IronNet (IRNT -7.67%) shareholders lost ground to the market on Thursday as the stock fell 9% by 1:15 p.m. ET compared to a 0.6% drop in the S&P 500. That drop added to significant short-term losses for the cybersecurity specialist, whose volatile stock had been up 30% at one point in 2022 but is now down over 20%.
Thursday's drop came in response to management's preliminary fiscal fourth-quarter earnings report.
The small-cap business's sales rose 11% to $8.2 million, executives said in a press release. That growth rate was strong compared to the prior quarter and reflected solid growth in the customer base and in average contract size.
The company's subscription services saw especially strong growth. "We are encouraged by the momentum of our cloud-based subscription business model," co-CEO William Welch said in a press release.
Still, investors may have been disappointed by management's new outlook for the current fiscal year, 2023.
IronNet sees revenue landing at about $34 million this year, representing roughly 25% growth. Heading into the report, most investors who follow the stock were looking for sales to grow over 40% to $42 million. That gap helps explain why shares fell immediately following the report.
The company has a bright future ahead of it even if sales trends disappoint from time to time. But those misses will be more pronounced with a small-cap business like this, and so investors may prefer to own more established software-as-a-service companies.
Yet today's earnings update is no reason to abandon the growth thesis for IronNet, either. It simply implies a slower year ahead than many investors were hoping to see.