Splunk Inc SPLK

Narrow-moat Splunk reported solid second-quarter results, with the top line exceeding both our expectations and guidance, driven entirely by upside in term license revenue. As data volumes rise and cyber threats become increasingly complex and frequent, we view Splunk’s unique comprehensive data platform as increasingly aligning with evolving customer demands. In the quarter, Splunk Observability, IT, and Security Clouds were launched--with the intent of enhancing efficiency and visibility into customers’ tech infrastructure. We believe accelerating demand combined with the success of workload pricing positions Splunk to realize sustained growth and competitive wins as the cloud transition continues apace. Although we expect increasing cloud penetration and an evolving product suite to lead to healthy long-term growth, we are maintaining our fair value estimate for Splunk at $164 per share due to near-term cloud transition-related top-line pressures. With shares rising to $160 in the aftermarket, we view shares as fairly valued.