How Splunk’s Different Segments Contribute to Its Business

Splunk’s (SPLK) license segment, which contributes more than 50% of its total business, has seen strong growth thanks to the company’s ability to rapidly provide insights into collected data sets, strong product portfolio, and innovative product launches.

In the last five years, Splunk’s license business has grown at a compound annual rate of 37%. The graph above shows how Splunk’s license segment and maintenance and service segment revenue has grown by double digits.

In fiscal 2018, license revenue grew 26.8% YoY (year-over-year) to $694 million, and in fiscal Q4 2018, it rose YoY to $254.3 million from $190.5 million.

Splunk’s license business gained from cloud revenue and its partnership with Amazon Web Services (AMZN). The company’s plan to shift to a subscription-based business model from a perpetual model also increased Splunk’s customer order size.

In fiscal 2018, maintenance and service revenue rose 43.2% YoY to $577 million. In the fiscal fourth quarter, revenue rose YoY to $165.4 million from $115.9 million. Over the last five years, it has grown at a compound annual rate of 54%. Splunk expects maintenance and service revenue to become a larger part of its overall revenue as its installed customer base grows.