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Will Healthy Revenue Growth Boost Splunk's (SPLK) Q3 Earnings?

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Splunk Inc. (SPLK - Free Report) is set to release third-quarter fiscal 2024 results on Nov 28, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 69.05%. It pulled off a trailing four-quarter earnings surprise of 154.90% on average.

The company is likely to record a top-line expansion year over year, driven by growing demand for its cloud services and cybersecurity solutions. The introduction of AI-powered features across its product offerings is expected to enhance prospects.

Factors at Play

In the quarter under review, Splunk signed a definitive agreement to merge with Cisco Systems. Per the deal, Cisco aims to acquire Splunk for approximately $28 billion.

Splunk boasts a leadership position in the cybersecurity domain and is witnessing solid momentum driven by its robust, enterprise-scale portfolio. Its premium security analytics solutions offer real-time operational intelligence. By integrating the complementary capabilities in AI, cybersecurity and observability, Splunk and Cisco are aiming to develop next-generation AI-enabled solutions.

Despite the industrywide shift toward AI integration, the lack of control over AI’s applicability raises security concerns among businesses. However, AI offerings introduced by Splunk blend automation with human input. This approach ensures swift detection and response to issues along with greater control of AI implementation on enterprise data. Owing to these factors, Splunk is experiencing healthy demand for its AI native solutions. These developments are likely to have generated incremental revenues during the quarter.

Splunk Edge Processor and Splunk Edge Hub continue to experience healthy traction. Businesses worldwide are adopting these products to gain enhanced visibility and control over their data. Splunk is also actively introducing innovative features to augment the monitoring of data generated from sensors, IoT devices and industrial equipment across business operations. These initiatives are likely to have supported the top line during the third quarter.

The Zacks Consensus Estimate for net sales in the Cloud Services segment is pegged at $476.14 million, suggesting solid growth from $374.03 million in the year-ago quarter. Per the Zacks Consensus Estimate, Cloud Annual Recurring revenues are projected to reach $2.012 billion, up from $1.616 billion in the prior-year quarter. Contribution from the License vertical is projected to be $380.85 million.

For the October quarter, the Zacks Consensus Estimate for total revenues is pegged at $1,028 million, indicating growth from $930 million reported in the year-ago quarter. Adjusted income per share is pegged at $1.12, suggesting an increase from 83 cents recorded in the prior year quarter.

Earnings Whispers

Our proven model does not predict an earnings beat for Splunk for the fiscal third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.00%, with both pegged at $1.12. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Splunk Inc. Price and EPS Surprise

 

Splunk Inc. Price and EPS Surprise

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

 

Zacks Rank: Splunk currently has a Zacks Rank #3.

Stocks to Consider

Here are some other companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Marvell Technology (MRVL - Free Report) has an Earnings ESP of +0.18% and carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Nov 30. You can see the complete list of today’s Zacks #1 Rank stocks here.

Snowflake Inc. (SNOW - Free Report) has an Earnings ESP of +67.33% and a Zacks Rank of 2. The company is set to report its quarterly numbers on Nov 29.

American Woodmark Corporation (AMWD - Free Report) has an Earnings ESP of +14.30% and carries a Zacks Rank of 3. The company is set to report its quarterly numbers on Nov 30.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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