By Senad Karaahmetovic
Shares of Splunk Inc (NASDAQ:SPLK) are trading nearly 8% up in pre-open Thursday after the company raised its forecast.
Splunk posted an adjusted EPS of $0.83 on revenue of $930 million, crushing estimates of earnings of $0.25 on revenue of $847.7M. Revenue soared 40% year-over-year, driven by a strong outperformance of License and Cloud business segments (both up 54% YoY). The adjusted gross margin came in at 82%, easily ahead of the 78% consensus.
For the fourth quarter, the company projects revenues in the range of $1.055B and $1.085B, in line with estimates for $1.07B. Full-year revenues are now seen between $3.455B and $3.485B, up from a prior estimate of between $3.35B and $3.4B. Splunk also raised its full-year adjusted operating margin outlook to 12%-13%, up from 8% and higher than the 7.9% consensus.
“In addition to our strong top line results, we also made good progress on our expense reduction during the quarter,” the company said in a press release.
Truist analysts reiterated a Buy rating and a $130 per share price target after the company delivered “a strong beat on the top and bottom line driven by continued strength in License revenue and CEO Gary Steele's cost optimization efforts.” They added that SPLK continues “to navigate the deteriorating macro with an accommodative approach to onboarding customers on their cloud subscription offering.”
“We view their improving profitability and FCF generation favorably in the current macro environment,” the analysts added in a note.
Raymond James analysts also noted that a strong beat was driven by robust cost controls. The analysts are less enthusiastic about SPLK stock, hence reiterating the Market Perform rating.
“This seems to us like a way to maximize cash generation potential and may attract an acquirer at some point, and don’t fault investors that choose to play for this, but we await a true turn in business trends within the key growth areas to make something beyond just a tactical call on the stock,” they wrote in a note.