Data analytics and cybersecurity software firm Splunk reported a quarterly earnings beat Wednesday and raised its outlook for the rest of the year. SPLK stock finished Thursday with a double-digit gain.
For the second quarter ended July 31, San Francisco-based Splunk reported adjusted earnings of 71 cents per share on revenue of $911 million. That's up from earnings of 9 cents per share on $799 million in sales for the same period last year.
SPLK stock analysts polled by FactSet expected earnings of 46 cents a share on $889 million in sales.
Also, Splunk officials increased the company's sales outlook for the rest of fiscal 2024, which ends in January. The firm now expects $3.94 billion at the midpoint, up from $3.9 billion. Analysts polled by FactSet had called for sales of $3.91 billion for the fiscal year.
SPLK stock surged 12.9% to close at 112.83 on the stock market today.
SPLK Stock: Finding Stability
Splunk offers cloud-based software tools that allow corporations to crunch data in real time. That can allow companies to identify operational issues in their software, as well as potential security breaches. Company leaders said Splunk is increasingly using artificial intelligence to bolster its offerings.
"Given Splunk's flexible and highly scalable data architecture, our industry-leading security and observability solutions, and our quickening pace of innovation, we are in a unique position to help enterprises bolster resilience by harnessing AI across our product portfolio," Splunk Chief Executive Gary Steele said on the company's earnings call.
Analysts took the results and the management commentary as a sign the company is finding stability while other companies have been more cautious with software spending.
"We believe the worst of headwinds are behind, and await [annual recurring revenue] growth stabilization in coming quarters," Stifel analyst Brad Reback wrote in a note to clients. "Beyond the top-line, we believe Splunk is well positioned to drive improving profitability and cash flow generation over the next several years."
Watching The AI Market
Also, analysts took note of Splunk's commentary on investing in improvements to its software, including AI. Splunk reported the same day as Nvidia released blockbuster earnings that stoked further excitement over the AI market.
At its investor day last month, Splunk announced a new Splunk AI software suite. The company said it will bolster the security and data observability capabilities of its products.
"Splunk's strong results and improved full-year outlook reflect the company's solid execution and strong demand for its security and observability solutions," William Blair analyst Jonathan Ho said in his note to clients. "We are encouraged by the company's commitment to maintain a fast pace of innovation as we believe that is crucial to remain competitive in this space."
Ho maintained an outperform rating on SPLK stock.
Getting Back On The Radar?
Evercore ISI also holds an outperform rating on Splunk, with a target price of 125.
"While Splunk remains off most investor radar screens (for now), management continues to deliver on driving more profitable growth, and we believe Splunk remains one of the more idiosyncratic stories in software heading into [the second half of the year,]" Evercore ISI analyst Kirk Materne said in a note.
As of Wednesday's close, SPLK stock is up 15.6% for 2023. But shares had fallen 7% this quarter.
Also, Splunk holds a strong composite rating of 94 out of a best-possible 99, according to IBD Stock Checkup. The company's shares rank sixth out of 26 companies in the Computer Software Database group.
