Unstructured data specialist Splunk (NASDAQ:SPLK) has had a rather turbulent year. After peaking at $106 in February, shares pulled all the way back to $40 as names in big data briefly fell out of favor. Well, shares have been on the road to recovery for a few months now, and Splunk just reported strong earnings that are giving its recovery even stronger legs.

Splunk is coming back in a big way.

A beat ...
Total revenue jumped 48% to $116 million. Licensing revenues were up 41% to $71.8 million. The company released new versions of all of its major products during the quarter, while launching new mobile products. Adjusted operating income was $2.7 million, or a non-GAAP operating margin of 2.3%. That all led to adjusted earnings per share of $0.02.

Splunk added over 500 new customers in the third quarter, with particular strength in security markets. Splunk now has over 8,400 customers globally. The company continues to execute on winning new customers and upselling existing ones to new services (70% of license bookings were upgrades and expansions from existing customers). The biggest score during the quarter was a "seven-figure order with a leading sporting goods Company."

Compare those figures to the consensus estimates and Splunk's own guidance, and it's clear why investors are so pleased with the results. The Street was calling for just $107.2 million in revenue and $0.01 per share in adjusted net income. In August, Splunk guided third quarter revenue to a range of $105 million-$107 million, and expected its non-GAAP operating margin to be around 1%.

... and a raise
It gets better. Splunk is again raising its full-year outlook for fiscal year 2015. This is the third time that the operational intelligence company has boosted its forecast.

Date provided

Fiscal 2015 revenue guidance

Fiscal 2015 adjusted operating margin guidance

February 2014 

Approximately $400 million

Approximately 0%

May 2014 

$402 million-$410 million

Approximately 0%

August 2014 

$423 million-$428 million

Approximately 1%

November 2014

$438 million-$440 million


Source: SEC filings.

Not only are sales on the rise, but Splunk is also executing on the profitability side. To be fair, Splunk is still unprofitable on a GAAP basis because it's spending so heavily on investing in future growth, but those investments will prove to be well worth it in the long run. Right now, growing the top line is the No. 1 priority, much like other growth companies.

Splunk is crushing it
The public sector is also performing very well, with Splunk enjoying a record quarter in this market segment. Splunk had broad-based strength with federal, state, and local governments, including a new enterprise agreements with the Department of Energy, the United States Postal Service, and the Department of Homeland Security.

With all the high-profile retailer data breaches in recent memory, Splunk's security business is also benefiting, landing over 200 orders for its enterprise security app. As cyberattacks evolve and become increasingly sophisticated, so too must enterprise security. That's where big data analytics comes in, because Splunk can help companies dynamically recognize patterns and trends to improve security. CEO Godfrey Sullivan noted that security is "not about a static rules engine on top of a relational database anymore." Security is now 40% of the business.

In the wake of such a strong quarter, analysts are now rushing to boost ratings and price targets. Splunk might be worth chasing higher.