Asana (NYSE:ASAN) shares fell sharply following the release of its first quarter earnings report due to investor concerns about slowing revenue growth and a warning about net retention rate headwinds.
For the first quarter, the work management platform's revenue increased 9% year-over-year to $187.3 million, a significant slowdown from 26% growth reported in the year-ago quarter.
This was higher than analyst estimates of $185.5 million.
Adjusted earnings per share (EPS) were $0.05, an improvement from a loss per share of $0.06 in the year-ago quarter and beating estimates of $0.02.
Asana CFO Sonalee Parekh warned during the company’s earnings call that net retention rate (NRR) would remain a headwind in the near term due to downgrade pressure in enterprise and middle-market segments and increased buyer scrutiny leading to longer decision times, which also weighed on the stock on Wednesday.
The company reported an overall dollar-based NRR of 95% for the quarter, slightly below analyst expectations of 96%.
On a positive note, Asana raised its full-year non-GAAP operating margin outlook to at least 5.5%.
“Looking ahead, we’re raising our full-year non-GAAP operating margin guidance, reflecting our confidence in our ability to drive durable, profitable growth—even in the face of macro uncertainty,” Parekh said in a statement.
“We are focused on driving efficiency while remaining committed to investing in AI innovation, customer health, and customer acquisition—key drivers of long-term growth acceleration.”
Analysts cautious
Jefferies highlighted that Asana has begun to see signs of macroeconomic strain, particularly in the form of elongated sales cycles and heightened budget scrutiny among enterprise customers in the Americas.
While regions such as Asia Pacific and Japan and Europe, along with small business segments, remain strong, the cautious tone has led management to reduce the lower end of its fiscal 2026 revenue guidance by $7 million.
One of the most notable wins in the quarter was a record $100 million, three-year renewal deal with a major global tech customer. However, Jefferies flagged that the deal, while headline-grabbing, was renewed at a lower annual contract value than previous annual renewals.
Asana’s AI Studio, now in general availability, added $1 million in annual recurring revenue within its first two months. Despite this early momentum, Jefferies also cautioned that meaningful revenue contribution from AI Studio likely won’t materialize until fiscal 2027, leaving Asana more exposed to near-term macro softness.
Shares traded down 14.6% at $16 in early trade on Wednesday.