Investors in big data analytics company Splunk Inc. had lots to cheer about today as the company posted earnings that crushed Wall Street’s expectations.

The company’s annualized recurring revenue from cloud software, a key measure of its transition to cloud services, also topped estimates by some distance.

Splunk reported a fourth-quarter profit before certain costs such as stock compensation of 38 cents per share on revenue of $745 million, down 7% from a year ago. Wall Street analysts had modeled a profit of just 3 cents per share on revenue of $677 million.

The company’s stock rallied, up almost 5% in after-hours trading. That followed nearly a 4% drop, to $143.19 a share, in regular trading, down along with most tech stocks today.

Splunk Chief Executive Doug Merritt (pictured) pointed to the company’s progress through its ongoing transformation to a cloud business model. The success of that transformation was evidenced in the numbers.

Splunk reported annualized recurring revenue from cloud computing software of $810 million, up 83% from a year ago. Its total annualized recurring revenue from all parts of its business came to $2.36 billion, up 41% and ahead of the analyst estimate of $2.33 billion.

In an interview with SiliconANGLE shortly after the earnings report, Merritt pointed out that cloud made up just 20% of the company’s revenue four years ago, but now represents more than half of its business and is growing fast, with an 84% compound annual growth rate. “The piece we’re most excited about is continued progress within cloud,” Merritt said.

The CEO said that he was always comparing Splunk to how the biggest 15 to 20 cloud-based companies are growing in the cloud, and said that from his own data the only one that’s growing faster is Snowflake Inc., which also reported strong cloud revenue today. He added that Splunk’s cloud growth has benefited from the COVID-19 pandemic, even though that has “put higher scrutiny on spend.”

Splunk’s growth was so encouraging that it seems investors were willing to forgive the company for its mildly disappointing guidance for the next quarter, which fell just short of expectations. For the first quarter, Splunk said it’s expecting revenue of between $480 million to $500 million, below analysts’ estimates of $507 million.

Or it may just be that investors are looking further ahead. Merritt pointed out that Splunk continues to add more services to its platform. Recently, the company added stream processing in limited availability, and it has also made a big investment in observability, another fast-growing market, where it has grabbed big-name customers such as Shopify Inc. and Nike Inc., among others.

“Our cloud offering continues to get more rich,” Merritt said. “We’re better-positioned than we’ve ever been.”

With reporting from Robert Hof

Photo: SiliconANGLE