Splunk has been shifting its revenue model to focus on subscriptions rather than perpetual licenses.
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Splunk shares are trading lower after hours despite better-than-expected results for its fiscal second quarter, ended July 31.
For the quarter, the provider of network analytics software posted revenue of $606 million, ahead of the range of $550 million to $570 million it had predicted. Splunk (ticker: SPLK) said annual recurring revenue, or ARR, was $2.63 billion, up 37%, and slightly above the $2.59 billion to $2.61 billion it had forecast.
That includes cloud software ARR of $976 million, ahead of its guidance for $950 million to $960 million. Cloud revenue was $217 million, up 73%. On an adjusted basis, the company lost 62 cents a share in the quarter.
The Wall Street consensus had called for revenue of $562.8 million and a loss of 69 cents a share.
“Our team delivered another strong quarter, validating the high strategic value we deliver to the world’s largest and most dynamic organizations,” Splunk CEO Doug Merritt said in a statement. “We doubled the number of customers with Cloud ARR of $1 million or more as workloads and data continue to shift to cloud.”
He added that the company had better-than-expected results in every major geographic region.
Splunk has been going through a business-model transition, pushing customers to cloud-based versions of its software, while also changing its revenue model to focus on subscriptions rather than perpetual licenses. That process has caused some complications to reported earnings.
CFO Jason Child said in an interview that the latest quarter’s results show clear progress on the transition. He noted, for instance, that billings were up 29% from a year ago, accelerating from 5% in the April quarter. The growth follows four negative quarters in the January 2021 fiscal year.
For the October quarter, Splunk sees revenue of between $625 million and $650 million, with total ARR of $2.8 billion to $2.825 million, cloud ARR of $1.1 billion to $1.11 billion, and a non-GAAP operating margin of between -15% and -20%. The Street has been projecting revenue of $637 million and a loss of 28 cents a share.
For the January 2022 fiscal year, the company expects revenue of between $2.53 billion and $2.60 billion, total ARR of $3.085 billion to $3.135 billion, cloud ARR of $1.305 billion to $1.33 billion, and a non-GAAP operating margin of between -14% and -17%. It said full-year operating cash flow is expected to be about $100 million.
The Street consensus calls for revenue of $2.53 billion and a loss of $1.50 a share. In late trading, Splunk was off 1.5%, to $152.56.
Write to Eric J. Savitz at [email protected]
