Magic Software Enterprises Faces Third-Quarter Revenue Shortfall

Shares of Magic Software Enterprises have taken a significant hit following a warning from the Israeli business software maker regarding a revenue shortfall in the third quarter. The company attributes this decline to unexpected cancellations from some of its important U.S.-based blue-chip customers.

Chief Executive, Guy Bernstein, stated that during the latter half of the third quarter of 2023, there was a substantial and unexpected decrease in demand for their software services. These customers suddenly decided to suspend active time and materials based projects without any advance notice.

As a result of these cancellations, Magic Software now expects to report third-quarter revenue of approximately $129.3 million, falling short of its previous target range of $142.4 million to $143.1 million. The company also anticipates reporting third-quarter adjusted operating income of about $17.1 million.

Looking ahead to the fourth quarter, Magic Software projects revenue in the range of $115 million to $125 million.

Further complicating matters, the company discloses that around 200 of its employees have been drafted for service due to the outbreak of Israel's war against Hamas. Consequently, these employees will be unavailable for work.

While this news has undoubtedly impacted Magic Software's shares, it remains to be seen how the company will navigate through these challenges.