Splunk Books Lower-than-Feared Q3 Loss; Shares Rise After-Hours

Software company Splunk, Inc. (SPLK) has reported a smaller-than-expected loss in the third quarter of Fiscal 2022, and total revenues also surpassed consensus estimates. Meanwhile, the company provided Q4 revenue guidance below expectations.

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Following the results, shares of the company gained 2.1% in the extended trading session on Wednesday after closing 7.7% lower on the day.

Results in Detail

Splunk incurred an adjusted loss of $0.37 per share, smaller than the Street’s loss estimate of $0.51 per share. The company reported an adjusted loss of $0.07 per share in the same quarter last year.

Total revenue generated during the quarter grew 19% year-over-year to $665 million, topping the consensus estimate of $646.63 million.

Cloud revenue was $243 million in the quarter, up 68% year-over-year. Additionally, while Cloud ARR stood at $1.11 billion, up 75%, total ARR was $2.83 billion, up 37%.

Markedly, Splunk reported 270 customers with cloud ARR greater than $1 million, up 96% year-over-year, while 635 customers contributed total ARR greater than $1 million, up 43%. (See Splunk stock charts on TipRanks)

CFO Comments

In response to third-quarter results, the CFO of Splunk, Jason Child, said, “The demand environment remains strong, and customer engagement is excellent, especially for existing customers managing their hybrid environments. We expect our momentum to continue through the end of the year and we’re on track to end FY22 with more than $3 billion of total ARR.”

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Guidance

For the fourth quarter of Fiscal 2022, the company projects total revenue in the range of $740 million to $790 million, versus the consensus estimate of $834.11 million. Cloud ARR is expected to land between $1.325 billion and $1.350 billion, while total ARR is projected in the range of $3.085 billion to $3.135 billion.

For Fiscal 2022, the company expects total revenues of between $2.51 billion and $2.56 billion.

Wall Street’s Take

The Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 12 Buys and 6 Holds. The average Splunk price target of $188.93 implies 69.14% upside potential. Shares have lost 45.8% over the past year.

Risk Analysis

According to the new TipRanks’ Risk Factors tool, Splunk stock is at risk mainly from three factors: Finance and Corporate, Ability to Sell, and Tech and Innovation, which contribute 35%, 22%, and 20%, respectively, to the total 46 risks identified for the stock.