Credit: Splunk,

Splunk (SPLK) might not always get the love it deserves from Wall Street after beating expectations. But with shares down 7% since last quarter's solid report, this time there's no denying the operational intelligence software company's strength.

After rising 4.5% in Thursday's regular session, shares of Splunk popped another 6% in after-hours trading, after the company released fiscal second-quarter 2016 results. Quarterly revenue rose 46% year over year to $148.3 million, including a 42% increase in license revenue to $88 million, and a 53% increase in maintenance and services revenue to $60.4 million. Based on generally accepted accounting principles, that translated to an operating loss of $65.6 million, and a net loss of $0.44 per share. On a non-GAAP basis -- which excludes items such as stock-based compensation and acquisition expenses -- Splunk achieved operating income of $4.8 million (for adjusted operating margin of 3.2%), and adjusted earnings of $0.03 per share.

Analysts, on average, were anticipating lower revenue of $140.3 million, and adjusted net income of just $0.02 per share.

Investing for growth
Splunk also generated operating cash flow of $13.6 million during the quarter and, after investing roughly $2.8 million property and equipment, achieved free cash flow of $10.8 million. As Splunk continues to eschew bottom-line profitability in favor of grabbing market share and revenue growth in its burgeoning industry, this cash flow helps offset Splunk's significant ramp-ups in sales and marketing (up 39.8% year over year to $111.8 million in Q2), and research and development (up 41.3% to $48.3 million).

And these investments continue to bear fruit; Splunk was named a leader the 2015 Gartner Magic Quadrant for security information and event management, and was the only company in this year's quadrant to improve its "completeness of vision" rating. Consequently, Splunk also added more than 500 customers during the quarter -- up from 450 last quarter -- to bring its total to over 10,000 customers globally. Notable new and expanded customer relationships in Q2 include Aflac, Experian, Geico, Barnes & Noble, Samsung Semiconductor, Staples, the U.S. Marine Corps, the U.S. Securities and Exchange Commission, and Yelp.

"We are pleased with our quarterly results and thrilled to cross the 10,000 customer mark worldwide," added Splunk CEO Godfrey Sullivan. "We have extended our position as the leading platform for machine data, with two acquisitions focused on machine learning."

Specifically, in June, Splunk purchased Metafor Software for an undisclosed sum, expanding its machine learning capabilities in IT security operations and anomaly detection. Then early last month, Splunk acquired machine learning and behavioral analytics specialist Caspida for an aggregate purchase price of $190 million. At the time, Splunk stated that by combining its existing machine data platform with Caspida's science-driven threat detection capabilities, its customers now have access to "the most comprehensive security analytics solution available today."

A bright future
For the current quarter, Splunk anticipates revenue between $158 million and $160 million, with adjusted operating margin between 1% and 2%. Analysts were less optimistic here again, with consensus estimates predicting fiscal third-quarter revenue of $155.2 million.

Finally, Splunk raised its expectations for fiscal 2016 and now expects revenue between $628 million and $632 million (up from previous guidance for $610 million to $614 million), with adjusted operating margin remaining between 2% and 3%. Though Wall Street analysts were anticipating a raise, consensus expectations were only modeling fiscal 2016 revenue of $616.1 million.

In the end, this was another impressive report from Splunk as it continues to expand its capabilities. Assuming it can maintain this torrid growth as it scales its business into new vertical markets, I see no reason Splunk stock won't ultimately follow suit and handsomely reward patient investors.