Splunk Lower After Loss Widens, Revenue Outlook Misses Estimate

Splunk, the San Francisco provider of data-analysis software, reported a wider fiscal-third-quarter loss on 11% lower revenue.
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Splunk  (SPLK) - Get Report, the San Francisco provider of data-analysis software, reported a wider fiscal-third-quarter loss on 11% lower revenue.

Both figures, as well as the company’s fourth-quarter revenue outlook, lagged Wall Street’s expectations.

For the quarter ended Oct. 31, Splunk’s loss widened to $1.26 a share from 38 cents a share in the year-earlier quarter. On an adjusted basis, Splunk posted a loss of 7 cents a share.

Shares outstanding rose 5.3% to 160.5 million, and revenue dropped to $558.6 million from $626.3 million.

A survey of analysts by FactSet produced consensus estimates for a GAAP loss of $1.02 a share, or adjusted earnings of 9 cents a share, on revenue of $613 million.

At last check, Splunk shares were trading down 11% at $182.89. They closed the regular Wednesday trading session off 0.3% at $205.91.

Splunk also estimated fiscal-fourth-quarter revenue at $650 million to $700 million. Analysts polled by FactSet were expecting $777.9 million.

In what he called a challenging environment, Splunk Chief Financial Officer Jason Child said his company “exceeded our cash-flow target significantly and we ended with cloud annual recurring revenue [ARR] up 71% year-over-year -- among the highest growth rates in the industry.”

Total annual recurring revenue now exceeds $2 billion, President and Chief Executive Doug Merritt said.

In a late-October analysis, Barron’s reported that Splunk is shifting to delivering its analytics software primarily via the cloud rather than through on-premise installations. And it is shifting to a subscription-based revenue model and away from perpetual and term licenses.

This latter shift to subscriptions, Barron’s says, tends to hurt software companies' revenue growth early on in the transition.

Wall Street expects Splunk to report a modest drop in revenue for fiscal 2021 from the year earlier. The company, however, has been urging investors to focus on ARR to measure the company’s growth, Barron’s reported. And on that basis, Barron’s says, “Splunk is thriving.”

Most recently, Splunk last month said it definitively agreed to acquire Flowmill, the Palo Alto, Calif.-based specialist in network-performance monitoring. Terms weren’t disclosed.