![]() ![]() Its GAAP Earnings Per Share was $1.44, which beat analyst forecasts by $1.31. Splunk reported a super non-GAAP operating margin of 38%, which surpassed management's expectations of between 23% and 26%. Splunk also won a deal with a large financial services provider in Asia, which provides greater visibility across its variety of cloud-based "microservices". This more "straightforward" pricing also encouraged a larger Norwegian Bank and energy business in Asia to sign multi-year security deals with Splunk in Q4 FY23. Splunk's switch from "ingest-based pricing" which analyzes data consumption to "workload" based pricing offers customers more flexibility and cost efficiency. Government agencies are an incredibly lucrative customer base, as new product purchases are likely to be even more "sticky" than enterprises. federal government, which signed a multimillion-dollar contract "expansion" agreement to increase the usage of Splunk's products. Notable customer wins in the quarter included the Department of the U.S. In addition, larger organizations tend to have a greater number of account expansion opportunities. The adoption by larger organizations paying (>$1m ARR) also means its customers are finding immense value in the product, which is likely to be more "sticky" (due to the complexities of enterprises). This of course then reduces the complexity for CISOs (Chief Information Security Officers) and potentially even cost. Secondly, from my experience in the IT industry, I know Splunk is often seen as the ideal platform to "consolidate" a variety of security and observability tools. In addition, this is possibly even more so during uncertain economic times. Firstly, security and observability are essential for organizations, due to the cyber trends mentioned in the introduction. ![]() I believe this is for a couple of reasons. This is a positive sign in my mind, as it means despite the macroeconomic environment, larger customers are still happy to adopt Splunk's platform. This increased by 17% year over year or 115 new customers to 790 while its Cloud ARR (>$1m) customers have been growing at an even faster rate of 33% year over year to 422 customers. Splunk has also continued to grow its larger customer base, which generated over $1 million in ARR each. This is also important because management has reported a slowdown in cloud migrations in Q4, driven by the "macro environment". Therefore, it was great to see Splunk continues to offer support for multiple deployments and its Non-Cloud ARR still makes up a substantial (~50%) of the total. However, as the industry stands, a Hybrid cloud environment is prevalent as is on-premises. Splunk also offers an extensive "migration guide" to help those on-premises customers move to the cloud version of the platform. This wasn't a surprise to me, given the forecasted growth in the cloud industry, which was expected to be worth $1.2 trillion by 2027. This was driven by strong Cloud ARR growth, which increased by 33% to $1.778 billion. Annual Recurring Revenue also increased by a steady 15.5% year over year. Its revenue was $1.25 billion, which beat analyst expectations by $177 million and increased by a rapid 38.84% year over year. Splunk reported strong financial results for the fourth quarter of the fiscal year 2023. In this post, I'm going to break down its financial report before diving into my valuation model and forecasts for the stock, let's dive in. In Q4 FY23, Splunk continued to execute tremendously and reported a beat on both top and bottom-line growth expectations. Splunk is poised to benefit from these trends and was ranked number one in the Security Information and Event Management industry by both Gartner and IDC. In addition, the Hybrid cloud industry is forecast to grow at an 18.4% compounded annual growth rate, driven by tailwinds across digital transformation. This is especially important given there was a reported 38% increase in Cyber-attacks in 2022, according to Check Point research. This is an essential process in order to ensure the efficient and secure running of operations. Its platform basically enables a CISO or Chief Information Security Officer at an organization to track all the IT logs, alerts, and activities. Splunk ( NASDAQ: SPLK) is a software company that provides an IT Observability platform.
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