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Earnings Results: Splunk stock shows volatility following surprise profit, new CEO

Splunk Inc. rallied at first in the extended session Wednesday then pared most of those gains as the cloud-based enterprise software company reported a surprise profit, topped Wall Street outlook estimates, and named a new chief executive.

Splunk 
SPLK,
-1.39%

shares, which had rallied more than 10% after hours, were last up around 2%, following a 1.4% decline in the regular session to close at $114.92. Over the past 12 months, shares have dropped 23%, compared with a 13% gain in the S&P 500 index
SPX,
+1.86%

and a 3% rise in the tech-heavy Nasdaq Composite Index
COMP,
+1.62%
.

Splunk reported a fourth-quarter loss of $140.8 million, or 88 cents a share, compared with a loss of $139.5 million, or 86 cents a share, in the year-ago period. The company reported adjusted net income, which excludes stock-based compensation expenses and other items, of 66 cents a share, compared with 38 cents a share in the year-ago period.

Revenue rose to $901.1 million from $745.1 million in the year-ago quarter, as cloud revenue surged 69% surge to $289 million. Total annual recurring revenue, or ARR, rose 32% to $3.12 billion from a year ago. ARR is a software-as-a-service metric that shows how much revenue the company can expect based on subscriptions.

Analysts surveyed by FactSet had forecast a loss of 21 cents a share on revenue of $774.6 million and total ARR of $3.12 billion, based on Splunk’s forecast revenue between $740 million and $790 million and total ARR of $3.09 billion to $3.14 billion.

“We reached a significant milestone as we surpassed $3 billion in total ARR last year, with cloud revenue growing 70%,” said Jason Child, Splunk’s chief financial officer, in a statement. “The impact of our business transformation on our financials is normalizing, and we’re well positioned for strong growth in revenue and cash flow.”

Splunk also named Gary Steele as its new CEO, who will start on April 11 and take over for interim CEO Graham Smith, who will return to his role as chairman. Early in the fourth quarter, Smith took over for Doug Merritt, after he suddenly resigned.

Steele is the founder of cybersecurity company Proofpoint Inc., where he served as CEO until it was acquired by private-equity firm Thoma Bravo in 2021.

Splunk expects first-quarter revenue between $615 million and $635 million, while analysts had forecast revenue of $605.1 million.

Splunk forecast revenue of $3.25 billion and $3.3 billion for fiscal 2023, and held to last quarter’s estimate of total ARR of about $3.9 billion for the year. Analysts expect fiscal 2023 revenue of $3 billion, and fiscal 2023 ARR of $3.91 billion.

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