Splunk Announces Fiscal Second Quarter 2024 Financial Results

Splunk Inc. (NASDAQ: SPLK), the cybersecurity and observability leader, today announced results for its fiscal second quarter ended July 31, 2023.

Second Quarter 2024 Financial Highlights

• Total ARR was $3.858 billion, up 16% year-over-year.
• Total revenues were $911 million, with Cloud revenue growing 29% to $445 million.
• GAAP Operating Expenses declined 2% year-over-year; non-GAAP Operating Expenses declined 3% year-over-year.
• Trailing twelve month operating cash flow was $827 million, up 247% year-over-year.
• Trailing twelve month free cash flow was $805 million, up 273% year-over-year.
• 834 customers with total ARR greater than $1 million, an increase of 111 year-over-year.

“Splunk delivered another solid quarter, demonstrating the incredible value organizations worldwide gain from unified security and observability,” said Gary Steele, President and CEO of Splunk. “Through our ongoing focus on accelerating innovation and harnessing AI, we unveiled many important advancements during the quarter to help customers strengthen their overall digital resilience and security posture. Our team’s strong execution, operational discipline and deep customer engagement have again illustrated Splunk’s leadership.”

“Q2 represents a strong quarter of growth, execution, and operating leverage. We generated 16% ARR growth as we reduced non-GAAP operating expenses by 3% year-over-year,” said Brian Roberts, CFO of Splunk. “We are raising our full year outlook on the top and bottom line as we focus on driving growth by delivering value to customers and increasing profitability through greater efficiency.”

Recent Business Highlights

• Splunk Unveils New Artificial Intelligence (AI), Security and Observability Innovations at .conf23: Thousands of partners and customers, including FedEx, Carnival, IKEA and VMware, attended Splunk’s annual user conference to drive digital resilience and power their organizations to be ready for anything. Key product announcements included:
  • Splunk AI, a collection of new AI-powered offerings to enhance Splunk’s unified security and observability platform. Splunk AI combines automation with human-in-the-loop experiences, so organizations can drive faster detection, investigation and response while controlling how AI is applied to their data.
  • Splunk Edge Hub, a new solution that simplifies the ingestion and analysis of data generated by sensors, IoT devices and industrial equipment. Exclusively distributed through authorized domain expert partners, this solution provides more complete visibility across IT and OT environments by streaming previously hard to access data directly into the Splunk Platform.
  • New portfolio innovations across Splunk’s unified security and observability platform. Enhancements include unified security operations with Splunk Attack Analyzer automated threat analysis, Splunk Observability Cloud and Splunk Cloud Platform integrations as well as unparalleled visibility across any environment – from edge to the cloud – with Splunk platform enhancements.
• Splunk and Microsoft Collaborate Through Strategic Partnership: Also announced during .conf23, Splunk and Microsoft are partnering to build Splunk’s enterprise security and observability offerings on Microsoft Azure. Additionally, for the first time, Splunk solutions will be available for purchase on the Microsoft Azure Marketplace.
• Splunk Named a Leader in 2023 Gartner® Magic Quadrant™ for Application Performance Monitoring (APM) and Observability*. This recognition follows Splunk’s ninth consecutive recognition as a Leader in the 2022 Gartner® Magic Quadrant™ for Security Information and Event Management**, positioning Splunk as a vendor recognized by Gartner in both reports.
• Splunk Cloud Platform Attains StateRAMP Moderate Authorization: As a State Risk and Authorization Management Program (StateRAMP)-authorized provider, SLED organizations can leverage Splunk’s actionable intelligence and advanced analytics at scale to address use cases across various areas such as cybersecurity, IT modernization, procurement processes, artificial intelligence and more.

Financial Outlook

The company is providing the following guidance for its fiscal third quarter 2024 (ending October 31, 2023):

• Total ARR is expected to be approximately $3.980 billion.
• Total revenues are expected to be between $1.02 billion and $1.035 billion.
• Non-GAAP operating margin is expected to be between 24.7% and 25.3%.
• Free cash flow is expected to be approximately $75 million which implies trailing twelve months free cash flow of $834 million.

The company is updating the following guidance for its fiscal year 2024 (ending January 31, 2024):

• Total ARR is expected to be between $4.150 billion and $4.175 billion (was previously between $4.125 billion and $4.175 billion).
• Total revenues are expected to be between $3.925 billion and $3.95 billion (was previously approximately $3.9 billion).
• Non-GAAP operating margin is expected to be between 21.0% and 21.5% (was previously between 18% and 18.5%).
• Free cash flow is expected to be between $855 million and $875 million (was previously between $805 million and $825 million).

A reconciliation of non-GAAP guidance measures to corresponding GAAP guidance measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, expenses that may be incurred in the future. For example, stock-based compensation-related charges, including related employer payroll tax-related items, are impacted by the timing of employee stock transactions, the future fair market value of our common stock, and our future hiring and retention needs, all of which are difficult to predict and subject to constant change. We have provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for our historical non-GAAP financial results included in this release.

Conference Call and Webcast

Splunk’s executive management team will host a conference call beginning at 1:30 p.m. PT (4:30 p.m. ET) today to discuss financial results and business highlights. Interested parties may access the call by dialing (800) 715-9871 in the U.S. or (646) 307-1963 from international locations and referencing conference ID 3140501. A live audio webcast and replay of the conference call will also be available on Splunk’s Investor Relations website at https://investors.splunk.com/events-presentations. An audio webcast replay of the call will be available for the next 12 months.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Splunk’s long-term prospects, including Splunk’s guidance for total ARR, total revenues, non-GAAP operating margin and free cash flow for the company’s fiscal third quarter 2024 and fiscal year 2024 and free cash flow for the trailing twelve months ended with the third quarter 2024; our global presence and trends in customer demand and engagement; statements regarding our operating efficiency, growth, profitability and cash flows; statements regarding our products, projects, technology and ongoing product development, including recently announced products; statements regarding our partnerships; statements regarding our market opportunity as well as our ability to meet customer needs; and trends in the markets for our products, including the security and observability markets. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: the macroeconomic environment, including inflationary pressures, economic uncertainty and impacts on information technology spending; risks associated with Splunk’s growth, particularly outside of the United States; the impact of Splunk’s restructuring plans; risks associated with Splunk’s ability to successfully introduce and gain market acceptance for new products and technologies; Splunk’s inability to realize value from its significant investments in the company’s business, including product and service innovations and through acquisitions; Splunk’s shift from sales of licenses to sales of cloud services which impacts the timing of revenue and margins; Splunk’s transition to a multi-product software and services business; Splunk’s inability to successfully integrate acquired businesses and technologies; Splunk’s inability to service its debt obligations or other adverse effects related to the company’s convertible notes; and general market, political, economic, business and competitive market conditions.

Additional information on potential factors that could affect Splunk’s financial results is included in the company’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2023, which is on file with the U.S. Securities and Exchange Commission (“SEC”) and Splunk’s other filings with the SEC. Splunk does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

*Gartner, Magic Quadrant for APM and Observability, Gregg Siegfried, Mrudula Bangera, 5 July 2023
**Gartner, Magic Quadrant for Security Information and Event Management, Pete Shoard, Andrew Davies, Mitchell Schneider, October 2022

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About Splunk Inc.

Splunk Inc. (NASDAQ: SPLK) helps build a safer and more resilient digital world. Organizations trust Splunk to prevent security, infrastructure and application issues from becoming major incidents, absorb shocks from digital disruptions, and accelerate digital transformation.

Splunk, Splunk>, and Turn Data Into Doing are trademarks and registered trademarks of Splunk Inc. in the United States and other countries. All other brand names, product names, or trademarks belong to their respective owners. © 2023 Splunk Inc. All rights reserved.