Earnings preview: Will Cloudera make a surprise turnaround in Q2?

Cloudera (NYSE: CLDR), which has been struggling to recover from the current losing streak, is unlikely to return to profitability in the second quarter of 2020. Reflecting the underlying weakness, the company had provided downbeat guidance in its recent quarterly earnings reports.

For Cloudera, a leading provider of artificial intelligence software, market watchers predict a moderate loss of $0.1 per share for the July quarter, which is broadly in line with last year’s loss. In contrast, they are looking for a 66% growth in revenues to $183.27 million. The results will be published on September 4 at 4:10 am ET.

The stock barely witnessed any improvement after slipping to a record low in June, following the dismal first-quarter results. The debacle also forced CEO Tom Reilly to step down. The current downturn, which started after the company got mired in multiple lawsuits for allegedly misleading investors with an extensive revision of its 2020 guidance, is expected to continue in the near future.

A ‘Sinking Ship’?

The whole episode has given Cloudera the image of a sinking ship, which is something the new management team needs to attend to on a war footing. It needs to be noted that the stock has fallen 54% in the past twelve months.

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Cloudera’s merger with rival tech firm Hortonworks earlier this year, a move aimed at taking on Amazon Web Services, was not well-received by investors. It is estimated that the slowdown in sales, amid interruptions caused by the integration of Hortonworks, will continue to weigh down on overall performance.

CDP in Focus

For a turnaround, the stakeholders are currently pinning hope on the recently launched Cloudera Data Platform (CDP), which was showcased to a large group of customers at an event a few months ago. Meanwhile, the management is making every effort to bring the business back on track, including strategic partnerships with tech majors like International Business Machines (BM).

Q1 Outcome

In the first quarter, Cloudera’s revenue rose 82.5% year-over-year to $187.5 million but missed the market’s expectation. On an adjusted basis, it recorded a loss of $0.13 per share, which topped the Street view by a wide margin.

Related: Cloudera Q1 2020 Earnings Conference Call Transcript

From an investment perceptive, it is too early to write off Cloudera, given its turnaround prospects in the fast-growing cloud market that is still at a nascent stage. Also, the company’s business is considered to be unaffected by the tariff-related uncertainties.

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