Splunk Inc.‘s stock dipped late today after the data analytics company issued revenue guidance for its fiscal first quarter way below analysts’ expectations.

The warning came after the company reported fourth-quarter financial results that beat Wall Street’s revenue targets. The company posted a profit before certain costs such as stock compensation of 96 cents per share on revenue of $791 million, up 27% from a year ago.

Wall Street was also expecting a 96-cent profit, albeit on lower revenue of $783.2 million.

The company, which sells software that helps enterprises to search, correlate, analyze, monitor and report on data in real time, added that its software revenue for the quarter came to $617 million, up 33% from a year ago.

Splunk also published its full fiscal-year results, reporting an adjusted profit per share of $1.88 on total revenue of $2.359 billion, up 31% year-over-year. Software revenue for the full year came to $1.686 billion, up 40%.

All in all, it was a pretty decent end to what was a solid year for Splunk. But investors were quick to distance themselves from the company when they saw its guidance for the next quarter.

Executives said they’re expecting first-quarter revenue of about $450 million, which is quite a bit below the $526.7 million in revenue forecast by Wall Street analysts. As a result, Splunk’s stock was down more than 4% in after-hours trading.

In a conference call, Splunk executives tried to draw attention away from that miserable forecast, saying that the company’s annual recurring revenue rate is a much better metric by which to evaluate its growth. At the end of the quarter Splunk reported a total ARR of $1.68 billion, up 54% from a year ago. The company is now targeting 40% ARR growth over the next three fiscal years, said Splunk Chief Financial Officer Jason Child.

“We expect our cloud products could represent more than 60% of our total software business in the next few years and during this shift, ARR is the best metric to evaluate our growth,” Child said.

Despite the lower forecast, Splunk remains a company that is firing on all cylinders, fueled by its new platform philosophy of “data to everything”, Constellation Research Inc. analyst Holger Mueller told SiliconANGLE.

“Splunk has also made big steps in the key area of observability of modern software environments and next generation applications,” Mueller said. “Now it’s all about execution, no matter if the metric is ARR or traditional revenue numbers, Splunk needs to grow and 2020 will show if it can do that.”

Photo: Splunk