Key Points

Although net income is usually not the key profitability metric for REITs, this one missed badly on the line item in its first quarter. The company also sliced its revenue and profitability guidance for the full year.

Investors were bearish on the equity of Alexandria Real Estate Equities(NYSE: ARE) throughout Tuesday's trading session. After the office space-focused real estate investment trust (REIT) reported its latest quarterly results, its stock fell and continued to wallow. It closed the day almost 6% lower in price. Meanwhile, the benchmark S&P 500(SNPINDEX: ^GSPC) crawled 0.6% higher.

Flipping into the red

For its first quarter of 2025, Alexandria's total revenue came in at just under $758 million. This was down some distance from the $769 million of the same period in 2024. The company's net loss according to generally accepted accounting principles (GAAP) was $11.6 million, or $0.07 per share. That was quite the shift from the first quarter 2024's nearly $167 million profit.

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However, funds from operations (FFO) is considered a truer yardstick for a REIT's profitability. Alexandria was well in the black on that metric, although it suffered a year-over-year fall to $392 million ($2.30 per share) from almost $404 million.

The company missed badly on the bottom line; analysts tracking Alexandria's stock were anticipating a profit of $0.76 per share. At least it beat on revenue, as those pundits were collectively modeling a figure of less than $752 million.

A big chop to guidance

Sentiment on Alexandria was also effected by significant cuts in guidance for full-year 2025. The company now feels it will earn $1.36 to $1.56 per share in GAAP net income, which is a much lower range than its previous forecast of $2.57 to $2.77. The consensus analyst is $3.80.

FFO guidance for the year was also reduced, to a range of $8.51 to $8.71 per share; previously, management was predicting $9.23 to $9.43.

To put it mildly, the office segment of the real estate market remains volatile, due to the persistence of work-from-home arrangements. It might be best to stay away from Alexandria and other office REITs because of this.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alexandria Real Estate Equities. The Motley Fool has a disclosure policy.

Why Alexandria Real Estate Stock Tumbled on Tuesday was originally published by The Motley Fool

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