 From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. Recent earnings reports from key enterprise software and infrastructure players underscore that tech spending remains robust in the post-isolation economy, especially for those companies that have figured out a cloud strategy. Now, despite COVID variant uncertainties and component shortages in hardware, most leading tech names outperformed expectations this past week. That said, investors were not in the mood to reward all names. And any variability in product mix or earnings outlook or other nuances were met with a tepid response from the street. Hello and welcome to this week's Wikibon Cube Insights, powered by ETR. And this Breaking Analysis will provide you with commentary and data points on key tech companies that announced this past week, including Snowflake, Salesforce, Workday, Splunk, Elastic, Palo Alto Networks, VMware, Dell, Pure Storage, HP, Inc, and NetApp. Let's start by rolling back a week or so and look at how stocks that are priced to perfection get impacted by any negative news. Back on August 20th, we saw this headline hit. Snowflake stock falls as analysts says signings growth has slowed. The analyst report was put out by a boutique firm Cleveland Research. The stock took a double digit hit, as you can see here. I immediately got several texts from investors who know I follow the company asking me what I thought. Now as a disclaimer, I don't give stock picking advice. Please do your own research. But between theCUBE, Wikibon, and ETR, we do see a lot of data. And I'm happy to share that, which I did with this tweet. It said lots of talk ahead of Snowflake's earnings. Some analysts have said their data suggests a slowdown. ETR data looks pretty encouraging. And I tagged Meravadrian, he's a sharp analyst over at Gartner who follows data and database. He responded, I don't speculate about revenues, but there's no discernible shift in our client conversations, though interest still seems high. Okay, cool, but let's dig into the ETR data a bit and see why we remain positive. This is a larger and more detailed version of the chart in the tweet. It's a candlestick that shows a time series of the spending data on Snowflake using ETR's net score methodology. The stack bars represent the percent of customers in the survey that are newly adding the Snowflake platform. The forest green indicates the number of customers reporting that their spending is increasing by 6% or more. The gray is flat spend, that's plus or minus 5%. The pinkish stack, that's decreasing spend by 6% or more. And the bright red is where chucking the platform we're leaving. Now you subtract the reds from the greens and that yields a net score, which for Snowflake last survey was a very elevated 81.3%. We've highlighted the spending velocity line. That's net score at the top. Put a picture of that blue line for Snowflake in your mind because we're going to come back to it. The yellow line down below is market share, which is a measure of the pervasiveness in the survey, i.e. mentioned share, if you will. So looking at this chart, one might conclude that the lime green, i.e. new account acquisition is compressing. However, in further analyzing the data, back in January 2019, Snowflake's presence in the survey was much lower, only 35 accounts. In subsequent quarters, that number has jumped to over between 120 and 140 Snowflake accounts, so much bigger N. So while the percentage of respondents may be shrinking, the absolute number of new accounts is growing. On the Snowflake earnings call, Snowflake said that new customers increased this past quarter to 458 up from 397 in the same period last year. What's also telling is the forest green. On its very first earnings call as a public company, Snowflake's CFO, Mike Scarpelli, said very clearly, the company's revenue growth in the near term will come from existing customers. And the forest green, i.e. existing customers is spending more, is expanding in the ETR survey. So very strong confirmation of that trend. And note, the red is virtually non-existent for Snowflake. So it's no surprise that Snowflake handily beat its earnings on the 25th of August, which prompted a flurry of texts to me saying, you were right, thanks, don't thank me. Do your own research, we're just one data source. Okay, so here's a snapshot of some of the major players that announced earnings this past week. This chart is our popular XY view with net score or spending momentum on the vertical axis and market share or pervasiveness in the survey on the horizontal plane. We talked about Snowflake already, but I'll emphasize, they've held that roughly 80% net score for 10 plus quarterly surveys now. And they've continued to move steadily to the right on the horizontal axis. Let's make some comments on these other names and then dig in a bit more. Salesforce, of course, they're the big player amongst these names that we're showing. And as we've said in previous breaking analysis segments, they have become the next great software company showing 20% plus growth for five consecutive quarters, which is quite impressive. Splunk, as we've reported, is struggled in the survey, but you can see Splunk has a great presence in the dataset. They have an awesome customer base and the acquisition of Signal FX plotted on the left with an elevated net score represents a really good opportunity to enter new markets like observability and pull Signal FX to the right, to the rest of Splunk's customers. And that can help accelerate Splunk's move toward a subscription model. And then there's Workday. We're plotting the company's core HCM business as well as its emerging financial software suite. The latter represents Workday's TAM expansion opportunity and the company appears to be back on track to show sustained growth. Now let's dig a little deeper into these names and we'll start with Salesforce. Here's the ETR spending profile for Salesforce. Salesforce, as we showed earlier, has a huge and growing presence in the market and a consistently elevated net score in the ETR data. And while the chart shows much more green than red in a strong uptick in spending momentum from last October's survey, this doesn't really tell the whole story. Salesforce's stock price rocketed out of the March 2020 crash and ran up to a peak last August and is on its way back. Salesforce has made a number of strategic acquisitions including Tableau, Slack, MuleSoft and several other billion dollar plus buys as well as a number of smaller acquisitions. This past quarter saw 23% revenue growth relative to last year with 20% plus operating margins. That's huge. Salesforce's acquisition strategy is beginning to demonstrate the company's promised operating leverage and Slack in our view will only add to that benefit including continuous improvement and free cash flow. Salesforce revenue will blow through $25 billion this fiscal year. It's a company with a $250 billion market cap that appears to be one, a name that has meaningful upside opportunity. Okay, let's take a quick look at Splunk. We're finally seeing an uptick in Splunk's spending momentum within the ETR data set. Eric Bradley and I have discussed this in previous breaking analysis segments. The key point as we've reported is we see Splunk as a company that has been in transition from a traditional license to an ARR subscription model and it's finally the company is showing clarity that there's light at the end of that tunnel. Investors don't like companies in transition and like Salesforce, Splunk's stock price ran up to an all-time high last August but then came down hard and never fully recovered but it has come off its May lows and there were some real positives this past quarter. Cloud annual recurring revenue for Splunk this past quarter grew 72% and its bookings grew 29% year on year. The company was conservative in its guidance and there still seems to be some uncertainty around cashflow but more clear guidance by Splunk on the top line is a welcome sign. Now another name that we've been following that announced earnings this week is Elastic and as you can see by the ETR data that company has an elevated net score with very little red in the bars. Now note that blue line while it's slowly decelerating it remains very strong and elevated. Remember the comment earlier I made about freezing that snowflake blue line in your head? The reason we said that is because for snowflake to hold its roughly 80% net score position firmly over the past 10 plus quarters is quite astounding and for the most part, it's unprecedented than the ETR dataset in recent memory. Back to Elastic, the company grew its top line by 45% which is a healthy beat and that helped operating margins come in above expectations. Elastic has become the open source poster child for observability but customers often cite challenges related to complexity and scaling with the need often to seek professional services help which sometimes impacts adoption and cost obviously but overall very strong report especially in its cloud business which grew 89% relative to last year. All right, let's pivot to infrastructure. We're going to do that with Palo Alto networks and then look at a broader more traditional hardware and software players. In February of 2020, we reported the valuation divergence between Palo Alto networks and Fortinet and we cited the challenges that Palo Alto was having around its shift to cloud. That was a clear headwind at the time especially with regard to some of its go to market challenges. At the same time, we said that we were confident that Palo Alto would work through these issues and the CISOs from the ETR panels along with other anecdotal information from the CUBE community suggested that the company would power through these problems. Well, it has. Palo Alto has a huge presence in the market and consistently elevated net scores as you can see here. Palo Alto stock is trading near all time highs and it reacted very well to the earnings report this past week where revenue grew nicely at 28% year on year. The company has consistently impressed despite some hiccups of the past and appears to be well-positioned for the emerging hybrid work economy. Okay, now let's take a look at some of the key infrastructure players that announced this past week. This chart shows our popular XY view with net score spending momentum on the vertical axis and market share or pervasiveness on the horizontal axis. We'll start with VMware. It has the biggest presence in the market amongst these names. VMware's revenue grew 9% in the quarter which was in line with estimates. The company had a solid quarter but only marginally beat expectations and the stock got hit hard. It was down 8% midday on Friday. VMware cited stronger than expected perpetual license sales and somewhat softer SaaS subscription revenue. Now it's not surprising that we're going to see some lumpiness in those two lines as the company transitions to a subscription model but investors clearly want to see more growth in SaaS and subscriptions than they do in the traditional perpetual license model. VMware cloud and AWS grew 80% and that's confirmed in the data here. Compute was also strong. One concern in the ETR data is the VMware cloud which is the core, the VMware cloud foundation VCF which you can see here is well off its January net score highs. Now it's possible that ETR is picking up some of the conservative clients that don't want to move to an ARR or subscription model. It's unclear but we'll continue to watch that trend. Overall VMware's business model is solid in our view and very, very strong. Now let's talk about Dell next. Dell in our view at a great quarter. It grew top line revenues by 15% year on year. Its client business grew 27% and you can see the elevated Dell laptop net scores in this chart. The ISG business was up 3% that comprises servers and networking which was up 6% and storage which was off 1%. The storage business continues to struggle but management reported that its mid-range storage revenue was up 17%. Now the challenge here is that high-end storage it's cyclical, it's exposed sometimes somewhat to mainframe cycles but the other thing is that a lot of the mid-range capability is eating away at the high end not the least which by the way is pure storage competing at the higher end but also Dell's own mid-range business. So that continues to be a drag on revenue. The size of the traditional high-end business that VMAX, PowerMAX business still is quite large and the new is not growing fast enough to offset the decline in the old. But I mean I saw these numbers from Dell I was surprised to see the stock down nearly 5% at midday on Friday and I think what's happening is a couple of things. One is that HPQ, HPInc which we show here at a lower net score than Dell's laptop business cited supply chain issues and component shortages. Now Dell cited the same but maybe it's off on sympathy. It's clear to us that Dell is doing a much better job than HP with regard to managing component shortages. The frustrating thing for these companies is it might be a $50 part holding up a server or in Dell's case or a laptop in Dell and HPQ's case. But demand is good which is a positive but the biggest factor in Dell's stock price we think is it's getting dragged down with VMware. In a way, if you think about it with VMware's value comprising so much of Dell's market cap being down only 4% while VMware is down 8% implies that the core Dell business is viewed positively by the street. But I thought with the VMware spin coming later this year investors might gravitate more aggressively toward Dell but that didn't happen. Maybe over time. Now you see NetApp on the chart. NetApp beat on top line revenue and earnings this past quarter. However, the company has not performed well in the ETR surveys for several quarters and has a negative net score. This is due when you tear apart the math this is due to a low number of new adoptions and a fat middle, very big fat middle of flat spending and a pretty high churn in the data set. Now the company claims they've picked up 1500 new customers in its cloud business. So maybe the ETR surveys not picking that up or perhaps it's existing customers that are moving to NetApp's cloud service that they're counting as new. That's unclear but NetApp claims that its public cloud business grew 155% in the quarter. Regardless, the street likes NetApp's story. The stock has been acting very well this year outpacing the S&P 500. Now you also see Pure on the chart with a nicely elevated net score. The company beat top and bottom lines this quarter and its CEO Charlie Giancarlo promised roughly 20% revenue growth going forward. The street sure liked that, that story and the stock shot up nearly 20% on that news. And you can see here, a little drill down in the ETR spending data, trends in the right direction for Pure to support this momentum. Pure's messaging is all around a modern data platform and it's clear from customer conversations that its storage products are easier to use than traditional storage offerings. And it has a leg up on the as a service trend which we've been reporting on which Pure has been pursuing for a number of years. But it's still a much smaller player, a couple billion dollars than the Dell's and the NetApp's of the storage world but if it can continue on a strong growth trajectory it will of course become a larger company. The question will be how to continue to expand its total available market. Now the obvious path has been share gains which over the years it has accomplished and has served them well. But that won't be as easy as it was last decade when Pure caught EMC and NetApp flat footed without strong flash array strategies. Pure's Portworx acquisition is something to watch as well as it tries to transition the market to a true cloud-like programmable infrastructure model, infrastructure as code. And we'll leave you with this thought about the infrastructure space generally in storage specifically. While cloud storage has exploded over the past several years, on-prem storage has been extremely soft. This in our view has been due to the double whammy that we've reported, the combination of cloud stealing share from on-prem and the big flash injection. In other words, the latter suppressed the need to buy more spinning spindles and controllers for better performance and a hurt demand. You don't need to do that when you have all this flash headroom. But as we predicted last year, we believe that there's pent up demand as people go back to work and headquarters need refresh. There's only so much blood that IT managers can squeeze from the stone, moving storage around and optimizing servers and improving things like utilization. While at the same time maintaining adequate performance and doing so within some kind of reasonable window of a day. Storage is no longer monolithic. There are emerging use cases, especially ones that are data intensive. Different storage types are emerging. As Satya Nadella said recently, we've reached peak centralization and as such that will create tailwinds for storage offerings that can accommodate cloud and on-prem because IT pros understand that moving data is expensive and risky. It's best to keep data where it belongs for reasons of performance and of course compliance. So it looks like there's a decent chance that the long storage winter is over and the market could return to solid growth, even the face of a continued cloud explosion. Now to circle back quickly to the enterprise software business, there seems to be no end in sight to the shift to cloud based offerings, both SAS and snowflake like consumption models which were big believers. Digital transformation initiatives are real, they're meaningful and software spending we believe is going to be robust and power these transformations for quite some time. Okay, that's it for today. Remember, these episodes are all available as podcasts. All you got to do is search breaking analysis podcast. We publish each week on wikibon.com and siliconangle.com. You can reach me at dVolante on Twitter or my LinkedIn posts or email me at david.volante at siliconangle.com. Please do check out the ETR website at ETR.plus and see their new data packages and offerings for all the survey data. This is Dave Vellante for theCUBE Insights powered by ETR. Thanks for watching everybody be well and we'll see you next time.