What happened

Shares of Cloudera (NYSE:CLDR) slumped on Friday after the machine learning and analytics platform provider posted its first quarterly report as a publicly traded company. While Cloudera beat analyst estimates for both earnings and revenue, an explosion in operating costs and a drop in deferred revenue since the start of the year may have contributed to the decline. Cloudera stock was down about 14% at 11:30 a.m. EDT.

So what

With shares of Cloudera trading at a double-digit multiple of sales, expectations were high going into the company's first earnings report. Cloudera seemed to largely beat those expectations, with first-quarter revenue of $79.6 million, up 41% year over year and nearly $4 million higher than the average analyst estimate. A non-GAAP loss of $0.27 per share was $0.08 better than analysts were expecting.

Cloudera Manager running on a laptop.

Image source: Cloudera.

But there were some problems on the cost side of the equation. Despite the surge in revenue, gross profit decreased year over year, driven by a near-tripling of the total cost of revenue. Operating expenses also rocketed higher, more than tripling year over year. Stock-based compensation totaled $191 million and was responsible for much of the increase in costs.

Deferred revenue, which provides some indication of future revenue, slipped from the fourth quarter. Total deferred revenue was $213 million, down from $217 million on Jan. 31. Seasonality may be a factor, but a company that sells subscriptions not touting deferred revenue growth is odd.

Now what

Cloudera expects revenue to grow by 32% to 33% year over year during the second quarter, a slowdown compared to the first quarter. A non-GAAP loss between $0.24 and $0.26 per share is expected. For the full year, Cloudera sees revenue growing by 32% to 34%, with a non-GAAP loss of $1.04 to $1.07 per share.

While Cloudera bested analyst expectations for the first quarter, costs rose far faster than revenue. Investors had been willing to pay more than 10 times annual sales for shares of Cloudera prior to its first earnings report. With slowing revenue growth, exploding costs, and massive losses, it's unclear whether that will remain true.