Both reported quarterly results late Wednesday and had very different-pandemic related stories to share with investors.
Zscaler, a security software vendor for the cloud, said revenue in the period ended October climbed 52% and the company raised its forecast for the year. Splunk, a provider of data analytics software, said revenue shrank 11% from a year earlier, missing estimates for a third straight period.
For Zscaler, momentum has picked up throughout the year as large enterprises seek ways to protect their increasingly disparate data and secure their networks now that employees are connecting from more places and devices. After Thursday's rally, the stock is now up 298% for the year, the third-best performance among U.S. tech stocks behind only Zoom and Fastly.
"Covid was a catalyst in changing the mindset and shaking off inertia, resulting in a reduced need for educating customers about the value of the Zscaler architecture over legacy approaches," CEO Jay Chaudhry said on the company's earnings call."
Meanwhile, Splunk's drop on Thursday left the stock up only 5.6% this year, trailing the S&P 500's 13% gain. While Zscaler was founded in 2008 and grew up alongside new cloud infrastructure and the emergence of mobile computing, Splunk got started five years earlier for on-premises data centers and had to later develop its analytics software for the cloud.
Splunk said cloud services revenue climbed 80% in the quarter, but that still only accounts for 26% of total revenue. The rest of the business is either flat or deteriorating.
CEO Douglas Merritt said on the earnings call that some deals are getting pushed out and that the "variability we see because of the pandemic effects" makes its difficult to predict what will happen in the coming months. The company said $50 million to $60 million in expected bookings slid out from the quarter.
According to Michael Turits, an analyst at KeyBanc Capital Markets, the concern for Splunk is that companies are focusing today on buying technologies that are critical to getting through the current crisis.
The third-quarter miss is likely due to "de-prioritization of analytics relative to digital transformation and security investments in response to COVID-19/WFH," Turits wrote. Longer term, he said Splunk remains "the de facto machine data platform standard," and he still recommends buying the shares.
As it stands, Splunk is stuck somewhere between the legacy tech vendors, which are struggling to find growth, and the cloud-first applications and tools that have seen business accelerate since the pandemic forced offices to close.
For an example of the latter, look at Snowflake, which is also in the data analytics market. It reported revenue growth on Wednesday of 119% in its first earnings statement since its IPO in September, and the stock soared 16% on Thursday. Snowflake's data warehouse software was built for the cloud, making it easy for customers to deploy and use regardless of whether people are working remotely.
Investors are clearly distinguishing between the work-from-home winners and losers. Snowflake is trading at over 70 times next year's revenue, while Zscaler and Zoom are priced at well over 30 times forward sales. Splunk's price-to-sales multiple for next year is 10.