Cloud Stocks: Analysis of Splunk’s PaaS Strategy

Big data player Splunk (NASDAQ: SPLK) continues to focus on its cloud bets. But the company is failing to deliver in the shorter term. It recently announced its second quarter results which failed to meet market expectations. Its outlook fell short as well, but its cloud metrics continue to impress the market.

Splunk’s Financials

Revenues for the second quarter fell 5% over the year to $492 million, falling short of the market’s expectations by 6%. Adjusted loss of $0.33 per share was also wider than the market’s estimated loss of $0.32 per share..

By segment, license revenues fell 36.8% to $176.8 million. Maintenance and service revenues grew 13.3% to $189 million. Cloud revenues grew 79% over the year to $126 million.

Among other metrics, Annual Recurring Revenue (ARR) grew 50% over the year to $1.93 billion. Its shift to a SaaS model last year accelerated as cloud business accounted for nearly half of total software bookings in the quarter with cloud ARR growing 89% over the year.

Splunk forecast revenues of $600-$630 million for the third quarter and did not provide a forecast for the fiscal year. The market was looking for revenues of $645.4 million for the quarter with an EPS of $0.01 and revenues of $2.44 billion for the year with a net loss of $0.34 per share for the year.

Splunk’s Cloud Focus

Splunk continued to add to its cloud capabilities. During the quarter, it announced that its service, Splunk Cloud, was now available on Google Cloud. The addition on Google Cloud will allow its customers to get more flexibility for real-time visibility on both hybrid and multi-cloud environments. In addition to this, Splunk also rolled out enhancements that will extend its cloud capabilities and will help strengthen its platform.

With the latest release of its Data Stream Processor (DSP), Splunk uses the streaming capabilities from Apache Pulsar. DSP will collect, process, and deliver data to the destination of choice to either Splunk or a different platform. The machine will enable customers to get higher volume and speed comparable to those available on offline batch processing.

Additionally, Splunk also announced the general availability of its product Mission Control. Mission Control provides the basic elements needed to perform advanced detections and investigations, making security operations processes easier, contain and fix threats, and gain visibility across the entire security infrastructure all the cloud. It comes with key SIEM functionalities.

Splunk’s PaaS Strategy: Platform or API

Splunk has been an active Paas player. It allows developers to access Splunk Cloud Services via REST APIs and SDKs from their custom-built cloud-native app.

Splunk’s PaaS Strategy: Developer Community

Splunk is very focused on building a thriving developer community. It runs a focused developer program that lets third party developers build apps for its platform. Developers can build apps and integrations that bring new kinds of data into the Splunk platform and help provide data-based insights to users. Users can then investigate, monitor, analyze, and act on the data to make better and smarter decisions.

Splunks’s PaaS Strategy: PaaS Strategy: Marketplace and Metrics

Splunk currently offers more than a thousand apps and integrations on its marketplace called Splunkbase. Despite being an active PaaS player, Splunk does not share any metrics on either app usage or developer revenues. It would be interesting to see what those numbers look like.

Its stock is currently trading at $223.59 with a market capitalization of $35.2 billion. It had climbed to a 52-week high of $225.86 earlier this week. The stock has recovered from the 52-week low of $93.92 it had fallen to in March this year.

This segment is a part in the series : Cloud Stocks