Image source: FireEye.

Shares of FireEye (NASDAQ:FEYE) fell more than 16% in after-hours trading on Thursday following the release of the company's second-quarter earnings report. The cyber security vendor turned in a disappointing revenue figure; worse, it sharply reduced its outlook for the rest of the year.

Let's take a closer look at the report.

Growth is slowing

FireEye lost $0.33 per share on revenue of $175 million. Analysts had expected the company to post a bigger loss per share ($0.39) but had projected additional sales, around $181.7 million. Notably, this continues a recent trend -- back in May, FireEye shares fell after the company's first-quarter sales came in below analyst estimates. Even more ominus, FireEye's revenue fell short of the guidance it gave back in May. Then, FireEye had said its second-quarter revenue would come in between $178 million and $185 million.

Although FireEye's loss was not as wide as anticipated, the company isn't profitable, and doesn't expect to be profitable anytime in the near future. Rather, investors have flocked to the company on the basis of its growth, which has been nothing short of extraordinary in recent years. Unfortunately, FireEye's growth has slowed dramatically. Its revenue was up only 19% on an annual basis this quarter. That's down sharply from the 56% revenue growth the company enjoyed in the second quarter last year.

Revenue is a favored metric among investors, but billings may be a more important figure when it comes to FireEye. The company is currently in the midst of a transformation. As I explained back in July, FireEye's customers are substituting subscription services in favor of hardware. As FireEye records hardware sales differently than it does subscriptions, its revenue figure can make the company's business look weaker than it actually is.

What is troubling in this earnings report is that FireEye's billings growth was even more muted than its revenue growth, rising just 10% year over year. That's far less than the 57% annual growth it recorded in last year's second quarter. It was also much worse than management had expected. FireEye had projected second-quarter billings to fall within $200 million and $215 million. Instead, it came in at just $196 million.

The rest of the year could be tough

Hopefully, FireEye doesn't fall short of its guidance in future quarters. If it does, it will be particularly unfortunate, as the company lowered its outlook for the year.

Previously, FireEye had expected to generate between $780 million and $810 million worth of revenue this year, and $975 million to $1.055 billion of billings. Now, however, management believes it will bring in just between $716 million and $728 million of revenue, and between $780 million and $810 million of billings. Gross margin is on track to come in a point lower than previously expected (72% compared to 73% previously), and the company's full-year loss could be worse, between $1.28 and $1.32 per share. In May, FireEye had projected a full-year earnings per share loss between $1.20 and a $1.27.

Worst of all, FireEye now believes its operating cash flow will be negative for the year, as its operations burn between $50 million and $55 million in 2016. In May, it had projected positive operating cash flow of between $70 million and $80 million. The change is largely driven by a restructuring: FireEye will shed workers and pay severances to better align its cost structure. Management hopes the change will propel the company to profitability on an adjusted basis by the end of next year. Still, the fact that FireEye is undertaking a series of layoffs may signal that the company's days of rapid growth are behind it.

Overall, it's been a difficult year for FireEye shareholders, and it appears the pain will continue for some time. It's only the first quarter under new CEO Kevin Mandia, but it's hard to paint FireEye's results as anything other than a disaster.

FireEye shareholders who still believe in the company should look for it to at least match its guidance next quarter, or it may be time to finally exit.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.