Not every fast-growing, money-losing software company delivers great returns for investors. While investing in that type of company was a winning strategy in 2020, data specialist Cloudera (NYSE:CLDR) has been a disappointment during its four years as a publicly traded company.

Cloudera went public in 2017 at $15 per share with big ambitions: The company pegged its total addressable market at $65.6 billion by 2020. Cloudera was growing sales quickly, with revenue shooting up 60% to $261 million in 2017.

A notepad drawing of a fish eating a smaller fish.

Image source: Getty Images.

Cloudera has successfully grown over the years, reporting revenue of $869 million in 2020. But the losses have piled up. Cloudera reported a net loss of $163 million in 2020, only slightly better than its loss of $187 million in 2017. 

Cost cutting has prevented the bottom line from getting worse, but growth has slowed way down as a result. Revenue grew by just 9% in 2020, and the company has guided for even slower growth this year.  

A bumpy ride comes to an end

The stock market has not been a fan of the Cloudera story. It's been a volatile ride for investors, with the stock dipping well below its IPO price in late 2018 and staying there until recently. Cloudera stock has moved upward with other high-flying software stocks during the pandemic, but it was starting from a low point.

CLDR Chart

CLDR data by YCharts

Cloudera has been transforming itself into a cloud-centric subscription-based company, but that story won't play out in public any longer. The company announced on Tuesday that it had agreed to sell itself to private equity firms Clayton, Dubilier & Rice and KKR in an all-cash transaction. Cloudera shareholders will receive $16 per share when the transaction closes in the second half of 2021.

Anyone who bought Cloudera at the IPO price and held until now will come away with a measly 6.7% return. Anyone who bought in soon after the IPO will likely lose money. Those who bet on a turnaround when Cloudera stock was plumbing its all-time lows have done well, but Cloudera was far from the only profitless tech stock to soar over the past year.

The story just didn't pan out

When Cloudera was working on acquiring fellow data software company Hortonworks in 2018, then-CEO Thomas Reilly made some bold statements about the combined company's potential. In an interview with CNBC around that time, Reilly pointed to the artificial intelligence and machine learning capabilities of Cloudera as the key to the company becoming the next Oracle. Oracle has long dominated the market for database software, despite no shortage of competition.

Reilly predicted that Cloudera with Hortonworks would be producing over $1 billion of revenue by 2020, along with at least 15% operating cash flow margin. Reilly also said he expected sales to be growing by at least 20% annually.

Revenue fell short of that goal by about $130 million, and the growth rate is far below that 20% target. Cloudera did produce a healthy operating cash flow in 2020, but it was largely due to cost cutting and a significant amount of stock-based compensation. Cloudera isn't profitable on a GAAP basis.

Reilly abruptly resigned in mid-2019 as Cloudera slashed its 2020 forecast. The stock fell off a cliff as a result.

Sometimes companies tell fantastic growth stories that largely play out. Other times, like in the case of Cloudera, the story turns out to be based on overly optimistic projections that quickly unravel.

Not every software company is the next Oracle, or the next Microsoft, or the next Adobe, or the next salesforce.com. The fact that there are only a small number of truly dominant software companies today should tell you that most of the money-losing software stocks touted as the next big thing are not, in fact, the next big thing.

Given Cloudera's track record as a public company, it's probably not the next Oracle.

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.