Splunk's User Conference Highlights Advancements in AI and Strategic Collaboration with Microsoft, Still Analysts Remain Cautious

Needham analyst Mike Cikos reiterated Splunk Inc SPLK with a Buy and a $125 price target.

Following the analyst's attendance at Splunk's conference event in Las Vegas, he believed the company's annual user event demonstrated a total change of pace versus last year.

At this year's event, he noted a greater eagerness from the customer base concerning reception to new product announcements.

The sheer number of product announcements demonstrated the pick-up in internal R&D innovation at Splunk. Notably, the company is working to deliver a more predictable cadence of innovation.

Cikos' customer conversations revealed enthusiasm for Splunk's commitment to both On-Premise and Cloud environments and Splunk's new Edge Hub product.

While the company was tight-lipped about financials, he sensed ample room to continue executing against a focused cost-cutting program to drive Margins & Cash Flows higher.

The event saw over 6,000 in-person attendees, representing over 1,900 organizations. Splunk's partner network has expanded to more than 2,800 (from over 2,400 a year ago) – likely reflecting positive partner reception to Partnerverse enhancements at last year's event.

Management discussions highlight a broader pool of potential users due to natural language processing, larger attack surfaces, and a larger volume of datasets from accelerated Software development.

JMP analyst Trevor Walsh maintained a Market Perform rating.

The analyst flagged security and observability announcements as general portfolio innovations) a broad set of AI-related enhancements, a strategic partnership with Microsoft Corp MSFT, further expansion into the IoT/OT security realm with the release of an edge device, and an exhibitor lineup that included prominent names in cybersecurity.

He viewed the innovations both on the AI front and in terms of product enhancements as a nod to a new management team executing its plan and following suit with other peers in the industry; however, the aggregate result of these announcements does not change his more cautionary view on Splunk's overall competitive positioning in the market.

The analyst maintained FY24 non-GAAP EPS estimate of $3.17 (consensus $3.25) on revenue growth of 7.0%, FY25 non-GAAP EPS estimate of $3.65 (consensus $3.82) on revenue growth of 12%, and FY26 non-GAAP EPS estimate of $4.61 (consensus $5.10) on revenue growth of 13%. 

Price Action: SPLK shares are trading lower by 1.29% at $103.12 on the last check Monday.