Splunk’s 4Q Results Top Wall Street Estimates; Shares Jump 5.1%

Shares of Splunk Inc. surged by 5.1% in after-hours trading on March 3 as the company posted 4Q results, which topped analysts’ estimates. The data analytics software company’s revenues generated $745 million, down by 6% year-on-year but ahead of consensus estimates of $682.2 million. Splunk reported non-GAAP net income per share of $0.38 that exceeded analysts’ expectations of $0.04.

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Splunk’s (SPLK) CEO Doug Merritt said, “We now have more than 500 customers investing over $1 million annually in our platform and solutions. At our size, Splunk is one of the fastest growing companies in the history of enterprise software.”

SPLK’s CFO Jason Child added, “With Total ARR [annualized recurring revenue] growing 41% year-over-year and $810M of Cloud ARR accelerating to 83% growth, we are extremely proud of the team’s execution and the company’s business fundamentals, both of which remain strong.”

The company’s total ARR was $2.36 billion in 4Q, up by 41% year-on-year while SPLK’s cloud business had revenues of $171 million, an increase of 72% year-on-year.

In 1Q FY22, Splunk expects ARR to be between $2.42 billion to $2.44 billion on total revenues of between $480 million to $500 million. SPLK projects non-GAAP operating margin to be a negative 30%. (See Splunk stock analysis on TipRanks)

Following the earnings release, Oppenheimer analyst Ittai Kidron reiterated a Buy and a price target of $203 on the stock. Kidron said, “The results show that it [the company] continues to have multiple growth levers within its core buckets of Security, ITOps [IT operations], and DevOps/Observability; and is executing on its transition to a subscription-based model, evidenced by the 83% YoY growth in Cloud ARR and 51% Cloud contribution to bookings.”

“Overall, we come away positive on the outlook for FY22, seeing potential for growth to continue to accelerate (driven by Splunk’s Cloud business), room for international expansion (specifically in EMEA), and from stronger close rates as macro headwinds start to subside,” Kidron added in a note to investors.

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 7 Buys and 4 Holds. The average analyst price target of $213.10 implies around 49% upside potential to current levels.