(Bloomberg) -- Splunk Inc. shares rallied back from a 15% loss in post-market trading after the company’s chief executive offered reassurances that growth is intact despite revenue forecasts that trailed Wall Street estimates.
The data-software company forecast fiscal 2021 revenue of about $2.6 billion, which fell short of the average analyst estimate of $2.88 billion. First-quarter revenue is expected to be about $450 million, compared with an estimate of $523 million.
Chief Executive Officer Doug Merritt attributed the shortfall to the company’s shift to cloud-based services, under which revenue recognition is delayed relative to term contracts. The stock was down 1% as of 5:32pm in New York.
“ARR continues to accelerate and we see cloud continue to accelerate,” he said in an interview.
The San Francisco-based company, whose software helps companies analyze data to detect things like network outages and security threats, has seen cloud-based revenue surge in recent years and has shifted customers to annual billing from multiyear. Cloud revenue accounted for 35% of Splunk’s total revenue at the end of fiscal 2020, Merritt said.
That transition has caused confusion on Wall Street and contributed to a reduced free cash flow forecast in August that sent the stock tumbling. Splunk said Wednesday it’s targeting annual recurring revenue of 40% on a compound annual growth rate basis.
Merritt has augmented his company’s rapid growth with acquisitions. Splunk bought five companies last year, the biggest of which was the $1 billion acquisition of SignalFX.
Merritt said his focus remains executing on the completed deals.
“Integrating and delivering the is our number one priority,” he said.
Revenue last quarter expanded 27% to $791 million. That exceeded the average Wall Street estimate of $782.2 million. Fourth-quarter adjusted earnings per share were 96 cents, matching the estimate.
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