Why Splunk, Inc. Stock Plunged Today

By Markets Fool.com

Image source: Splunk, Inc.

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What:Shares of Splunk Inc. (NASDAQ: SPLK) fell as much as 9.8% early Friday, and traded down 8.5% as of 11:00 a.m. EDT despite the operational intelligence software platform company releasing stronger-than-expected fiscal second-quarter 2017 resultsyesterday after the market close.

So what:Quarterly revenue increased 43.4% year over year, to $212.8 million, including 31.5% growth in license revenue, to $115.7 million, and 60.8% growth in maintenance and service revenue, to $97.1 million. Based on generally accepted accounting principles (GAAP) -- and keeping in mind Splunk consciously forsakes bottom-line profitability in favor of top-line growth in these early stages -- that translated to a net loss of $86.6 million, or $0.65 per share. On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation, Splunk's quarterly net income was $7.3 million, or $0.05 per share.

For perspective, Splunk's guidance called for lower revenue of $198 million to $200 million. Analysts, on average, were looking for revenue of $200.5 million and adjusted earnings of $0.03 per share.

Splunk CEO Doug Merritt called it a "strong" quarter, crediting both the addition of 500 new customers and existing customers expanding their use cases of Splunk's products.

Splunk also increased its full-year guidance, telling investors to expect fiscal 2017 revenue of $910 million to $914 million. That's up from Splunk's previous outlook for full-year revenue of $892 million to $896 million, and well above analysts' consensus estimates for revenue of $897.5 million.

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Now what: For what it's worth, this marked Splunk's seventh straight quarterly revenue beat, so perhaps the market is simply accustomed to the company's propensity for outperformance. What's more -- and with the usual caveat that past performance is no guarantee for future success -- note shares also fell around 8% the day after Splunk's equally exceptional fiscal first-quarter report in May, only to climb more than 20% in the ensuing weeks as investors had time to absorb Splunk's results.

So, while the market's reaction might not indicate as much today, I think patient, long-term investors should be more than happy with where Splunk stands.

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Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Splunk. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.