Splunk Inc. reported fourth-quarter fiscal 2022 (ended Jan 31, 2022) non-GAAP earnings of 66 cents per share, which beat the Zacks Consensus Estimate by 447.4%. The company had reported earnings of 38 cents per share in the year-ago quarter.

Fourth-quarter total revenues grew 20.9% year over year to $901.1 million, beating the consensus estimate by 16.4%. Splunk benefited from strong execution across its platform, observability and security businesses as organizations partnered with it to secure their business infrastructure.

In fiscal 2022, revenues increased 19.9% year over year to $2,673.7 million.

Quarter in Detail

License revenues (49.3% of total revenues) were $444.6 million, up 9.6% year over year. Cloud services revenues (32.1%) surged 69% to $289.4 million. Maintenance and service revenues (18.6%) fell 0.3% to $167.2 million.

Splunk ended the quarter with total annual recurring revenues (ARR) of $3.12 billion, up 32% year over year. Cloud ARR soared 65% to $1.34 billion.

The company ended the quarter with 317 customers generating Cloud ARR greater than $1 million, up 70% year over year. It had 675 customers with total ARR greater than $1 million, up 32%.

Other Details

Non-GAAP gross margin contracted 110 basis points (bps) from the year-ago quarter to 82.3%. Non-GAAP Cloud services gross margin expanded 480 bps to 66.5%. Non-GAAP operating income was $144.2 million compared with $98.6 million in the year-ago quarter.

Splunk’s expansion and renewal customers include Box, Inc., CVS Health, Fred Loya Insurance, Intel and Papa John’s International.

The company has appointed Gary Steele as chief executive officer and a member of the board of directors, effective Apr 11, 2022.

Cash Flow & Liquidity

In fiscal 2022, the company generated $128 million of cash from operating activities (with a free cash flow of $117 million) against a cash utilization of $190.9 million in fiscal 2021. As of Jan 31, 2022, it had $1,428.7 million in cash and cash equivalents with $3,137.7 million of senior notes.

Guidance

For the first quarter of fiscal 2023 (ending Apr 30, 2022), Splunk expects total revenues in the range of $615-$635 million. Non-GAAP operating margin is likely to be between -20% and -25%.

For fiscal 2023 (ending Jan 31, 2023), the company expects Cloud ARR to be at least $2 billion. It estimates total ARR to be about $3.9 billion. Total revenues are likely to be between $3.25 billion and $3.3 billion. Non-GAAP operating margin is anticipated to be between 0% and 2%. Operating cash flow is estimated to be at least $400 million.

Zacks Rank & Stocks to Consider

Splunk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clearfield, Inc. (CLFD Quick QuoteCLFD - Free Report) is a better-ranked stock in the broader Zacks Computer and Technology sector, sporting a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has been revised 20.5% upward over the past 60 days.

Clearfield delivered a trailing four-quarter earnings surprise of 50.7%, on average. It has gained 116% in the past year.

Qualcomm, Inc. (QCOM Quick QuoteQCOM - Free Report) , carrying a Zacks Rank #2 (Buy), is another solid pick for investors. The consensus estimate for current-year earnings has been revised upward by 12.2% over the past 60 days.

Qualcomm delivered a trailing four-quarter earnings surprise of 12.2%, on average. It has appreciated 32.4% in the past year.

Sierra Wireless, Inc. also carries a Zacks Rank #2. The consensus mark for current-year earnings has been revised upward by 237.5% over the past 60 days.

Sierra Wireless pulled off a trailing four-quarter earnings surprise of 58%, on average. The stock has returned 20.2% in the past year.