Billion Dollar Unicorns: Splunk Outpaces Market Expectations
According to an IDC report published earlier this year, the global Big Data Analytics market is forecast to grow from $130.1 billion in 2016 to over $203 billion in 2020, translating to an annualized growth rate of 11.7%. Billion Dollar Unicorn club member Splunk (Nasdaq: SPLK) is benefitting from this rapid growth.
Splunk’s Financials
Splunk’s third quarter revenues grew 34% over the year to $328.7 million, ahead of the market’s expectations of $309 million. Adjusted EPS of $0.17 was also ahead of the Street’s forecast of $0.14 for the quarter, and significantly better than the $0.10 it reported a year ago.
By segment, license revenues increased 29% over the year to $179.8 million, and maintenance and service revenues grew 42% to $148.82 million. During the quarter, Splunk signed more than 450 new enterprise customers.
For the current quarter, Splunk forecast revenues of $388-$390 million. Analysts forecast revenues of $384 million with an EPS of $0.32 for the quarter. Splunk raised its revenue guidance for the current year to $1.239-$1.241 billion with billings of $1.485 billion. For fiscal 2019, Splunk forecast revenues of $1.55 billion, above market estimates of $1.52 billion.
Splunk’s Acquisitions
During the quarter, Splunk continued to grow inorganically. Last month, it announced the acquisition of selected assets of Rocana, a privately held analytics solution company. The acquisition includes technology and IP assets, along with several technical employees from Rocana. Splunk plans to leverage Rocana’s assets to enhance its machine data platform and machine-learning capabilities. Rocana was founded in 2014 by Cloudera, Vertica, and Experian alumni. Its core product Rocana Ops gathers and analyzes data from multiple sources to give technologists the ability to see emerging issues. Terms of the deal were not disclosed.
Additionally, Splunk also announced the acquisition of another privately held company SignalSense. Seattle-based SignalSense offers cloud-based advanced data collection and breach detection solutions that leverage machine learning. It is an expert in building modern cloud applications and applying machine learning to data at scale. Splunk will integrate SignalSense’s expertise to advance its machine learning capabilities for its machine data platform.
Besides product enhancement, Splunk is also reviewing its pricing strategy. Last quarter, it announced additional focus on value-based pricing for its customers. New pricing models launched included use-case specific solutions with tailored pricing metrics, licensing arrangements for enterprise agreements, term license true-up capabilities to allow organizations to increase usage over time, and free, personalized Dev/Test licenses, to name a few.
The market is pleased with Splunk’s outlook. Its stock is trading at $80.18 with a market capitalization of $11.35 billion. It had fallen to a low of $50.64 in December last year and had climbed to a high of $84.88 last month soon after its result announcement.
Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...
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