By early afternoon, shares had slid 5.4% to $53.10.
The open-source software company said it expects revenue between $412 million and $415 million for its first quarter ending May. Analysts surveyed by Thomson Reuters forecast sales of $414.98 million, at the high-end of management's range.
First-quarter net income fell short of expectations, however. Red Hat issued earnings guidance of 32 cents to 33 cents a share, lower than analysts' estimates of 34 cents a share.
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For its fiscal 2015 ending February, the Raleigh, N.C.- based business said it expects revenue between $1.73 billion and $1.75 billion and earnings in the range of $1.54 to $1.56 a share.
Analysts had expected full-year sales of $1.751 billion and earnings of $1.58 a share.
Weak guidance overshadowed a better-than-expected fourth quarter. Red Hat reported net income of 39 cents a share on $400.4 million in sales.
Analysts had forecast 37 cents a share in net income and $398.92 million in revenue.
TheStreet Ratings team rates RED HAT INC as a Buy with a ratings score of B. The team has this to say about their recommendation:
"We rate RED HAT INC (RHT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
- You can view the full analysis from the report here: RHT Ratings Report