After Q2 Beat, Splunk Raises FY23 Revenue Outlook But Revises ARR Downwards

Splunk Inc SPLK reported second-quarter FY23 revenue growth of 32% year-over-year to $798.75 million, beating the consensus of $747.78 million.

Cloud revenue was $346 million (+59% Y/Y). Cloud Dollar-Based Net Retention Rate was 129%. 723 customers with cloud ARR greater than $1 million (+24% Y/Y).

Adjusted EPS was $0.09 versus $(0.62) in 2Q22, which may not be comparable to the consensus of $(0.35).

The gross margin expanded by 440 bps to 74.1%. The adjusted gross margin was 78.5% vs. 75.1% a year ago.

The operating loss reduced to $(190.09) million, from $(344.43) million in 2Q22.

Splunk generated cash from operating activities year-to-date of $124.72 million, compared to $14.74 million a year ago. Free cash flow of $113.08 million.

3Q23 Outlook: Splunk expects total revenue of $835 million and $855 million vs. a consensus of $834.82 million; Non-GAAP operating margin of 6% and 8%.

FY23 Outlook: The company sees total revenues of $3.35 billion and $3.4 billion (was previously between $3.30 billion and $3.35 billion), vs. a consensus of $3.33 billion, and a Non-GAAP operating margin of ~8% (was previously 2%).

It expects an operating cash flow of at least $420 million (which was previously $400 million); and a free cash flow of ~$400 million.

Total ARR is expected to be approximately $3.65 billion; Cloud ARR is expected to be roughly $1.8 billion (was previously $3.9 billion and $2.0 billion, respectively).

Price Action: SPLK shares are trading lower by 10% at $99.29 during the post-market session on Wednesday.