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SPLK Stock Rises After-Hours on Earnings Beat

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Shares of cloud software solutions company Splunk (SPLK) were up 8.5% in after-hours trading today. The company announced its earnings results for the second quarter of fiscal 2020 (which ended in July) on August 21 after the markets closed.

Splunk reported sales of $517 million for Q2, up 33% year-over-year. The company’s adjusted EPS rose 275% year-over-year to $0.30.

SPLK had reported sales of $388.3 million and EPS of $0.12 for Q2 of fiscal 2019. Wall Street analysts expected the company to post revenues of $488.35 million and EPS of $0.12 for Q2 of fiscal 2020. So Splunk crushed Wall Street estimates, driving the stock higher after-hours.

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Key metrics for SPLK in Q2 2020

Splunk’s sales were driven by 46% growth in the company’s software revenue and an 80% rise in its cloud revenue. The company added 500 new enterprise customers in Q2. CFO Jason Child stated, “With year-over-year revenue growth of 80% and ARR now over $300 million, the strength of our cloud business is driving a faster transition to a renewable software model. By the end of the year, we expect that virtually all new software sales will be cloud or term license-based.”

The company expanded its partnership with Deloitte Risk & Financial Advisory. The advisory will leverage Splunk Phantom to help enterprises report and address cyber threats.

Splunk also announced Splunk Phantom and Splunk Enterprise’s integration with Amazon Web Services. This integration aims to help clients investigate cyber threats more quickly on the AWS platform.

Plus, SPLK announced an acquisition of Cloud Monitoring company SignalFx in a $1.05 billion deal—60% cash and 40% stock. The company would need to pay a little more than $600 million in cash for the acquisition. It expects the deal to close in the second half of fiscal 2020. SignalFx is, reportedly, a market leader in the “in real-time monitoring and metrics for cloud infrastructure, microservices and applications.”

Splunk forecasts sales of $600 million for the third quarter. It estimates sales of $2.30 billion for fiscal 2020 overall—above its previous estimate of $2.25 billion. Analysts had expected SPLK to post sales of $590.25 million in Q3 and $2.26 billion in 2020.

SPLK stock is now trading at $130, which means it’s returned 25% year-to-date. We identified Splunk as a solid long-term bet in July.

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