Investors in the Nasdaq Composite (NASDAQINDEX:^IXIC) have been richly rewarded in 2020, and December has gotten off to a good start for the index. Record highs have been frequent for the Nasdaq, and on Thursday, the benchmark appeared to be poised to reach new heights yet again. As of just after noon EST, the Nasdaq was higher by more than half a percent -- gains consistent with the remainder of the stock market.

Underlying the overall market, though, there were winners and losers. Okta (NASDAQ:OKTA) was one of several tech stocks that posted solid gains after releasing favorable earnings. However, Splunk (NASDAQ:SPLK) showed that not all Nasdaq stocks can satisfy their investors all the time.

Okta ups the ante

Shares of Okta were higher by 8% on Thursday, adding to recent gains. The cloud identity protection specialist made investors happy with its fiscal third-quarter financial results.

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Image source: Getty Images.

Okta stayed strong during the period. Revenue jumped 42% year over year, due largely to rising subscription-based sales. Subscription revenue backlog figures rose at an even healthier 53% pace during the period, and Okta enjoyed record free cash flow for the quarter. Moreover, the company posted an adjusted profit for the period, reversing a year-earlier loss and showing the progress it has made in building a sustainable business model.

Okta expects more growth to come as well. Fourth-quarter guidance called for sales to rise 32% to 33%, which would give it a 40% growth rate for the full year. The company is conservatively projecting a modest loss for the period even on an adjusted basis, but investors have gotten used to Okta setting a low bar and then surpassing it.

Investors have found that the dramatic acceleration in cloud adoption has required greater awareness of identity protection concerns, and Okta has stepped into the breach with its services. That could spur plenty of further growth for the company in the years to come.

Splunk goes splat

Meanwhile, Splunk's shares went the other way, plunging 20%. The data analytics specialist wasn't able to give its shareholders what they wanted to see in terms of growth.

Splunk's key numbers were mixed. Annual recurring revenue rose 44% from year-ago levels, bolstered by a 71% jump in cloud-based recurring sales. However, when considering revenue from all sources, Splunk's top line fell 11% year over year, as the company remains in transition in bolstering its recurring revenue inflows despite seeing 444 customers producing annual sales of $1 million or more.

Investors weren't pleased to see Splunk lose money again during the quarter, even on an adjusted basis. Moreover, company guidance for $650 million to $700 million in revenue for the fourth quarter wasn't in line with what Wall Street was expecting. The fact that Splunk withdrew its long-range guidance for the 2023 fiscal year also highlighted the uncertainty in the data analytics specialist's future.

In order to satisfy those following the stock, Splunk needs to return to profitability and find ways to close on deals it's losing to competitors. The company can't be patient with its transition to a full software-as-a-service model, and if it doesn't move quickly, Splunk could see further losses.

Let the buyer beware

The Nasdaq's gains make it seem as if profits are inevitable. But each company has its own strengths and weaknesses, and it's important before you invest to understand everything that could affect a particular stock both now and down the road.

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.