What Happened:

Shares of database as a service company Couchbase (NASDAQ: BASE) fell 15.7% in the morning session after the company reported second-quarter earnings results. ARR guidance for next quarter and the full year came in below Wall Street's estimates, though the company lifted full-year revenue guidance that is now in line with expectations. Notably, the company experienced higher-than-expected customer churn and down-sell, which dampened ARR growth. The bottom line wasn't encouraging either, as the business suffered cash burn and operating losses. Overall, this was a mixed quarter, with the ARR guidance likely to weigh on shares.

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What is the market telling us:

Couchbase’s shares are very volatile and over the last year have had 17 moves greater than 5%. But moves this big are very rare even for Couchbase and that is indicating to us that this news had a significant impact on the market’s perception of the business.

The biggest move we wrote about over the last year was 6 months ago, when the stock gained 17.9% on the news that the company reported fourth results that blew past analysts' total revenue, ARR (annual recurring revenue), and EPS estimates this quarter as it generated more subscription revenue than expected. Next quarter's revenue guidance was also higher than Wall Street's estimates, though its full-year outlook was in line.

Overall, this was a really good quarter that should please shareholders, especially with the broader software sector showing choppy full-year 2024 guidance.

Couchbase is down 24.4% since the beginning of the year, and at $15.96 per share it is trading 45.5% below its 52-week high of $29.26 from March 2024. Investors who bought $1,000 worth of Couchbase’s shares at the IPO in July 2021 would now be looking at an investment worth $525.62.

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