A year after Red Hat’s financial results topped $1 billion in annual sales for the first time, the Raleigh open source software company reported another record year.

Fiscal 2013 revenue reached $1.14 billion. For the fiscal fourth quarter, Red Hat (NYSE: RHT) reported $347.8 million in sales, a 17 percent increase compared to a year ago and the 44th consecutive quarter of revenue growth for the company.

But it’s not enough.

Red Hat missed the marks set by analysts, who had higher expectations for the company. Analysts estimated the company would reach $349.3 million in fourth quarter revenue, according to data compiled by Bloomberg News. Net income, excluding some items, was 36 cents per share in the fourth quarter, beating the 30 cents per share analyst estimate. Still, Red Hat’s stock fell 3.94 percent to $48 per share in after hours trading.

Analysts at Technology Business Research reviewed the results and forecast a good year ahead. Others aren’t as optimistic. 

While analysts have fixated on the revenue targets, Red Hat CFO Charlie Peters tried to  cast the company’s revenue in a better light by shifting focus to the company’s backlog. Backlog refers to customer contracts that will be billed in the future. The figure does not yet reflect dollars contributing to the company’s top line. In the fourth quarter in particular, Red Hat landed several large customer deals; three of them larger than $10 million, six over $5 million and a “substantial number” larger than $1 million. Red Hat set another company record as its backlog grew to $280 million, up 40 percent for the year.

“This unbilled backlog number is important,” Peters told analysts during the conference call to discuss results. “It’s directly connected this quarter to the significant increase in the large deals.”

But even as the backlog grows, Red Hat faces steep challenges. One of them is the impact of the sequester, the mandatory budget cuts that are being implemented across the federal government. Government work represents a sizable portion of Red Hat’s business. Peters did not project the sequester’s impact on Red Hat but he did say that nearly every software company is facing similar circumstances.

“There’s no doubt in my mind that the federal budget discussions that have been going on for some time have slowed down buying decision in the U.S. in the federal government here,” Peters said. “We’re not aware of losing any business, it’s just a little bit slower.”

If U.S. government spending on software slows, replacing that revenue with more business overseas does not necessarily present a better alternative. Red Hat now draws about 40 percent of its revenue from outside the United States and CEO Jim Whitehurst touted Red Hat’s growth prospects overseas. All of the company regions had double digit annual billings growth in fiscal 2013 despite global economic challenges, he said.

But that’s exactly where analysts have placed their concerns. Some doubt the company’s ability to continue growing given global economic headwinds. A Raymond James analyst downgraded the company’s stock rating, citing worries about growth prospects this year. Cross Research analyst Richard Williams told Bloomberg News that tax increases in the U.S. and a worsening recession in Europe are causing businesses to put off upgrading to Red Hat’s Linux software from older Unix systems,

“The channel checks showed that activity just stopped after the first week of December,” said Williams, who has a hold rating on the shares with $51 price target.

(Bloomberg News contributed to this report)