ability to achieve our objectives in fiscal 2025.”

There were some bright spots in the results, with a breakdown of its revenue showing a 20% increase in subscription revenue, which came to $49.3 million in the quarter, ahead of the Street’s target of $48.8 million. Revenue from services rose 5% from a year ago, to $2.3 million, ahead of the $2.2 million forecast.

In addition, Couchbase reported annual recurring revenue of $214 million at the quarter’s end, up more than 18% from a year ago. Its gross margin also increased, from 86.3% a year ago to 87.5% today, while remaining performance obligations rose 27%, to $215.8 million.

Despite those cherry-picked highlights, there were also reasons for investors to be alarmed. The company said it’s anticipating revenue of $50.3 million to $51.1 million in the current quarter, with the midpoint falling just short of the Street’s guidance of $50.63 million. It also forecast total ARR of between $218.5 million and $221.5 million, shy of the $220.2 million estimate.

Sharp-eyed investors were quick to note that the revenue guidance shows that it’s anticipating growth of just 10.7%, representing a dramatic slowdown compared to the quarter just gone, and also the same period one year earlier. It’s likely that this is what sparked a rapid selloff, sending Couchbase’s stock down more than 10% after-hours.

Couchbase also lifted its full-year revenue guidance to $207.1 million at the midpoint, but this remains just short of the Street’s target of $207.3 million.

Constellation Research Inc. analyst Holger Mueller said Couchbase did well to continue growing during the quarter, with much of that growth fueled by its ongoing product innovations, such as the addition of vector support for AI workloads.

“Investors will be pleased to see that Matt Cain and team were able to put the brakes on their growing cost base, which meant that Couchbase was able to reduce its overall loss per share for the first time in a few quarters,” he said. “There is much more work to do but that is a good start. The slowing revenue growth is a concern, but Couchbase has a few options. It can either find a way to grow faster, try to appease its investor’s readiness for more losses, or work on further reducing its operational expenses.”

Shareholders may take some comfort from the ongoing innovation at Couchbase, which announced a major update to the Capella service today with the launch of Capella Columnar, enabling developers to build more intelligent and adaptive applications that leverage real-time insights.

It also updated the mobile version of its database with new functions including vector search, making it more suitable for generative AI applications.

Photo: Couchbase