Big-data company Splunk Inc.’s shares fell almost 3% in extended trading today after it gave a first-quarter and full-year outlook that came in far below Wall Street’s targets.

The company had just delivered strong fourth-quarter results, reporting earnings before certain costs such as stock compensation of $2.04 per share on revenue of $1.25 billion, up 39% from a year earlier. Wall Street had been targeting earnings of just $1.14 per share on sales of $1.08 billion.

The strong performance saw Splunk swing from a loss of $141 million a year earlier to record a net profit of $269 million for the quarter. For the full year fiscal 2023, it reported total revenue rose 37%, to $3.654 billion, with cloud revenue growing an even more imprssive 54%, to $1.475 billion.

However, the company is bracing itself for tougher times ahead. For the first quarter, it expects revenue of between $710 million and $725 million, quite a bit below the analyst consensus estimate of $807.2 million. For the full year, it’s targeting sales of $3.85 billion to $3.9 billion, below Wall Street’s forecast of $4.02 billion.

Chief Executive Gary Steele (pictured) focused on the positives, hailing the company’s “solid finish” to an important year. “Splunk plays a critical role in helping our customers ensure their digital systems are resilient, secure and able to adapt to constant change,” he said. “As we begin our new fiscal year, we remain committed to delivering durable growth and substantially increasing free cash flow.”

The company is the creator of a popular data processing platform that’s used by large enterprises to detect and troubleshoot technical issues within their information technology infrastructure. It also offers tools for dealing with cybersecurity incidents such as data breaches. Its tools are popular, used by thousands of enterprises.

Surprisingly, much of Splunk’s growth in the previous quarter was driven by license revenue, which rose 50% from a year ago, to $670 million. Cloud revenue, which has grown much faster in previous quarters, rose by 43%, to $413 million. Maintenance and services generated an additional $167 million, flat from the year before.

Holger Mueller of Constellation Research Inc. said Splunk seems to have turned a corner by achieving profitability in the last quarter. “Gary Steele and team have managed to grow the company’s revenue by almost $1 billion, while slightly reducing its operating expenses,” he said. “For years, Splunk was operating on a cost base that it would only be able to pay for in the next full year. Now, though, its revenues and outgoings have come in sync, enabling the company to generate a profit.”

As impressive as its performance was, Splunk understands that it’s not immune to the macroeconomic forces affecting the wider technology industry, and it has taken steps to mitigate their impact. Last month, the company announced it would lay off about 325 employees, representing 4% of its total staff, with most job losses coming in its North American offices. The layoffs were framed as part of a “broader set of proactive organizational and strategic changes” that also include changes to its business processes and cost structure, designed to ensure it can balance growth with profitability in the months to come.

In other news, Splunk announced that it has hired former Lyft Inc. executive Brian Roberts as its new chief financial officer.

Photo: CNBC Television/YouTube