Cigna earnings beat by $0.04, revenue topped estimates
On Thursday, Goldman Sachs adjusted its outlook on Couchbase Inc (NASDAQ:BASE), reducing the price target to $17 from the previous $18, while keeping a Sell rating on the stock. The adjustment follows Couchbase’s second-quarter fiscal year 2025 earnings report.
The company’s total revenue and operating margins exceeded consensus estimates by 1% and approximately 200 basis points, respectively. However, the annual recurring revenue (ARR) of $214 million was in line with the guidance provided.
Despite the slight outperformance, Couchbase’s stock experienced a 10% decline, which Goldman Sachs attributes to several factors. One is the smallest revenue beat to date at only 1%, compared to an average of 7% in previous quarters. Another is the deceleration in year-over-year revenue growth, with third-quarter guidance suggesting around 10% growth, a significant drop from 25% and 20% in the first and second quarters of fiscal year 2025, respectively.
Couchbase’s report also highlighted the churn of two major customers, one of which was unexpected and adopted an open-source solution, along with typical churn and down-sell behavior. However, there were some positive takeaways from the quarter, including the third-highest gross ARR quarter to date, despite the churn, and continued momentum with Capella, as evidenced by 37 sequential additions and a net new ARR of $5 million, which is the highest figure to date.
Management has reiterated its guidance for fiscal year 2025, projecting a 15% increase. This guidance is set against a challenging macroeconomic backdrop and suggests a recovery weighted towards the second half of the fiscal year, with expectations of a Q4-skewed performance.
Goldman Sachs believes the second-quarter results confirm its thesis regarding Couchbase’s prolonged negative margin profile and the challenges it faces in achieving durable medium-term 20%+ ARR growth, especially given the presence of well-resourced competitors. The firm indicates that it could become more positive on the stock if Couchbase demonstrates an accelerated profitability profile or notable acceleration in Capella in fiscal year 2026 and beyond.
In other recent news, Couchbase Inc. reported better-than-expected second-quarter results, with adjusted earnings per share of -$0.06, surpassing the consensus estimate of -$0.09. The company's total revenue grew by 20% YoY to $51.6 million, exceeding expectations of $51.11 million. In the same vein, annual recurring revenue (ARR) stood at $214 million, aligning with the company's guidance.
Despite these positive outcomes, Goldman Sachs has reduced the price target for Couchbase from $18 to $17 while maintaining a Sell rating. This adjustment follows the company's second-quarter fiscal year 2025 earnings report, where it was noted that total revenue and operating margins outperformed consensus estimates by 1% and roughly 200 basis points, respectively.
The company's third-quarter and full-year fiscal 2025 guidance were largely in line with consensus estimates. However, Goldman Sachs suggests that achieving a sustainable 20%+ ARR growth may be challenging due to competition from well-funded rivals.
An improved profitability profile or significant acceleration of Capella, the company's database-as-a-service, in fiscal year 2026 and beyond could lead to a more positive outlook on the stock, according to the firm.
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