May 21, 2020, 4:23 p.m. EDT

Splunk sales and forecast come in low amid cloud transition, stock falls

Annual guidance rescinded, quarterly forecast comes in lower than expected for a second consecutive quarter

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By Jeremy C. Owens, MarketWatch , Jon Swartz


Bloomberg
Splunk Inc. reported sales growth of 2% Thursday, failing to hit a forecast that disappointed investors three months ago.

Splunk Inc. shares fell more than 5% in after-hours trading Thursday after the software company reported that sales grew less than executives expected and issued a second consecutive disappointing forecast.

Splunk /zigman2/quotes/203060494/composite SPLK -6.22%  reported a loss of $305.6 million, or $1.94 a share, on revenue of $434.1 million, up 2% from $424.9 million a year ago. After adjusting for stock-based compensation and other effects, the company reported a loss of 54 cents a share, down from adjusted earnings of 2 cents a share a year ago. Analysts surveyed by FactSet had expected an adjusted loss of 57 cents a share on sales of $443 million.

Splunk disappointed investors in March with its forecast for the first quarter and full year, and failed to live up to its quarterly forecast with Thursday’s results while rescinding its annual guidance. Splunk continued that pattern Thursday, projecting revenue of $520 million for the second quarter, while analysts on average expected $550 million, according to FactSet.

Splunk sells data-crunching software used for security and other purposes, and has been focusing on a cloud transition that can lead to lower revenue totals but better predictability of future results. Cloud revenue grew 81% year-over-year to $112 million, Splunk reported.

“Our shift to a SaaS model is accelerating with cloud driving nearly half of total software bookings in the quarter with [annual recurring revenue] growing 52% year over year,” Splunk Chief Financial Officer Jason Child told MarketWatch in a phone interview Thursday.

Splunk did not specifically spell out any negative effects from COVID-19, which is thought to be less deleterious for software companies that offer cloud products meant to help secure and monitor a dispersed workforce. Chief Executive Doug Merritt has stressed the need for strong data analysis to combat the coronavirus, and recently told MarketWatch that he was disappointed with the federal government’s use of data in its response.

Splunk shares are up 9% this year, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.06%  is down 8.7%.

/zigman2/quotes/203060494/composite
US : U.S.: Nasdaq
$ 200.38
-13.28 -6.22%
Volume: 2.19M
Aug. 7, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$31.83 billion
Rev. per Employee
$563,441
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/zigman2/quotes/210599714/realtime
US : S&P US
3,351.28
+2.12 +0.06%
Volume: 2.28B
Aug. 7, 2020 5:10p
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Jeremy Owens is MarketWatch’s technology editor and San Francisco bureau chief. You can follow him on Twitter @jowens510. Jon Swartz is a senior reporter for MarketWatch in San Francisco, covering many of the biggest players in tech, including Netflix, Facebook and Google. Jon has covered technology for more than 20 years, and previously worked for Barron's and USA Today. Follow him on Twitter @jswartz.

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