Commvault reported Q3 revenue of $314 million, up 19% year-over-year, and non-GAAP earnings of $1.17 per share, comfortably above consensus estimates. Despite topping expectations on both top and bottom lines, the stock plunged over 30% as the company’s prior valuation at 73 times trailing earnings left little cushion for anything short of aggressive guidance. Investors reacted strongly to management’s cautious outlook for Q4, sending shares lower in volatile trading.

Annualized recurring revenue reached $1,085 million, a 22% increase year-over-year (17% on a constant currency basis), driven by subscription ARR of $941 million, up 28%. Subscription revenue climbed 30% to $206 million, including 44% growth in SaaS bookings. Non-GAAP operating margin held at a healthy 19.6%, while free cash flow was $2 million, affected by working capital timing. These metrics underline the company’s transition to a software-driven model with high visibility.

For Q4, Commvault expects total revenues of $305 million to $308 million and subscription revenue of $203 million to $207 million, implying growth deceleration compared with the current quarter. Full-year guidance anticipates revenues between $1,177 million and $1,180 million and subscription ARR growth of approximately 24%. Non-GAAP EBIT margin is projected to remain near 19%–20%, while free cash flow is forecast at $215 million to $220 million, including one-time restructuring costs.

Over the past year, consensus price targets have fallen from $191.35 to $175.29 as analysts factor in slowing growth in legacy licenses and intensifying competition in data protection. RBC Capital’s latest target stands at $63, reflecting valuation concerns relative to peers in the information-management sector. Investors will be watching the upcoming Q4 webcast for any color on product adoption trends and margin expansion initiatives.