Splunk's Q2 and Q3 outlook disappoint

The company cited momentum in its pivot to the cloud, but results fell short of analysts' expectations.

Splunk's second quarter earnings and third quarter outlook fell short of expectations as it transitions from a licensing revenue model to cloud subscriptions.

The company, which provides a data platform, reported revenue of $492 million, down 5% from a year ago, with a non-GAAP loss of 33 cents a share. Splunk reported a net loss for the second quarter of $261.3 million, or $1.64 a share.

Wall Street was looking for second revenue of $522.1 million and non-GAAP loss of 33 cents a share.

As for the outlook, Splunk projected revenue between $600 million and $630 million. For the third quarter, analysts were modeling a non-GAAP profit of 3 cents a share on revenue of $642.4 million.

Splunk CEO Doug Merritt said the company's cloud business is accelerating with sales of $126 million in the second quarter, up 79%. Splunk also has almost 400 customers with contracts topping $1 million.

On a conference call, Merritt said: 

Our customers are turning to Splunk Cloud faster than ever before, thanks to its rapid time to value, high velocity of innovative features and lower total cost of ownership. The current macro environment is playing a role here, too, as more and more organizations accelerate their move to cloud-based services in response to the pandemic. Many of the purchasing trends we saw in Q1 continued or accelerated in Q2. Although some customers remain hesitant to commit to long-term contracts, especially for larger orders, many existing customers continue to expand their use of Splunk. 

Merritt also said that Splunk Cloud's availability on Google Cloud is "seeing strong traction with a limited availability release." Splunk is also on AWS. 

Overall, Splunk has been gaining wallet share and customers, but as it branches out it faces more competition from the likes of New Relic among others.