Beware Splunk's Impressive Operating Cash Flow Forecast
Monitoring and analytics company Splunk (NASDAQ: SPLK) posted fiscal third-quarter earnings that exceeded expectations. Furthermore, management forecast operating cash flow would reach $1 billion by fiscal 2023 -- ending in January 2023 -- which would be a huge improvement compared to the currently negative cash flow. Given the company's solid results, this goal seems realistic, but it doesn't take into account some significant costs that moderate this apparently massive profitability.
During the third quarter, revenue increased to $626 million, up 30% year over year. And remaining performance obligation (RPO), a leading indicator of revenue, jumped to $1.45 billion, up 52% year over year.
Compared to competitors such as New Relic and Datadog -- which grew their quarterly revenue by 27% and 88%, respectively -- Splunk's growth wasn't that impressive. But if you take into account Splunk's larger scale by a factor of more than four based on revenue, its high-double-digit growth shows the strength of its business.
Source Fool.com
