While other real-time data processing methods are possible to construct without violating SPLK's patents, SPLK's technique works particularly well and is proven," Freeman writes in his report.Īs a result of this competitive advance, CFRA sees hundreds of new use cases being developed that combine Splunk's data processing engine with machine learning apps, providing the company with near-term opportunities in the hundreds of millions. " Patented underlying software engine that can truly process streaming data in real time. Should You Buy the Mobileye Self-Driving Car IPO? The analyst believes that Splunk has a significant competitive advantage against many of its peers. That's expected to continue, Freeman says. Splunk Has a Competitive Advantageīut over the past two years, its overall revenue growth has accelerated thanks to its Cloud ARR. By 2021, overall revenue fell by 6% as more of its traditional customers stopped doing business with the company. In its first year of transitioning, overall revenue growth fell to 30% from 42% in 2019 as traditional customers disappeared, replaced by cloud-based ones. It began its cloud-based subscription model in 2020. That's based on the company's transition to a cloud-based business model, continuing unabated for three years. While that's down from 130% seen in Q1 2023, it remains above 120%, which is considered excellent by industry standards.ĬFRA's three-year revenue CAGR (compound annual growth rate) forecast for Splunk is 23%. This means it's generating 29% more revenue in a given year from its existing customers. Its cloud dollar-based net retention rate (Cloud DBNRR) in its fiscal second quarter was 129%. The company continues to maintain loyal cloud-based customers. That's 640 basis points higher than in 2022 (a basis point is 1/100th of a percentage point). Meanwhile, Splunk's total annual recurring revenue (ARR) is expected to be $3.65 billion in 2023, with its cloud ARR accounting for 49.3% of its total ARR. That's up from 35.9% of overall revenue in Q2 2022. The company's most recent Q2 2023 earnings report saw cloud revenue grow by 59% year-over-year to $346 million, or 43.3% of its overall revenue. Can Stocks Picked by Artificial Intelligence Beat the Market? 3 Stocks to Watch
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