Yahoo Finance Splunk (SPLK) Q2 Earnings Beat on Healthy Revenue Growth
Splunk Inc. SPLK reported solid second-quarter fiscal 2024 results, with the bottom and the top line beating the respective Zack Consensus Estimate. The company’s expense-control strategy and focus on improving operational efficiency supported the bottom line. Splunk is witnessing healthy traction in cloud services and the cybersecurity domain. Despite macroeconomic headwinds, the company reported higher revenues year over year, driven by rising customer engagements, continuous innovation and a robust product portfolio.
Net Income
On a GAAP basis, the company incurred a net loss of $63.2 million or a loss of 38 cents per share compared with a net loss of $209.7 million or a loss of $1.30 per share in the prior-year quarter. The improved performance was primarily attributable to top-line growth and lower operating expenses.
Non-GAAP net income in the reported quarter was $134.8 million or 71 cents per share compared with $16.9 million or 9 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 29 cents.
Splunk Inc. Price, Consensus and EPS Surprise
Splunk Inc. price-consensus-eps-surprise-chart | Splunk Inc. Quote
Revenues
Total revenues in second-quarter fiscal 2024 increased to $910.6 million from $798.8 million in the prior year. The top line surpassed the consensus estimate of $888 million. The top-line growth was driven by positive demand trends in cloud services, cybersecurity and observability domains. Backed by its enterprise scale and unified product portfolio, Splunk witnessed significant customer additions and several project wins in the public and private sectors.
Cloud services revenues rose to $445.2 million from $346.4 million in the year-ago quarter. The uptick was propelled by rising demand for its cloud services. License revenues were $295.4 million, up from $281.7 million. Net sales from Maintenance and services decreased marginally to $170 million from $170.6 million in the year-ago quarter.
Total annual recurring revenues (ARR) were $3.86 billion, up 16% year over year. The company had 834 customers with an ARR of more than $1 million at the end of the second quarter. Cloud ARR increased 27% year over year to $1.92 billion.
Other Details
Gross profit increased to $698.7 million from $592 million in the prior-year quarter. Non-GAAP gross margin from cloud services rose 450 basis points year over year to an all-time high of 73.8%, surpassing management’s expectations. Non-GAAP operating income aggregated $151.6 million compared with $28.6 million in the prior-year period, with respective margins of 16.7% and 3.6%.
Cash Flow & Liquidity
During the first six months of fiscal 2024, Splunk generated $501.6 million net cash from operating activities compared with $124.7 million in the year-ago period. As of Jul 31, 2023, the company had $1,523.5 million in cash and cash equivalents with $3,102.9 million long-term debt.
Outlook
For third-quarter fiscal 2024, management estimates total revenues to be in the range of $1.02-$1.035 billion. Non-GAAP operating margin is projected in the range of 24.7-25.3%. Total ARR is expected to be around $3.98 billion. The company expects a free cash flow of 75 million in the upcoming quarter.
For fiscal 2024, management updated their previous revenue guidance level as it expects healthy demand trends backed by higher investment in research & development and a focus on operational efficiency. The company expects revenues to be approximately $3.925-$3.95 billion compared with the previous guidance of $3.9 billion. Non-GAAP operating margin is anticipated to be within 21-21.5%, higher than the previous estimated range of 18-18.5%. Free cash flow is projected between $855 million and $875 million, up from the previous range of $805-$825 million. Total ARR is expected in the band of $4.150 billion to $4.175 billion.
Splunk currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
T-Mobile US, Inc. TMUS, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 8.8% in the last reported quarter. It has a VGM Score of B.
Headquartered in Bellevue, WA, T-Mobile is a national wireless service provider. The company offers services under the T-Mobile, Metro by T-Mobile and Sprint brands. T-Mobile, through its subsidiaries, provides wireless services for branded postpaid and prepaid, and wholesale customers.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 18.7% and delivered an earnings surprise of 12.8%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
AudioCodes Ltd. AUDC is a Zacks Rank #2 stock. It has a long-term earnings growth expectation of 4.3% and delivered an earnings surprise of 2.2%, on average, in the trailing four quarters.
Headquartered in Lod, Israel, AudioCodes offers advanced communications software, products, and productivity solutions for the digital workplace. It provides a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.
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