Splunk’s (NASDAQ: SPLK) shares are down more than 10% after the firm released earnings.
Splunk’s sales were $798.8 million, which was more than the average forecast of $747.4 million. Annual recurring revenue (ARR) was $3.33 billion, slightly less than the $3.42 billion forecast.
This quarter, the business predicts revenues of $835 million to $855 million, which is higher than the $833.2 million estimate.
“We also produced significantly better non-GAAP operating margins for the quarter, driven by our laser focus on combining growth with profitability,” said Gary Steele, Splunk’s president and CEO.
Revenues for the whole year are expected to be between $3.35 billion and $3.4 billion, which is somewhat higher than the previous forecast of $3.3 billion to $3.35 billion. However, shares fell when the company reduced its full-year ARR guidance. Splunk reduced its revenue forecast by 6%, to $3.65 billion.
A BTIG analyst claims to have “seen worse” outcomes than Splunk provided in Q2. The analyst maintained a buy rating and a price objective of $132 per share.
“We weren’t anticipating a guide down, and the print disappointed us.” The report did include some good features, such as growing operating margins and an improved FCF projection. The analyst stated in a note, “While we cannot overlook the impact of a weaker economy on demand, we believe SPLK’s ARR projection is particularly conservative considering Q2 was the first full quarter with Gary Steele as CEO.”
According to a Barclays analyst, the cloud slowdown has not wowed the market.
“The incorrect revenue segment (term license contracts) outperformed in Q2 but the all-important cloud business underperformed, therefore investors will be disappointed.” We suspect, however, that the majority of this is due to a simple delay in cloud migrations for large on-premise clients. “This is irritating, but given the present situation, it makes sense and should not be a game changer for investors,” the analyst added.
