Splunk, Inc.'s Cloud Investments Drive Another Earnings Beat

Splunk just turned in yet another great quarter, and the market is responding in kind. Even after rising 3% into Thursday's close, shares of the operational intelligence software specialist jumped another 7% in after-hours trading.

Fiscal fourth-quarter 2015 revenue climbed 48% year over year, to $147.4 million, including a 43% increase in license revenue, to $98.1 million. That translated to adjusted income of $0.09 per share. Analysts, on average, were only expecting earnings of $0.04 per share on sales of $137.1 million.

Quarterly adjusted operating margin rose to 7.8%, and Splunk generated operating cash flow of $51.5 million, or roughly 34.9% of total revenue. After accounting for property and equipment purchases, free cash flow came in at roughly $48.8 million.

For the full fiscal year 2015, Splunk's revenue climbed 49%, to $450.9 million, including 42% growth in license revenue, to $283.2 million. Adjusted earnings for the year came in at $11 million, or $0.09 per share. Analysts were modeling fiscal 2015 earnings and revenue of $0.04 per share and $440.7 million, respectively.

Next, fiscal 2015 adjusted operating margin was 2.7%, while operating cash flow came in at $104 million, or 23% of total revenue. For reference, that's just above the targeted 21% to 22% range for operating cash flow margin provided by Splunk management during last quarter's call.Meanwhile, fiscal 2015 free cash flow was $90 million.

Top-line growth is still a priorityInvestors should also keep in mind that, based on generally accepted accounting principles, Splunk technically achieved an operating loss of $57.1 million in its most recent quarter, and GAAP net loss of $0.47 per share. But while that might sound bad, I'll reiterate it's not indicative of a failing business.

To the contrary, this early in its long-term story, Splunk's primary focus is both growing its top line and securing market share in this burgeoning, high-tech industry. To do so in its most recent quarter, Splunk dedicated a whopping $47.3 million to research and development, and a staggering $107.7 million to sales and marketing. Despite the fact this means putting aside bottom-line profits in the near term, this should beencouraging to seefor patient, long-term investors as Splunk continues to extend its market leadership position.

Splunk added more than 600 new customers during the quarter, bringing its base to more than 9,000 customers worldwide. Among the most notable names to either initiate or expand their relationships with Splunk in Q4 were Kaspersky Lab, Red Hat, Sephora, Tesco, Toyota Motor, the U.S. Department of State, The Washington Post, and Zillow.

"We finished FY15 with strongperformanceacross the board," added Splunk CEO Godfrey Sullivan, "and posted our best quarter yet forboth Splunk Cloud and the Splunk App for Enterprise Security. Our investments in cloud and solutions are helping to drive global customer adoption."

On (even better) guidanceSplunk also offered a revised look at guidance. Now, it expects fiscal 2016 revenue of roughly $600 million, representing a $25 million increase over Splunk's initial fiscal 2016 guidance provided three months ago. Adjusted operating margin should also be between 2% and 3%.Wall Street, for its part, was looking for full-year revenue and earnings of $580 million and $0.11 per share, respectively.

For the current quarter, Splunk sees revenue between $116 million and $118 million, with adjusted operating margin between negative 2% and 4%. Analysts were expecting a first-quarter loss of $0.04 per share on lower sales of $115.4 million.

In the end, Splunk stock certainly doesn't look "cheap" based on traditional metrics. But that's also not entirely unexpected for a fast-growing business that has yet to achieve sustained profitability. For now, given its better-than-expected performance on all fronts, it's no surprise the market is bidding up the stock today.

The article Splunk, Inc.'s Cloud Investments Drive Another Earnings Beat originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Splunk and Zillow Group. The Motley Fool owns shares of Zillow Group. 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.