Why Splunk Inc (NASDAQ: SPLK) stock is crashing

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Splunk Inc (NASDAQ: SPLK) stock fell over 7.9% on 24th May, 2019 (as of 11:20 am GMT-4; Source: Google finance) though the company posted better than expected results for the first quarter of FY20. Net income was $3.2 million for Q1, operating cash flow for Q1 was $35 million and free cash flow was about $20 million. SPLK ended the first quarter period with $2.8 billion in cash and investments.

Why Splunk Inc (NASDAQ: SPLK) stock is crashing

SPLK in the first quarter of FY 20 has reported the adjusted earnings per share of 2 cents, beating the analysts’ estimates for the adjusted loss per share of 15 cents, according to Zacks Investment Research. The company had reported the adjusted revenue growth of 36 percent to $424.9 million in the first quarter of FY 20, beating the analysts’ estimates for revenue of $395.7 million. Cloud revenue grew 85% to $62 million over last year. And Q1 software revenues grew 54%, which is the total of license and cloud to $265 million year-over-year. SPLK has ended the quarter with total RPO of $1.2 billion, up 57% over Q1 of last year. In Q1, the company has recorded 46 7-figure orders, and has added over 400 new customers, ending with over 18,000 customers overall. International operations has contributed 26% of total Q1 revenues and education and professional services represented 10% of revenues consistent with the seasonality.

Moreover, during the first quarter 2020, SPLK experienced continued customer momentum both with the company’s platform and in line with the core markets. In IT, ops and app delivery wins in the first quarter include Chipotle, who is moving to Splunk Cloud with this major expansion. Chipotle increased digital sales more than 100% in their latest quarter. The company’s biggest driver of sales and traffic growth. Madrid-based El Corte Ingles, which is one the largest department stores in the world has expanded their use of Splunk Enterprise. LATAM Airlines Group expand their use of Splunk Cloud, from which they can better monitor their website and customer applications for resolving the customer issues quickly, improve the ticketing process and increase revenue.

For the current quarter ending in August, Splunk expects the revenue to be in the range of $485 million. Analysts surveyed by Zacks had expected revenue to be of $477 million. Non-GAAP operating margin is expected to be approximately 3% for second quarter FY 20.

For full year 2020, the company has raised the outlook for revenue and expects total revenues to be approximately $2.25 billion (was approximately $2.20 billion). Non-GAAP operating margin is expected to be approximately 14%, which is unchanged from previous guidance.

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