Big data player Splunk (Nasdaq: SPLK) recently announced its quarterly results that surpassed market expectations. But the company’s growth metrics continue to decelerate. It is trying to drive growth through its cloud platform upgrades.

Splunk’s Financials

Revenues for the second quarter grew 23% to $606 million, surpassing the market’s expectations of $563.26 million. Non-GAAP net loss of $0.62 per share was higher than the market’s estimate of a loss of $0.69 per share.

By segment, license revenues grew 3.4% to $219.6 million. Maintenance and service revenues fell 5.02% to $168.7 million. Cloud revenues grew 73% to $217 million.

Among other metrics, Annual Recurring Revenue (ARR) grew 37% over the year to $2.63 billion.

Splunk forecast revenues of $625-$650 million for the third quarter, compared with the market’s forecast of $562.82 million. It expects to end the year with revenues of $2.53-$2.6 billion, compared with the market’s estimates of revenue of $2.53 billion and a loss of $1.50 per share.

Splunk’s quarterly results were impressive, but there were still a few worrying factors. During the quarter, its cloud ARR growth decelerated from 83% last quarter to 72%. Cloud Net New ARR growth dropped sharply to 13% in the quarter compared with 74% in the first quarter of the year and 140% a year ago. Margins for the Cloud segment edged marginally up from 59.2% last year to 60.7%. Splunk’s outlook for the year suggests that it expects the ARR growth to continue to decelerate.

Splunk’s Cloud Focus

Recently, Splunk announced its new platform called Splunk Security Cloud. The data-centric modern security operations platform delivers enterprise-grade advanced security analytics as well as automated security operations and integrated threat intelligence. It combines all of its security operations solutions, allowing customers to get the maximum value from their data. Teams are able to secure and manage multi-cloud deployments while continuing to remain agile and adapt to ever-evolving threats. Some of its features include machine learning-powered analytics to detect and deliver key insights into multi-cloud environments; an automated operation that drives faster time to detection, investigation, and response; threat Intelligence that automatically collects, prioritizes, and integrates all sources of intelligence driving faster detections; and an open ecosystem that helps correlate data across all security tools to detect threats faster.

Splunk has been receiving recognition as a market leader in AIOps from various industry observers including Gartner, Omdia Universe, Research In Action, and Constellation. Earlier this summer, Gartner had recognized it as the leader in market share for IT Operations Management (ITOM) and Security Information and Event Management (SIEM) Market. According to Gartner, Splunk was the market leader in the ITOM Performance Analytics software market with 7.8% market share and a leader in the SIEM market with a 29% share. The ITOM performance analysis software market grew 7.2% to $13.3 billion in 2020. The entire security market grew 10% last year to $49.7 billion, with the SIEM market accounting for $3.6 billion in revenues.

Its stock is currently trading at $158.11 with a market capitalization of $25.9 billion. It hit a 52-week high of $225.89 in August last year and a 52-week low of $110.28 in May.