New Relic Needs To Accelerate PaaS Strategy

According to a recent report, the global Application Performance Management (APM) industry is expected to grow 11% annually over the next few years to become an $11.2 billion industry by 2027. New Relic (NYSE: NEWR) recently announced its quarterly results that continue to outpace market expectations.

New Relic’s Financials

For the second quarter, New Relic’s revenues grew 14% to $166 million, ahead of the analysts’ estimates by 1.61%. GAAP loss grew from $16.9 million a year ago to $42.9 million. Non-GAAP loss of $0.07 per share fell short of the market’s forecast of $0.01 per share.

Among key metrics, customers with more than $100,000 in revenues grew to 1,039 from 908 a year ago. 77% of ARR was from Enterprise Paid Business Accounts, compared with 71% a year ago.

For the third quarter, New Relic forecast revenues of $163-$165 million with a non-GAAP net loss per diluted share of $0.13-$0.17. The Street was looking for revenues of $166.62 million for the quarter with a net loss of $0.01 per share.

New Relic’s Acquisition

Recently, New Relic announced its plans to acquire San Francisco-based Pixie Labs. Pixie Labs was set up to simplify the process of troubleshooting and live debugging applications in environments with Kubernetes by providing instant access to telemetry data, without manually adding instrumentation to the code. The acquisition will expand New Relic’s opportunity to serve the Kubernetes market and accelerate observability across organizations of all sizes. Prior to the acquisition, Pixie Labs had raised $9.2 million from one round of funding from investors GV and Benchmark. Its financial details are not disclosed.

Kubernetes is a fast-growing market. According to a recent survey by the Cloud Native Computing Foundation, 83% of survey respondents use Kubernetes in production, compared with 58% in 2018. Despite the increase in adoption, the Kubernetes support for software engineering teams remains lackluster. New Relic is hoping to address this market through the acquisition.

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