Shares of AppFolio (APPF), a provider of cloud-based software solutions for the real estate industry, plummeted by 6.3% in the pre-market trading session on Friday. This sharp decline came despite the company reporting a revenue beat for the fourth quarter of 2024, as investors reacted to a slight miss on earnings per share (EPS) and contracting operating margins.

AppFolio's Q4 2024 revenue rose by 19% year-over-year to $204 million, surpassing the analyst estimate of $200 million. However, the non-GAAP EPS of $0.92 fell short of the expected $0.94, missing expectations by 2.1%. Additionally, the company's non-GAAP operating margin contracted to 20.2%, down from 24.3% in the prior year's quarter.

The earnings report and conference call shed light on the factors contributing to the margin squeeze and EPS miss. AppFolio cited increased investments in product development, scaling efforts, and the acquisition of LiveEasy as key drivers behind the higher operational costs. Furthermore, one-time expenses related to executive transitions, including the departure of the former CFO, also impacted profitability during the quarter.