Why Thoughtworks Stock is Plunging Today

work of thought (TWKS -31.67%) Stock prices are falling sharply on Tuesday. The company’s shares were up 31.9% as of 1:15 p.m. ET, according to data from S&P Global Market Intelligence.

Softworks announced its fourth quarter results before the market opened this morning, recording sales and profits that fell below market expectations. In addition to missing Wall Street’s revenue and profit targets for the period, the software and consulting specialist issued advance guidance that surprised investors.

Thoughtworks’ fourth quarter report was a mess

Thoughtworks reported non-GAAP (adjusted) earnings per share of $0.02 on revenue of $252.4 million, while the average analyst estimate called for earnings per share of $0.03 on revenue of $257.4 million. Sales for the quarter were down about 19% year-over-year and 5% below the company’s previous sales guidance. Management determined that the sales failure was due to supply constraints, falling short of customer demand and requiring continued attention from some customers.

The 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, this would imply a revenue decline of approximately 20.5% year-over-year. Meanwhile, the company is guiding for adjusted losses 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, which would suggest a decline of about 11.5% for the year at the midpoint of the guidance range. On the revenue side, the company expects to post adjusted earnings between $0.01 per share and $0.06 per share.

The company’s guidance points to a significant decline from the $0.11 full-year adjusted earnings per share it posted last year. The sharp decline in sales and profits has proven to be a hard pill to swallow, and investors are selling the stock aggressively today.