Fortinet, Sprouts and ServiceNow Drop 17% to 22% After Hours as Earnings Outlooks Disappoint

U.S. stocks saw sharp after-hours declines Wednesday as earnings and outlooks disappointed investors across technology and consumer names. Fortinet (FTNT) fell 21.62%, Sprouts Farmers Market (SFM) fell 17.34% and ServiceNow (NOW) fell 16.85%, according to the after-hours moves provided to MarketCatalyst. Alphabet (GOOGL) lost 8.24% after reporting a Cloud-led quarter with negative free cash flow.

The biggest after-hours decliners

Fortinet: strong quarter, outlook not enough

Fortinet reported third-quarter revenue of $2.08 billion, up 20%, and billings of $2.34 billion, up 29%. Product revenue rose 37% to $765 million, and non-GAAP diluted EPS was $0.91 on a non-GAAP operating margin of 38%. For the fourth quarter, the company guided to revenue of $2.155 billion to $2.245 billion, billings of $2.775 billion to $2.925 billion and non-GAAP EPS of $0.93 to $0.95. Full-year guidance is revenue of $8.125 billion to $8.215 billion and non-GAAP EPS of $3.54 to $3.58. The full-year EPS forecast was above estimates, according to the information provided, yet the stock still fell more than 21%.

Sprouts: full-year comparable sales forecast misses

Sprouts reported third-quarter net sales of about $2.3 billion, up 5%, with comparable store sales down 0.9% and diluted EPS of $1.21 versus $1.22 a year earlier. Its full-year forecast calls for net sales growth of about 4.3%, comparable store sales down about 1.7%, diluted EPS of about $4.80 and 42 net new stores. The forecast missed expectations, as provided to MarketCatalyst. CEO Jack Sinclair said the company recognizes "the need to improve our performance" and is acting to strengthen execution and drive traffic. By our calculation, a full-year comparable decline of 1.7% after a 0.9% decline in the third quarter implies a weaker fourth quarter.

ServiceNow: in-line revenue, a billings miss and AI worries

ServiceNow said third-quarter revenue was $4.11 billion, up 20.5% and in line with a consensus of about $4.10 billion, according to market data. Adjusted EPS was $1.00 versus $1.02 expected. Billings of $3.64 billion rose 23.2%, which was described as a miss. Remaining performance obligations were about $30 billion, up 23%. As provided to MarketCatalyst, its quarterly sales outlook renewed concerns over AI-related demand and spending. The stock was quoted at $149.86 earlier in the day, so by our calculation a 16.85% drop from that level implies roughly $124.60. Earlier on Wednesday, HPE chose ServiceNow as the foundation for support services in its Cloud & AI business under a five-year deal.

Alphabet, Align and the rest

Alphabet fell 8.24% (Class A) and 8.14% (Class C) after revenue of $127.58 billion came in slightly below estimates and net income dropped on an $8.7 billion equity-securities loss; free cash flow was negative $9.07 billion. See our full Alphabet earnings coverage. Align Technology reported third-quarter revenue of $1.015 billion, up 1.9%, and non-GAAP EPS of $2.80 versus $2.61 a year earlier. It guided fourth-quarter revenue to $1.000 billion to $1.020 billion, which by our calculation is about flat with the third quarter at the midpoint. The outlook missed estimates, as provided. MiMedx reported a sales miss, according to the information provided. Atlassian (-7.10%), Rubrik (-5.81%) and Aurora Innovation (-5.70%) also declined.

What it means

The common thread is guidance. Fortinet and ServiceNow reported growth of 20% or more yet were punished for the outlook, Sprouts guided comparable sales below expectations, and Alphabet's spending outpaced its cash flow. After-hours moves can narrow or widen by the next open, and thinly traded after-hours prices can be volatile, so the regular session on Thursday will show how much of the selling holds.

Sources: Company earnings releases from Fortinet, Sprouts Farmers Market, ServiceNow and Align Technology (Oct. 28). After-hours percentage moves, consensus comparisons and company-specific catalysts not found in those releases are as provided to MarketCatalyst. This is informational, not a recommendation to buy or sell.