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Shares of BlackBerry Ltd. were on track Friday for their worst one-day decline in more than two years Friday, after the company reported weak software and services revenue.

Though BlackBerry BBRY, -12.21% reported a surprise profit in its first-quarter, its revenue of $169 million in the software and services segment came in below some analyst expectations. In addition to the weak revenue, TD Securities Inc. analysts said they believed the stock drop came due to commentary around the companys free cash flow, which would be negative if its payment from Qualcomm Inc. QCOM, +0.78% were excluded.

The company received $940 million out of its arbitration with Qualcomm, in a case about Qualcomm charging phone makers excessive royalty payments. Without that payment, the analysts attributed the weakness in BlackBerrys free cash flow to the company moving away from its hardware business.

We expect this to normalize over the coming quarters as the company completes its hardware exit over the coming quarters, said Daniel Chan, lead analyst on the note.

BlackBerrys stock were sinking 11.1% in active midday trade, putting the stock on track for its worst one-day decline since Jan. 15, 2015. The decline would also be the biggest one-day, post-results selloff since the company reported fiscal first-quarter 2013 results on June 28 of that year.

Volume reached 27.4 million shares, nearly tripled the full-day average.

TD Securities analysts had software and services revenue expectations of $203 million. They say the next couple of quarters could be weak for the company, but they were encouraged by management commentary saying that they expect software and services revenue to grow 10% to 15% for the full year.

That growth is expected to come in the second half of the year, driven by strong billings as well as professional services.

This gives us confidence that management can hit its Software & Services target growth for the full year, Chan said.

BlackBerry said it expects to be profitable on a non-GAAP basis and to have positive free cash flow for the full year.

BlackBerry shares have gained 36% in the past three months, compared with the SPDR Technology Select Sector exchange-traded funds XLK, +0.63% 6.5% rise and the S&P 500s SPX, +0.16% gain of 4%.

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BlackBerry shares plunge after weak software revenue, negative cash flow - MarketWatch