Splunk (SPLK) Q1 Earnings Beat Estimates on Higher Revenues
Splunk Inc. SPLK reported impressive first-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 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 $196.4 million or a loss of $1.19 per share compared with a net loss of $304.3 million or $1.90 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 $34.1 million or 18 cents per share against a net loss of $52.1 million or a loss of 32 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 35 cents.
Splunk Inc. Price, Consensus and EPS Surprise
Splunk Inc. price-consensus-eps-surprise-chart | Splunk Inc. Quote
Revenues
Total revenues in first-quarter fiscal 2024 increased to $751.5 million from $674.1 million reported in the prior year. The top line surpassed the consensus estimate of $719 million. 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 sector.
Cloud services revenues rose to $419.4 million up 30% from $322.9 million in the year-ago quarter. The uptick was propelled by rising demand of its cloud services. License revenues stood at $171.4 million, down from $185.8 million year over year. Net sales from Maintenance and services decreased to $160.6 million from $165.3 million in the year-ago quarter.
Total annual recurring revenues (ARR) were $3.725 billion, up 16% year over year. The company had 810 customers with an ARR of more than $1 million at the end of the first quarter. Cloud ARR increased 29% to $1.815 billion.
Other Details
Gross profit increased to $544.3 million from $471.9 million in the prior-year quarter. Non-GAAP gross margin from cloud services rose 600 basis points year over year to 73.6%, surpassing management’s expectations. Non-GAAP operating income aggregated to $25 million against an operating loss $57.3 million in the prior-year period, with respective margins of 3.3% and a negative 8.5%.
Cash Flow & Liquidity
During the first quarter of fiscal 2024, Splunk generated $491.8 million net cash from operating activities compared to $143.3 million reported in the year-ago quarter. As of April 30, 2023 the company had $801.5 million in cash and cash equivalents with $3,100.9 million long-term debt.
Outlook
For second-quarter fiscal 2024, management estimates total revenues to be in the range of $880-$895 million. Non-GAAP operating margin is projected in the range of 10-12%. Total ARR is expected to be around $3.825 billion. The company expects a negative free cash flow of 15 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 focus on operational efficiency. The company expects revenues to be approximately $3.9 billion which is at the higher end of the previous guidance level of $3.85-$3.9 billion. Non-GAAP operating margin is anticipated to be within 18%-18.5%, higher than previous estimated range of 16.5-17.5%. Free cash flow is projected between $805 million and $825 million. Total ARR is expected in the range of $4.125 billion and $4.175 billion.
Zacks Rank & Stocks to Consider
Splunk currently sporting a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
InterDigital, Inc. IDCC, sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%.
It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. AKAM, sporting a Zacks Rank #1, delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.
It is a global provider of content delivery network (CDN) and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Meta Platforms Inc. META, sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
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