Cloudera (NYSE: CLDR) once again proved its mettle by reporting impressive results for the April-quarter that was mostly marred by the market-turmoil spurred by the virus attack. Though the tech firm stands to benefit from the growing relevance of cloud-based solutions, even as remote working becomes the new normal in the business world, the recessionary effects of COVID might weigh on performance in the near term.
The Palo Alto, California-based company remains confident in the loyalty of its customers and the recurring revenue streams. The steady rise in the adoption of the Cloudera Data Platform (CDP), the flagship enterprise data cloud launched last year, and customer wins reflect the resilience of the business model.
On the flip side, some enterprises might postpone their decisions on investing in IT infrastructure and delay projects as the situation remains fluid. The company looks to overcome the impact of this issue by rightsizing the business and reducing costs to the levels where they do not affect margin.
“During times of economic stress, customers typically freeze current projects and limit new investment. We have no reason to believe that this downturn will be different and we assume that new applications and workloads are less likely to be funded while inertia will control existing projects.” Cloudera’s CEO Rob Bearden told analysts during his post-earnings address.
New Era Begins
It has been more than three years since the company became a public entity and the stock has gone through a series of ups and downs. While the outlook for the stock remains bearish, despite the company reporting a profit for the last quarter, it rallied this week due to the general uptick in sentiment. Analysts recommend holding Cloudera, citing the relatively slow recovery.
If the management’s optimistic earnings outlook is any indication, the turnaround would gather further steam in the second quarter. The key growth driver remains the CDP public cloud, which has been well received by the market. It will allow customers to operate in a hybrid environment in the future, especially after the launch of the CDP private cloud later this month.
“We’re into sort of the next phase of accelerating our digital transformation to make sure our customers can onboard to CDP in a self-service way, mix leading that effort inside the company. It’s exactly on track with the goal, and they were ambitious goals that we put in place.”Rob Bearden, CEO of Cloudera
According to the executives, the unique hybrid platform that is capable of handling the entire life cycle of data gives the company an edge over competitors. Also, the churn rate has moderated and contract renewals picked up steadily since last year. The software business remained largely unaffected by the coronavirus, but the services segment is struggling to maintain the momentum.
The impressive first-quarter report has come as a relief to investors and it is viewed as a testament to the efficient leadership of CEO Rob Bearden, who took charge early this year succeeding Tom Reilly. The timely shift in strategy, of investing more in existing customers despite the several new additions in recent months, is an effective way to retain market share in these times of uncertainty.
Q1 Numbers Beat
Cloudera has improved its financial position consistently over the years and recovered from the losing spree. It posted earnings of $0.05 per share for the April-quarter – compared to a loss last year – which also beat Wall Street’s prediction. A double-digit gain in subscription revenue more than offset a slump in the services segment, pushing up total revenue to $211 million. The guidance issued by the management indicates that the segment-performance trend will continue in the current quarter.
The recovery of Cloudera’s shares from last year’s record lows was hampered by the mass selloff set off by the COVID outbreak in mid-March. However, the stock quickly returned to the growth path in the following weeks and gathered momentum after the first-quarter earnings. It closed the last trading session down 31% from the IPO price.
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