What’s going on with Samsara stock after Q1 earnings?

Samsara Inc. (NYSE: IOT) shares are trading 14% lower at $30.04 after the company reported its first-quarter FY25 results.

Despite delivering solid financial performance and exceeding Wall Street expectations, the market reacted negatively to the company’s outlook.

Revenue and profit surge

In Q1 FY25, Samsara reported a 37% year-over-year (Y/Y) increase in revenue, reaching $280.7 million, beating the consensus estimate of $266.84 million.

Annual Recurring Revenue (ARR) also surged 37% Y/Y, totaling $1.18 billion.

Adjusted gross profit rose significantly to $215.9 million from $149.7 million a year ago, with a margin of 77% compared to 73% in the prior year.

This growth highlights Samsara’s ability to maintain strong profitability amidst its expanding operations.

Improved operating income and cash flow

Samsara’s adjusted operating income showed a remarkable turnaround, standing at $6.2 million versus a loss of $19.0 million in the previous year.

Additionally, the company reported an adjusted EPS of $0.03, exceeding the estimated loss of $(0.01).

Operating cash flow was $23.7 million, and adjusted free cash flow came in at $18.6 million, reflecting the company’s enhanced financial stability and operational efficiency.

Outlook and market reaction

Despite the strong quarterly performance, Samsara’s guidance for the next quarter and the full fiscal year contributed to the stock’s decline.

For the second quarter, the company expects adjusted EPS of $0.00-$0.01, which is below the estimate of $0.01, and revenue of $288 million-$290 million versus the estimate of $287.25 million.

The revised FY25 adjusted EPS outlook is $0.13-$0.15, up from the previous guidance of $0.11-$0.13, compared to a consensus of $0.12.

The FY25 revenue outlook was adjusted to $1.205 billion-$1.213 billion, from the previous $1.186 billion-$1.196 billion, versus an estimate of $1.20 billion.

Slowing growth and future prospects

Although Samsara’s revenue grew by 37.4% Y/Y to $280.7 million, the growth rate has slowed compared to the previous quarter’s increase of $38.74 million.

The company’s guidance suggests a further slowdown, with next quarter’s revenue expected to grow by 31.8% Y/Y to $289 million, compared to a 42.8% Y/Y increase in the same quarter last year.