Splunk stock spikes as strong forecast quiets concerns

Executives on Wednesday guided for second-quarter revenue of $880 million to $895 million, and tweaked their annual forecast to increase targets for adjusted operating margin and free cash flow. Analysts on average were expecting second-quarter sales of $868 million, according to FactSet.

For the fiscal first quarter, Splunk reported a loss of $196.4 million, or $1.19 a share, on sales of $419.4 million, up from $674 million a year ago. After adjusting for stock compensation, restructuring costs and other effects, the company reported earnings of 18 cents a share, improving from an adjusted loss of 32 cents a share a year ago. Analysts on average expected and adjusted loss of 14 cents a share on sales of $723 million, according to FactSet.

“Splunk delivered another solid quarter and once again delivered durable growth with increasing profitability and free cash flow,” Chief Executive Gary Steele said in a statement.

Splunk has undergone seismic changes in the past couple of years, changing both its chief executive and chief financial officer amid a growth slowdown, and laying off more than 300 workers earlier this year. The software company faces an uncertain environment for tech spending, especially for its banking customers, who have faced a crisis in 2023 that has trickled down to their preferred software providers such as Tenable Holdings Inc.
TENB,
-2.13%.

“Macro remains a wild card, especially as it relates to any impact from the recent banking turmoil, as we think financial services is one of the larger verticals for the company, although Splunk likely has relatively more exposure to bigger banks as opposed to smaller regional banks,” JP Morgan analysts warned in a preview of Splunk’s earnings, while maintaining a neutral rating on the stock.

Splunk’s stock has shown some volatility in the past year, but has gained overall. In the past 12 months, shares are up 9.7%, as the S&P 500 index
SPX,
+0.88%
has gained 5.2%.