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Splunk (SPLK) Q1 Loss Narrower Than Expected, Revenues Up Y/Y

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Splunk Inc. (SPLK - Free Report) reported relatively healthy first-quarter fiscal 2023 results (ended Apr 30, 2022) with year-over-year improvement in the bottom line and top line. The company expects this growth momentum to continue, given its customer-centric approach amid transformation to a cloud-based entity.

GAAP loss in the reported quarter was $304.3 million or a loss of $1.90 per share compared with a loss of $471 million or a loss of $2.81 per share in the year-ago quarter. The narrower loss in the quarter was primarily attributable to top-line growth. Non-GAAP loss in the reported quarter was 32 cents, narrower than the Zacks Consensus Estimate of a loss of 72 cents. The company had reported a loss of 91 cents per share in the year-earlier quarter.

Total revenues in first-quarter fiscal 2023 improved to $674.1 million from $502.1 million in the prior year, beating the consensus estimate of $628 million. Splunk benefited from strong execution across its platform, observability and security businesses as organizations partnered with it to secure their business infrastructure.

Splunk Inc. Price, Consensus and EPS Surprise Splunk Inc. Price, Consensus and EPS Surprise

Splunk Inc. price-consensus-eps-surprise-chart | Splunk Inc. Quote

Quarter in Detail

License revenues (27.6% of total revenues) were $185.8 million, up 29.7% year over year. Cloud services revenues (47.9%) surged 66.4% to $322.9 million, driven by strong customer demand and bookings momentum. Maintenance and service revenues (24.5%) increased 0.3% to $165.3 million.

Splunk ended the quarter with total annual recurring revenues (ARR) of $3.21 billion, up 30% year over year. Cloud ARR soared 60% to $1.4 billion.

The company ended the quarter with 317 customers generating Cloud ARR greater than $1 million, up 70% year over year. It had 690 customers with a total ARR of more than $1 million, up 28%, 329 customers of which had a cloud ARR of $1 million, up 62% year over year.

Non-GAAP gross margin improved to 74.7% from 71.5%, owing to higher revenues. Non-GAAP Cloud services gross margin expanded 730 basis points to 67.6%.

Cash Flow & Liquidity

In first-quarter fiscal 2023, the company generated $143.3 million of cash from operating activities compared with $70.7 million a year ago. Free cash flow was $137.7 million compared with $66.7 million in the prior year. As of Apr 30, 2022, it had $814 million in cash and cash equivalents with $3,866.2 million of senior notes.

Guidance

For the second quarter of fiscal 2023 (ending Jul 31, 2022), Splunk expects total revenues in the range of $735-$755 million. Non-GAAP operating margin is likely to be within -8% to -11%.

For fiscal 2023 (ending Jan 31, 2023), the company expects total revenues to be between $3.3 billion and $3.35 billion, up from $3.25 billion and $3.3 billion expected earlier. Non-GAAP operating margin is anticipated to be around 2%, up from prior projections of 0-2%.

Zacks Rank & Stocks to Consider

Splunk currently has a Zacks Rank #3 (Hold).

Clearfield, Inc. (CLFD - Free Report) , sporting a Zacks Rank #1 (Strong Buy), is a solid pick for investors in the broader industry. You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered an earnings surprise of 37.5%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 114.7% since May 2021. Over the past year, Clearfield has gained a solid 56.1%.

InterDigital, Inc. (IDCC - Free Report) also sports a Zacks Rank #1. It has a long-term earnings growth expectation of 15% and delivered a stellar earnings surprise of 141.1%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 88.5% since May 2021.

InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and the ability to penetrate different markets are impressive.

Sierra Wireless, Inc. (SWIR - Free Report) carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 223.7%, on average, in the trailing four quarters.

Over the past year, Sierra Wireless has gained 37.5%. Earnings estimates for the current year for the stock have moved up 616.7% since May 2021. The company continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.


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