Cloud infrastructure automation company HashiCorp Inc. delivered strong third-quarter financial results today that topped analysts’ expectations, with its revenue up more than 16%.

But its stock plunged more than 20% after-hours on the back of somewhat disappointing guidance, which was only in line with Wall Street’s estimates.

The company reported earnings before certain costs such as stock compensation of three cents per share, beating the Street’s estimate of a four-cent-per-share loss. Revenue came to $146.1 million, ahead of the $143.3 million forecast. But despite beating expectations, the company remains unprofitable, racking up a net loss of $39.5 million for the quarter, though down from a $72 million net loss one year earlier.

Looking to the fourth quarter, HashiCorp said it sees revenue of between $148 million and $150 million, the midpoint of which is squarely in line with the Street’s forecast of $149 million. The company also forecast earnings of between break-even and two cents per share, ahead of the Street’s view of a penny-per-share loss.

HashiCorp has been growing fast for a number of years thanks to the rise of the software and applications that operate as the beating heart of every enterprise today. Building software is complex and time-consuming, meaning there’s a big opportunity for anyone who can make that task easier.

The company sells automation software for enterprise technology infrastructure. Its main product is Terraform, which enables “infrastructure as code,” where system administrators write scripts to automate the configuration of cloud and on-premises systems. Terraform makes life much simpler than the old way of doing things, which involved navigating various consoles to configure systems manually. It eliminates the need to configure and adjust hundreds of settings, helping administrators save hours of work.

HashiCorp Chief Executive Dave McJannet (pictured) said in a statement he was pleased with the company’s results, saying they demonstrate “consistent execution” despite the ongoing macroeconomic challenges it faces.

Investors are no doubt concerned, however, by the company’s slowing revenue growth. Until recently, HashiCorp had regularly delivered growth of more than 20%, but it isn’t doing so now. One reason for that might be that it’s struggling to squeeze as much money from its customers as it was doing in the past. It reported a net revenue retention rate of 119% in the quarter, down from 124% in the prior quarter. NRR is a metric that measures how much the company’s revenue from its existing customer base grows.

The company is at least adding new customers. It ended the quarter with 4,354 total customers, up from 3,648 one year earlier. Of those, 877 generate more than $100,000 in annual recurring revenue, up from 760 a year ago.

Overall, HashiCorp enjoyed a very good quarter, with its revenue growing thanks to the enterprise push to become more software-driven, said Constellation Research Inc. analyst Holger Mueller. “HashiCorp made good progress on its path to profitability during the quarter, practically halving its net loss,” the analyst said. “It’s also encouraging to see the rising adoption of AI in the company’s portfolio, as generative AI has the potential to be both an enabler and a disruptor. The fourth quarter should see HashiCorp achieve a new miletone, breaking the half-a-billion annual revenue barrier for the first time.”

During the quarter, HashiCorp announced its intentions to acquire a company called BluBracket Inc., which develops software that can identify and fix insecure code before it’s launched. The software is said to be especially good at catching so-called hardcoded secrets, which include any passwords that an application may store, encryption keys and the authentication tokens that workloads use to verify one another’s security before exchanging data.

HashiCorp said the plan is to integrate BluBracket’s software with its open-source secret management offering, called Vault. Once that’s done, Vault will be capable of not only storing secrets but also ensuring that they’re not accidentally hardcoded into the software that uses them.

Photo: HashiCorp/YouTube