Splunk stock shows volatility after surprise profit, new CEO

Splunk Inc. initially rallied in Wednesday’s extended session but then shed those gains, plunging into negative territory, as the cloud-based enterprise software company reported surprise earnings, topped Wall Street’s outlook estimates and named a new chief executive.

Splunk SPLK,
-1.39%
stocks, which had rebounded more than 10% after hours, quickly shed those gains and plunged into negative territory. The shares last rose less than 1%, after falling 1.4% in the regular session to close at $114.92. Over the past 12 months, stocks have fallen 23%, compared to a 13% gain for the S&P 500 SPX index,
+1.86%
and a 3% rise in the tech-heavy Nasdaq COMP composite index,
+1.62%.

Splunk reported a fourth-quarter loss of $140.8 million, or 88 cents per share, compared with a loss of $139.5 million, or 86 cents per share, a year earlier. The company reported adjusted net income, which excludes stock-based compensation expense and other items, of 66 cents per share, compared with 38 cents per share in the same period last year.

Revenue reached $901.1 million, compared to $745.1 million in the year-ago quarter, as cloud revenue jumped 69% to $289 million. Total annual recurring revenue, or ARR, increased 32% to $3.12 billion from a year ago. ARR is a software as a service metric that shows the amount of revenue the business can expect based on subscriptions.

Analysts polled by FactSet had forecast a loss of 21 cents per share on revenue of $774.6 million and total ARR of $3.12 billion, based on Splunk’s revenue forecast of between $740 million and $790 million. and a total ARR of $3.09-3.14 billion.

“We achieved a significant milestone by surpassing $3 billion in total ARR last year, with cloud revenue growth of 70%,” Jason Child, CFO of Splunk, said in a statement. “The impact of our business transformation on our finances is normalizing, and we are well positioned for strong revenue and cash flow growth.”

Splunk also named Gary Steele as its new CEO and said he would start on April 11 and succeed interim CEO Graham Smith, who will return to his role as chairman. At the start of the fourth quarter, Smith took over from Doug Merritt, after his sudden resignation.

Steele is the founder of cybersecurity company Proofpoint Inc., where he served as CEO until its acquisition by private equity firm Thoma Bravo in 2021.

Splunk expects revenue of between $615 million and $635 million in the first quarter, while analysts had forecast revenue of $605.1 million.

Splunk forecasts revenue of $3.25 billion and $3.3 billion for fiscal 2023, and sticks to last quarter’s estimate of a total ARR of around $3.9 billion for the year. Analysts expect FY2023 revenue of $3 billion and FY2023 TAR of $3.91 billion.

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