The stock market is an odd place.
Red Hat, the leading Linux company, saw its third quarter of fiscal year 2017 grow by 18 percent year over year to $615 million. Up. Still, Wall Street had expected Red Hat to make $618.5 million -- and the market immediately punished it with a 13.9-percent stock price drop.
I'll stick to covering technology. It makes more sense.
Red Hat's subscription revenue for the quarter was $543 million. That's up 19 percent. The company reported adjusted earnings of 61 cents per share, which was higher than analysts' estimated 58 cents per share.
Subscription revenue in the quarter made up 88 percent of total revenue. Breaking down the subscriptions, Red Hat Enterprise Linux (RHEL) subscription revenue was $431 million. That's an increase of 16 percent. Application development-related and other emerging technologies' subscription revenue was $112 million. This is an increase of 33 percent.
Jim Whitehurst, Red Hat's president and CEO, credits Red Hat's cloud business for much of the company's growth. "Enterprise and service provider customers continue to adopt a hybrid cloud strategy for developing, deploying, and managing the life-cycle of their critical applications. Red Hat is uniquely positioned to address this need."
One member of the Red Hat executive suite is leaving. Frank Calderoni, executive vice president of Operations and CFO, is moving on to become the CEO of an undisclosed company. Calderoni, former Cisco CFO, has said that he will work with Red Hat after his resignation as needed. Red Hat intends to appoint Eric Shander, VP of Finance and Accounting, as temporary CFO.
Calderoni's departure is being made on good terms. Whitehurst said, "Our warm thanks to Frank for his contributions to Red Hat and for helping prepare Red Hat for the rich business opportunity we have before us."
Looking ahead, Red Hat expects the next quarter to be between $614 million to $622 million. Analysts, setting Red Hat up for a fall, are predicting the company should make $638 million.
For the full year, Red Hat still expects to make at least a cool $2.397 billion. Not bad for a company when much of the market is still confused about how an open-source business can make money from "free" software.