Why Thoughtworks Stock Is Crashing Today

Thoughtworks (TWKS -31.67%) stock is plummeting Tuesday. The company’s share price was up 31.9% as of 1:15 p.m. ET, according to data from S&P Global Market Intelligence.

Thoughtworks published fourth-quarter earnings results before the market opened this morning, posting sales and earnings performance that fell short of the market’s expectations. In addition to missing Wall Street’s revenue and profit targets for the period, the software and consulting specialist issued forward guidance that is spooking investors.

Thoughtworks’ Q4 report was a dud

Thoughtworks reported non-GAAP (adjusted) earnings per share of $0.02 on sales of $252.4 million, while the average analyst estimate had called for per-share earnings of $0.03 on revenue of $257.4 million. Revenue dipped roughly 19% year over year in the quarter, and also came in 5% lower than the company’s previous sales guidance. Management attributed the sales miss to supply constraints causing it to fall short of client demand as well as ongoing cautiousness from some clients.

Forward guidance was very disappointing

For the first quarter, Thoughtworks is targeting revenue between $241 million and $246 million. At the midpoint of the company’s guidance range, that would suggest a year-over-year sales decline of roughly 20.5%. Meanwhile, the company is guiding for an adjusted loss between $0.01 per share and $0.02 per share.

For the full year, management expects revenue to be between $980 million and $1.01 billion — suggesting an annual decline of roughly 11.5% at the midpoint of the guidance range. On the earnings front, the company expects to post an adjusted profit between $0.01 per share and $0.06 per share.

The company’s guidance points to a substantial step down from the adjusted annual earnings of $0.11 per share it posted last year. The rapid sales and earnings deterioration is proving to be a tough pill to swallow, and investors are aggressively selling out of the stock today.