Big-data analytics giant Splunk Inc. was left reeling today after missing on its third-quarter earnings and revenue targets and offering guidance for the next quarter that fell way short of expectations.

The company’s stock lost more than 23% of its value on Thursday after it reported a loss before certain costs such as stock compensation of 7 cents per share on revenue of $559 million. That represented a sales decline of 11% from the same quarter last year.

Those results were some way short of Wall Street’s guidance of earnings of 9 cents per share on revenue of $613 million.

Splunk’s guidance was way off the mark too. For the fourth quarter, it’s expecting revenue of between $650 million and $700 million, versus Wall Street’s forecast of $777.7 million.

Splunk Chief Executive Doug Merritt (pictured) did his best to put a brave face on things, saying that “even in the face of uncertain market conditions, Splunk remains one of the fastest-growing companies in the history of enterprise software.”

He also pointed to an important milestone for the company, noting that its total annual recurring revenue topped $2 billion for the first time.

Splunk’s total ARR rose to $2.07 billion, up 44% from the same quarter one year ago. ARR is an important metric for investors because it shows how much recurring revenue a company can expect to receive based on its yearly subscriptions. The company’s cloud revenue came to $145 million, up 80%, while cloud ARR hit $630 million, up 71% from a year ago.

Splunk also added 444 new enterprise customers in the quarter.

The numbers do at least suggest that Splunk’s transition to a cloud business model is progressing well. But the company, which sells software to help enterprises search, correlate, analyze, monitor and report on data in real time, is still heavily reliant on its old licensing business, and that, it would seem, is struggling.

Holger Mueller of Constellation Research Inc. told SiliconANGLE that Splunk was one of numerous technology companies that are still stuck in the midst of a transformation from licenses to cloud services. Unfortunately in Splunk’s case, the growth in the cloud has not made up for the decline in its license revenues.

“The pressure on profit goes up because cloud services carry a smaller margin than license revenue,” Mueller explained. “Both trends make it hard for Splunk to look good, and that’s a pity as the vendor is heading in the right direction on the product side with new innovations being made available that are key for enterprises operating in the cloud era.”

The analyst said there were other positives too, with Splunk reducing its sales and marketing expenditures and other general costs.

“The next quarters will be critical,” he said. “But investors need to ask when Splunk will pass the inflection point where cloud services are large enough to make up for the reduced license sales.”

During the quarter, Splunk held its annual Splunk.conf event and took the opportunity to announce a major update to its Data-to-Everything platform that helps to expand customer’s multicloud capabilities and give them easier access to their data. The new version also includes a Machine Learning Environment that makes it easier for companies to build and operationalize machine learning models by bringing data from multiple sources into a single platform.

Splunk also announced its plans to acquire Flowmill Inc., a Palo Alto, California-based startup whose software helps enterprises get visibility into their networks.

Photo: SiliconANGLE