New Relic (NEWR) Q2 Earnings Report Preview: What To Look For

Kayode Omotosho /
2022/11/07 2:30 am EST

Application performance management software company New Relic (NYSE:NEWR) will be reporting earnings tomorrow after the bell. Here's what investors should know.

Last quarter New Relic reported revenues of $216.4 million, up 19.9% year on year, beating analyst revenue expectations by 1.55%. It was a mixed quarter for the company, with a meaningful improvement in gross margin but underwhelming revenue guidance for the next quarter. The company added 38 enterprise customers paying more than $100,000 annually to a total of 1,137.

Is New Relic buy or sell heading into the earnings? Read our full analysis here, it's free.

This quarter analysts are expecting New Relic's revenue to grow 13.7% year on year to $222.5 million, slowing down from the 17.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Adjusted loss is expected to come in at -$0.06 per share.

New Relic Total Revenue

Majority of analysts covering the company have reconfirmed their estimates over the last thirty days, suggesting they are expecting the business to stay the course heading into the earnings. The company has a history of exceeding Wall St's expectations, beating revenue estimates every single time over the past two years on average by 2.6%.

Looking at New Relic's peers in the software development segment, some of them have already reported Q2 earnings results, giving us a hint of what we can expect. Dynatrace delivered top-line growth of 23.4% year on year, beating analyst estimates by 2.22% and Datadog reported revenues up 61.3% year on year, exceeding estimates by 5.37%. Dynatrace traded up 1.93% on the results, Datadog was up 4.87%. Read our full analysis of Dynatrace's results here and Datadog's results here.

The fears around raising interest rates have been putting pressure on tech stocks and while some of the software stocks have fared somewhat better, they have not been spared, with share price declining 5.91% over the last month. New Relic is down 0.3% during the same time, and is heading into the earnings with analyst price target of $70.5, compared to share price of $52.96.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.