Open source software company Red Hat (NYSE:RHT) saw its stock fall as much as 9.3 percent in after hours trading after the company’s forecast for billings fell short of Wall Street expectations.

Billings, a predictor of future revenue, rose 8 percent from a year earlier to $376 million, the Raleigh, company said in its release of fiscal second quarter earnings. Analysts at CLSA had projected an increase of 17 percent, and Stifel Nicolaus & Co. predicted 14 percent growth.

Red Hat’s business is probably being hurt by a slowdown in Europe, while billings were also lower than expected because customers set up contracts with longer payment terms, said Abhey Lamba, an analyst at Mizuho Securities USA Inc., in a note to clients. Investors focused on the billings number even as revenue and earnings per share topped estimates.

“While Red Hat beat on revenues, EPS and cash flows, it missed the key billings metric by a wide margin,” Lamba wrote. On average, analysts had expected billings of $398 million, he said.

[Inside Red Hat’s earnings: Analyst sees reason for hope.]

During a conference call with analysts to discuss the company’s quarterly results, CEO Jim Whitehurst tried to allay analyst concerns about the billings by explaining how the company’s revenue model is changing. The company has pointed to its cloud offerings as an opportunity for growth. But unlike its other services, cloud services are not billed up front so the revenue does not appear on the balance sheet until later.

Whitehurst also pointed to two deals in the quarter as being examples of revenue changes Red Hat will experience. Red Hat closed two of its largest deals in the quarter valued at more than $20 million. But the company only billed 15 percent of that total value in the quarter. Whitehurst said as the deals get larger, the contracts get more complicated and the contract terms are not standardized.

“As we grow as a company, as these relationships get bigger, we’re going to have some of that and it’s not going to be quite as cookie cutter in the way that we bill,” Whitehurst said.

CFO Charlie Peters said that one of the contracts is a three-year deal. The second one is slightly longer. He said that additional billing for those contracts will occur in the next 12 months.

Peters acknowledged that bookings in Europe, the Middle East and Africa in the quarter comprised the lowest percentage of total bookings “for some time.” Peters said that the European economic situation was weak, but he added that the fiscal third and fourth quarters are shaping up to be better.

Red Hat shares dropped as low as $48 in extended trading, after falling less than 1 percent to $52.93 at the close in New York. Prior to the report, the stock was little changed for the year, while the Standard & Poor’s 500 Index had jumped 19 percent.

Sales in the period ended Aug. 31 rose 16 percent to $374.4 million, compared with the $372.1 million average analyst estimate, according to data compiled by Bloomberg. Profit, excluding some costs, was 35 cents a share, topping the 33-cent average estimate. Net income rose 17 percent to $40.8 million, or 21 cents a share, from $35 million, or 18 cents, a year ago.

Red Hat forecast third-quarter sales of $381 million to $384 million, lagging the $391.5 million average analyst estimate.

(Bloomberg News contributed to this report)