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Splunk Posts Solid Results as Recurring Revenue Grows
by Daniel Newman | May 26, 2020

The News: Splunk Inc. (NASDAQ: SPLK), provider of the Data-to-Everything Platform, today announced results for its fiscal first quarter ended April 30, 2020.

First Quarter 2021 Financial Highlights

  • ARR was $1.775 billion, up 52% year-over-year.
  • Cloud revenue was $112 million, up 81% year-over-year.
  • Total revenues were $434 million, up 2% year-over-year.
  • GAAP loss per share was $1.94; non-GAAP loss per share was $0.56.

Analyst Take: Earnings continue to pour in for big tech with Splunk having reported late last week and despite a number of global headwinds, the company was able to deliver a strong quarter that included growth in revenue, cloud adoption, recurring revenue and narrowing losses.

Current market conditions continue to be tepid and for enterprise tech, there is some momentum, but for companies like Splunk that serve as a data platform to companies across vast industries, it is important to keep a watchful eye on the performance of the business along with how the company is able to adapt to shifting market demands and the forced changes that have been brought about because of Covid-19.

During the early parts of the pandemic, I had the opportunity to interface with CEO Doug Merritt. At that time, he shared with me about the company’s approach to dealing with the pandemic and how data platforms would be critical for aiding in helping enterprise resiliency as well as directly with the pandemic.

What to Watch Right Now With Splunk

Over the past few quarters as I’ve been analyzing Splunk, I’ve been watching a few things that are clearly starting to be addressed.

  1. Transformation to cloud: The company saw its cloud revenue grow 81% YoY, topping $112 million in the most recent quarter. This growth, while still early days, is a strong indicator that clients are moving to the cloud solution and new customers are being brought in as cloud users from day one.
  2. Growth of ARR: Another story of this quarter’s earnings was the solid recurring revenue growth. Splunk is a company that builds momentum and valuation around its ARR and as the number has reached ~$1.77 Billion on a 52% YoY performance, the business stabilizes and gains strength.
  3. Continued visibility in broader tech: Splunk is a company I often refer to as one of the biggest tech companies you’ve never heard of. If you are in IT or SecOps, you may be familiar, but the company will thrive on some growing brand visibility. This is where I watch for new customer wins, which the company continues to deliver on with companies like Shopify, TD Ameritrade and Zoom all signing on this quarter. Also, partnerships with cloud providers like AWS and Google serve as strong opportunities for growth and visibility–Both having expanded in this most recent quarter as well.

Overall Impressions of Splunk Fiscal Q1

The good news is that the results this quarter, despite the market challenges is showing a trend of the company being able to gain support of its new generation of cloud services by its current customers. We also saw a significant list of new high caliber clients that have adopted Splunk. Additionally, the company’s deepening partnerships with cloud providers including Google and AWS serve as proof points of the products growing validity to support modern architectures–also a positive means for driving greater brand and market visibility.

A positive overall quarter for Splunk.

Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.

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Image: Splunk
Daniel Newman