Despite solid growth, Splunk warns of tougher year ahead and its stock falls

Despite solid growth, Splunk warns of tougher year ahead and its stock falls

Posted on

Big data company Splunk Inc.’s shares fell almost 3% in extended trading today after it gave a first quarter and full year outlook that came in far below Wall Street’s targets.

The company had just delivered strong fourth quarter results, reporting earnings before certain costs such as stock compensation of $2.04 per share on revenue of $1.25 billion, up 39% from a year earlier. Wall Street had been targeting earnings of just $1.14 per share on sales of $1.08 billion.

The strong performance saw Splunk swing from a loss of $141 million a year earlier to record a net profit of $269 million for the quarter.

For the full year fiscal 2023, Splunk reported total revenue of $3.654 billion, up 37%, with cloud revenue of $1.475 billion, up 54%.

However, the company is bracing itself for tougher times ahead. For the first quarter, it said it expects revenue of between $710 million and $725 million, some way below the analyst consensus estimate of $807.2 million. For the full year, Splunk is targeting sales of $3.85 billion to $3.9 billion, below Wall Street’s forecast of $4.02 billion.

Splunk President and Chief Executive Gary Steele (pictured) focused on the positives, hailing the company’s “solid finish” to an important year. “Splunk plays a critical role in helping our customers ensure their digital systems are resilient, secure and able to adapt to constant change,” he said. “As we begin our new fiscal year, we remain committed to delivering durable growth and substantially increasing free cash flow.”

Splunk is the creator of a popular data processing platform that’s used by large enterprises to detect and troubleshoot technical issues within their information technology infrastructure. Splunk also offers tools for dealing with cybersecurity incidents such as data breaches. Its tools are popular, with Splunk counting thousands of enterprises among its customers.

Surprisingly, much of Splunk’s growth in the previous quarter was driven by license revenue, which rose 50% from a year ago to $670 million. Cloud revenue, which has grown much faster in previous quarters, rose by 43% to $413 million. Maintenance and services generated another $167 million, flat from the year before.

Holger Mueller of Constellation Research Inc. said Splunk seems to have turned a corner by achieving profitability in the last quarter. “Gary Steele and team have managed to grow the company’s revenue by almost $1 billion, while slightly reducing its operating expenses,” he said. “For years, Splunk was operating on a cost base that it would only be able to pay for in the next full year. Now though, its revenues and outgoings have come in synch, enabling the company to generate a profit. So congratulations are in order.”

As impressive as its performance was, Splunk understands that it is not immune to the macroeconomic forces impacting the wider technology economy, and it has taken steps to mitigate their impact. Last month, the company announced it would be laying off around 325 employees, representing 4% of its total staff, with most job losses coming in its North American offices. The layoffs were framed as part of a “broader set of proactive organizational and strategic changes” that also include changes to its business processes and cost structure, designed to ensure it can balance growth with profitability in the months to come.

In other news, Splunk announced that it has hired former Lyft Inc. executive Brian Roberts as its new chief financial officer.

Photo: CNBC Television/YouTube

Show your support for our mission by joining our Cube Club and Cube Event Community of experts. Join the community that includes Amazon Web Services and CEO Andy Jassy, Dell Technologies founder and CEO Michael Dell, Intel CEO Pat Gelsinger and many more luminaries and experts.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *