Business

The Splunk Inc (NASDAQ:SPLK) Story Keeps Looking Better and Better

Splunk Inc (NASDAQ:SPLK) is rocketing higher today after another solid quarterly report. The evolution of the company and its principal niche in the technology ecosystem continues to fuel our enthusiasm for the stock.

In raw numbers, non-GAAP EPS jumped 36% yr/yr to $0.38, which was a good bit better than market expectations. Revenue rose 40.4% yr/yr to $481 mln, which was well above prior guidance of $430-432 mln. Non-GAAP operating margin came in OctQ at 13.6%, down from 15.5% achieved in the prior year period. In terms of guidance, Splunk expects Q4 (Jan) revenue to come in around $560 mln, which is modestly above market expectations. SPLK expects JanQ non-GAAP operating margin to increase sequentially to 25-26%.

Splunk Inc (NASDAQ:SPLK) provides software that allows its customers to collect, index, search, monitor, and analyze data regardless of format or source.

 

The Increasingly Valuable Value-Add

Its software helps make sense of large and diverse data sets commonly referred to as big data and it’s specifically tailored for machine data. Examples include HVAC controllers, manufacturing systems, smart electrical meters, GPS devices and RFID tags.

These things are continuously generating machine data. Splunk’s software helps make sense of all these data points in real-time so management and IT staff can make the correct operational decisions.

Its flagship product is Splunk Enterprise, a machine data platform, comprised of collection, indexing, search, reporting, analysis, alerting, monitoring and data management capabilities. Splunk Enterprise can collect and index hundreds of terabytes of machine data daily, irrespective of format or source. Its platform uses Splunk’s patented data processing architecture that performs dynamic schema creation on the fly, enabling users to run queries on data without having to define or understand the structure of the data prior to collection and indexing.

This is in contrast to traditional IT systems that require users to establish the format of their data prior to collection in order to answer a pre-set list of questions.

Unlike other data technologies, the company suggests a value-add in that you do not have to know the questions you’ll ask before you deploy Splunk’s platform. The magic of Splunk is that its platform embraces the complexity and chaos of an ever-changing data landscape and allows clients to find insights from their data without the high entry cost of cleansing, parsing and structuring.

The company serves cloud and online services, education, financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology, and telecommunications industries.

As we saw in the quarter, SPLK’s growth is mostly coming from new customers as well as existing customers that decide to expand their data analytics and machine learning resources.

A few good examples were given by management on the conference call. Softbank purchased Splunk Cloud to speed up troubleshooting for mobile devices and app management. Chicago Public Schools expanded their use of Splunk Cloud to help automate their ServiceNow ticketing process along with other IT monitoring and response workflows. Long-time Splunk customer, Norfolk Southern, expanded their use of Splunk Enterprise and ES to better lead with an analytics-driven approach to security.

It isn’t hard to see what the market is jetting the stock higher today in reaction. The move takes SPLK shares back above their major moving averages in a single fell swoop, as well as reestablishing the stock back above the key psych $100/share level.

This is all now likely to serve as important support now that the weaker handed holders of the stock were likely shaken out under the big round number ahead of the report.

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