What happened

Shares of ​​Splunk (SPLK 0.06%) fell Thursday after the data security platform company reported its fiscal 2023 second-quarter results. It actually beat Wall Street's consensus estimates on the top and bottom lines, but investors appeared to be focusing their attention on management's disappointing guidance about annual recurring revenue and cloud sales. 

As of 1:23 p.m. ET, the tech stock was down by 11.8%.

So what 

Let's start with the good news. For the fiscal quarter, which ended July 31, Splunk's total sales increased 32% in the second quarter to $799 million, which was better than analysts' average estimate of $747.7 million. 

A woman looking at her phone.

Image source: Getty Images.

Its non-GAAP earnings of $0.09 per share were also an improvement from the loss of $0.62 per share it reported in the year-ago quarter, and was better than analysts' consensus estimate of a loss of $0.35 per share. 

Splunk's management also highlighted some other impressive results from the quarter, including cloud revenue that increased by 59% to $346 million and the number of its customers responsible for more than $1 million in annual recurring revenue increasing by 24% to 723.  

But investors looked past all of those figures and instead focused on the fact that management lowered the company's annual recurring revenue guidance for the year to $3.65 billion from its previous forecast of $3.9 billion. Additionally, the company now expects its cloud annual recurring revenue for the year to be $1.8 billion, down from previous guidance of $2 billion. 

Now what 

Splunk's management said on the fiscal Q2 earnings call that some of its customers have opted for shorter contracts, which is likely the reason the company cut its estimates for total and cloud annual recurring revenue. Tech investors are particularly sensitive to any perceived slowdowns in companies' growth right now, given their persistent worries about high inflation and a slowing economy. That's likely why some investors sold their Splunk shares Thursday.