Splunk Inc. topped analyst expectations in both revenues and earnings per share in its fiscal fourth quarter financial results, but the stock dove 7 percent after hours on a weaker-than-expected first-quarter forecast.

The developer of log analytics tools for operational intelligence said total revenues were $306.5 million, up 39 percent year-over-year, well ahead of consensus estimates of $288.22 million. Earnings per share were 25 cents against analyst estimates of 17 cents.

The first-quarter revenue forecast of between $231 million and $233 million was below analyst estimates of $241.42 million, however, which sparked the after-hours sell-off. For the full year, Splunk was more bullish, raising its fiscal 2018 revenue estimate to $1.185 billion, up $10 million over its most recent guidance and ahead of estimates of $1.18 billion.

For the 2017 fiscal year, total revenues were $950 million, up 42 percent over 2016. On the earnings call, Splunk executives referred more than 10 times to the company’s goal of reaching $2 billion in sales by 2020. “We’re early in our journey and investing for growth,” said Chief Executive Doug Merritt (pictured).

Indeed, executives insisted that Splunk’s only limitations are its own ability to grow. “The market opportunity is so big for Splunk, given that we can play in any use case, that market coverage is our biggest limitation,” Merritt said.

Splunk still doesn’t have a field sales presence in 18 states, “so we’ve got a lot of work to do,” said David F. Conte, senior vice president and chief financial officer. He said sales and marketing expenses will be above 50 percent of revenue for the remainder of fiscal 2018 as the company invests in growing its sales force and channel presence. Partners will be an important growth driver, Conte said. “We have been investing in our channel and I expect to realize the leverage from that in 2018 and forward,” he said.

Splunk added 700 customers in the quarter and 2,200 in the full fiscal year and said it’s tracking well to a goal of 20,000 customers by 2020. But the biggest growth is in existing accounts. Conte said more than 80 percent of fourth-quarter sales came from current customers who increased their spending. The company had 1,942 transactions of more than $100,000 and three of more than $10 million in the quarter.

Splunk’s erratic revenue performance is in part a consequence of its shift from perpetual licensing to a cloud subscription model. License revenues today make up nearly 60 percent of Splunk’s revenue, but the demand for subscription delivery in the cloud is growing.

Cloud subscriptions accounted for about 15 percent of fourth-quarter revenues and are expected to reach $85 million in fiscal 2018. “I think we’re in great shape in terms of transitioning to a selling notion of continuing our on-premises business but adding cloud,” Conte said. But he acknowledged that shift involves “moving the DNA” of the organization.

Executives also said growth is throttled by the lack of subject matter experts to help customers apply the ingestion and analytics tools to different usage scenarios. “Because Splunk is so broadly applicable, we need people in a lot of different markets,” Conte said.

Photo courtesy of Splunk