8/17/2023 0 Comments Splunk investor relationsWe note that Wall Street analysts for FY22 (next calendar year) have a revenue target of $2.88 billion. The degree of revenue visibility Splunk has with this level of ARR is also impressive. Heavy backend data projects like Splunk tend to get pushed down the priorities totem pole amid macro uncertainty, but what has ailed many other infrastructure software companies has seemingly not impacted Splunk at all. ARR in Q2 grew at a stunning 50% y/y pace of $1.93 billion, barely decelerating from Q1's growth rate in spite of the coronavirus. So the best measure of Splunk's growth, in my view, is its ARR. So ironically, the better that Splunk does in the cloud, the more its near-term revenue will suffer. Under the old license-based model, Splunk would recognize a lot of its revenue upfront - but revenue would be lumpier, and over a customer's lifetime, switching to a recurring or cloud-based model will deliver more overall value. However, as seasoned Splunk investors are aware, Splunk's headline revenue figures form an incomplete story because of the transformational shift to cloud happening underneath. Splunk's revenue declined -5% y/y to $491.7 million in Q2, missing Wall Street's expectations of $520.4 million (or flat y/y) in the quarter. Splunk Q2 results Source: Splunk Q2 earnings release The Q2 earnings summary is shown below:įigure 1. ![]() Let's now parse through Splunk's latest quarterly results in greater detail. Investors should take note of Splunk's myriad strengths and stay long. Cloud margins have been rising as it becomes a greater contributor to overall revenue, and Splunk has a target of hitting >$1 billion in annual operating cash flows by FY23 (two and a half years out).
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