uploads///Big Data

What’s Driving Growth for Splunk and Its Peers?


Dec. 9 2015, Updated 6:04 a.m. ET

Increase in big data penetration

Previously in this series, we discussed Splunk’s (SPLK) fiscal 3Q16 results, which the company released on November 19, 2015. The company not only exceeded analyst expectations, but it also posted a more than 50% growth in revenues in 3Q16. Looking at Tableau Software’s (DATA) recent fiscal 3Q15 results, we should note that this company—one of Splunk’s competitors, which provides data visualization to other companies—also reported an impressive revenue growth in its most recent quarter, reaching 63.5%.

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A very likely reason that these companies can report strong double-digit growth is that there is still relatively small penetration of big data in the technology space. Increasingly, a large percentage of companies in the technology industry intend to shift their operations towards big data space in coming quarters.

Leading technology players target big data

According to research done by Snowflake Computing, so far in 2015, only 5% of enterprises have fully deployed big data strategies. This is in comparison to 41% of companies that have only expressed an interest in big data.

Snowflake Computing is a big data startup that sells data warehouse, a cloud-based data service hosted on Amazon Web services, or AWS. As the chart above shows, big data has reached a value of approximately $27 billion in 2015 and is expected to be a $100 billion market in 2020.

Big inroads to big data across the industry

It’s no surprise that big technology players such as Microsoft Corporation (MSFT), Amazon.com (AMZN), IBM, and Oracle Corporation (ORCL) are aggressively making inroads into the big data space with their offerings. Cloudera and Hortonworks, also big data companies, have built their technology on Hadoop, which is an open source technology. HP, notably, believes that big data will likely drive the company’s growth after its split into two entities.

As an alternative to investing in Splunk directly, you might consider investing in the iShares North American Tech-Software ETF (IGV) in order to gain exposure to Splunk. IGV invests 1.81% of its total holdings in Splunk.


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