Splunk Inc (NASDAQ:SPLK) had a ‘good’ quarter and could be setting the groundwork for upgrades in the future, according to analysts at California-based stockbroker Wedbush.
The cloud-data firm saw its stock rise 14% on Thursday after its financial results beat expectations.
It posted adjusted earnings of $0.71 per share on revenue of $910.6 million, versus expectations of $0.46 per share on revenue of $889 million.
“The highlight of the quarter was the highest ever sequential growth in net new ARR [annualized recurring revenue], more than doubling from prior quarter,” Wedbush analyst Taz Koujalgi said in a note.
“Macro conditions continue to be choppy and consistent with prior quarters, and the company called out good execution by its team.
Koujalgi: “Overall, a good quarter, and if similar momentum and execution sustains there could be upside to ARR and FCF for the year.”
The Wedbush analyst meanwhile highlighted that a large majority of Plunk’s ARR additions, about 70% to 80% of them, are from upsells to existing customers.
As such, the uptick is impacted by the data company’s renewal base, he added.
“Splunk has not disclosed the seasonality of the renewal base in the quarter and has said that renewal base in FY24E is 20% higher than it was in FY23, but it would not be unreasonable to expect the big uptick in Net New ARR was for the most part driven by a big uptick in renewal base,” Koujalgi added.
Wedbush retained a ‘neutral’ rating but lifted its price target to $105, from $86.
At just under $114 per share Splunk stock was up 14% on Thursday, valuing the company at nearly $19 billion.
Gary Steele, Splunk's chief executive, in the results statement, commented: “Through our ongoing focus on accelerating innovation and harnessing AI, we unveiled many important advancements during the quarter to help customers strengthen their overall digital resilience and security posture.”
Looking ahead, Splunk projects third-quarter revenue between $1.02 billion and $1.035 billion, more than the analyst consensus estimates of $982 million.