Red Hat stock fell almost 5 percent on Tuesday after it reported better-than-expected earnings for the third quarter of its 2018 fiscal year, which ended on Nov. 30.
Red Hat's revenue was up 22 percent year over year. Application development and emerging technology subscription revenue came in at $162 million, which was up 44 percent year over year. Operating cash flow was $160 million, up 18 percent year over year and above the FactSet consensus of $147.8 million, according to StreetAccount.
With respect to guidance, the company said in a statement that it expects 81 cents in earnings per share, excluding certain items, and $758 million to $763 million in revenue in its fiscal fourth quarter. Analysts were expecting 75 cents in earnings per share, excluding certain items, and $753.7 million in revenue for that period, according to Thomson Reuters.
Red Hat brings in revenue from subscriptions, training and support for a distribution of the Linux open-source operating system and other software. Competitors include Hewlett Packard Enterprise, IBM, Microsoft and Oracle.
On Dec. 15 Stifel raised its target price for Red Hat stock to $150 per share. "We believe RHT's strategic position continues to strengthen as companies adopt hybrid cloud environments," Stifel's Brad Reback and Adam Borg wrote in a note.
Red Hat stock is up about 85 percent since the beginning of the year.