Splunk Inc. Q3 2023 Earnings Call Transcript

Gary Steele : Yes. Really good question. So we continue to encourage customers to move to cloud. That’s clearly a focus of our sellers. And while we were — our mix wasn’t exactly what we expected going into the quarter. We’re still pleased with the results. There’s still really good cloud momentum. And I think the place where we’re seeing opportunity is where we can provide some level of incentive around professional services and things like that, that help incent customers to move more quickly. Those are things we continue to explore with our sales team.

Mike Cikos : And one other, if I could. Great to see the cloud gross margins come in, I guess, north of that 70% that we should be looking at.

Gary Steele: It was a big milestone, frankly. That was a big milestone for us. I’m really proud of the team and the work that was done to get there ahead of time, frankly.

Mike Cikos : So I guess my question is — and I just wanted to stress test this, but was there anything onetime there? And then the follow-up is, is this 70% thought of as being more of a milestone, there’s more room to push that higher over time?

Gary Steele: Yes. No, great question. This is not a one time thing. This is durable, and we can go farther. What you will see, though, it will take more work to move those numbers. So you’ll see smaller incremental moves, but you’ll continue to see gross margin move up. And as you would expect, we’ve taken down the low-hanging fruit, and that’s what’s really driven us at this point and not that it wasn’t a lot of work, but we’ve gotten those through the low-hanging fruit. And now getting that incremental improvement in gross margin, we’ll just take more effort. And so you’ll see it continue to improve, but you’ll see the smaller increments.

Operator: I would now like to turn the call over to Gary Steele for closing remarks.

Gary Steele : I want to thank everyone for your time today and joining us. Our approach to balancing durable growth and profitability is delivering, as you can see in our cash flow and our momentum is there as they’re as strong as we close the year and set up for a strong next year. I’m especially appreciative of all Splunkers for their ongoing commitment and execution and for their close partnership with our customers around the world, particularly through this uncertain economic time. Thank you, again, and have a great day.

Operator: Thank you, ladies and gentlemen. That does conclude today’s call. Thank you for your participation. You may now disconnect.