According to a research report published late last year, the global application performance management (APM) market is estimated to grow at 12% CAGR through 2025 driven by the continuing adoption of artificial intelligence and the investments by public and private organizations. APM expert New Relic (NYSE: NEWR) recently announced its third quarter results that failed to meet earnings estimates.
New Relic’s Financials
For the third quarter, New Relic’s revenues grew 23% to $153 million, ahead of the analysts’ estimates of $149.2 million. GAAP loss grew from $8.5 million a year ago to $24.2 million. Non-GAAP income from operations was $3 million compared with $7.8 million a year ago. Adjusted non-GAAP net income earnings of $0.09 per share missed the market’s forecast of $0.12 per share, and fell from previous year’s income of $0.19 per share.
Among key metrics, customers with more than $100,000 in revenues grew to 926 from 816 a year ago. 62% of ARR was from Enterprise Paid Business Accounts 56% a year ago. Dollar-Based Net Expansion Rate for the third quarter was 109%, compared to 122% last year.
For the fourth quarter, New Relic forecast revenues of $154-$156 million with non-GAAP net income per diluted share of $0.02-$0.06. It expects to end the year with revenues of $594- $596 million and non-GAAP net income of $0.54-$0.59. The Street was looking for revenues of $155.06 million for the quarter with an EPS of $0.08 per share and revenues of $590.94 million for the year with an EPS of $0.64.
New Relic’s Cloud Growth
New Relic continues to expand its cloud offerings. During the last quarter, it announced the acquisition of Seattle-based IOpipe, an early-stage serverless monitoring startup. Set up in 2016 by Erica Windisch and Adam Johnson, IOpipe leverages its insight into AWS Lambda to provide detailed, high-cardinality data that allows teams to troubleshoot complex workloads. According to Gartner, by 2023, 100% of enterprises that use Infrastructure-as-a-Service (IaaS) or public clouds will use some serverless PaaS in production applications. New Relic is counting on this growth to help with these serverless technologies.
Following the acquisition, IOpipe’s team will initially focus on integrating key technology, such as support of AWS Lambda Layers and deployment frameworks, into the New Relic One observability platform. This will be followed by the development of a roadmap to accelerate New Relic’s support for other serverless technologies. Terms of the acquisition were not disclosed. Prior to the acquisition, IOpipe had raised $5.5 million from investors including Underscore VC, Storm Ventures, Struck Capital, Las Olas Venture Capital, Madrona Venture Group, New Enterprise Associates, Boldstart Ventures, and Correlation Ventures.
New Relic’s PaaS Strategy
Besides the cloud, New Relic is also focusing on building its platform strategy. Last September, it announced the New Relic One Observability Platform. New Relic One is aimed at connecting user experience and business data with its additional capabilities like New Relic Logs, Traces, Metrics, and AI. The platform has been opened to allow customers to bring in agent-based and open telemetry data. New Relic realizes that to unleash the power of a platform, it needs to allow third party developers to develop additional capabilities. New Relic One allows customers and partners to build their own observability applications.
As part of the PaaS strategy, it also released several open-source tools built on top of the New Relic platform. It also offers freely available apps such as Cloud Optimize, GitHub Integration, Site Analyzer, Status Page, and Customer Journeys.
Its stock is trading at $49.37 with a market cap of $2.8 billion. It touched a 52-week high of $108.91 in April last year. The stock has been steadily declining over the last year and the recent turbulence has not helped it much. It hit a 52-week low of $33.49 last month.
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