Splunk CEO Doug Merritt joins Yahoo Finance Live to discuss the company’s strong Q4 earnings report and outlook for 2021.

Video Transcript

JULIE HYMAN: We are also watching the dynamics when it comes to Splunk. This is an infrastructure software company that reported its earnings that beat estimates. Annual recurring revenue coming in at $2.36 billion. That's a 41% increase. On the flip side, the company did also release a revenue forecast for the first quarter that was a little bit below what analysts had been estimating.

Let's bring in Doug Merritt now. He is the Splunk CEO to talk us through some of the numbers. And Doug, I'm really curious what your visibility is on enterprise spending this year. I know you gave that first quarter forecast. We've been talking so much about the transition to a reopening economy, right? How is that playing out for you guys? Are you seeing your clients pull back on spending at all?

DOUG MERRITT: It's been a mixed year if I go back over the past four quarters. And it really depends on the sector in general because everyone is trying to get to the cloud and trying to get to more of a software footprint, whether it's retail, travel, hospitality, or more classic manufacturing or certainly high-tech industries.

So tech spending and certainly cloud spending has been pretty consistently up over the course of the year. But overall, as we all know, tech is a percentage of revenues. And when you're seeing revenues under severe pressure and some of these industries, they've got to be thoughtful on how much can they afford to get on tech, even though it's absolutely mission critical for them to get there.

BRIAN SOZZI: Doug, these tech purchases, Splunk, you name a lot of your competitors too, they're big dollar purchases. What are you hearing from CEOs in your circle? Are you still sensing that they're scrutinizing these big dollar tech purchases, even though they are helpful?

DOUG MERRITT: Again, it really depends on the organization. But overall, what we have seen, for sure, is a higher level of scrutiny. Any reasonable CFO, given so much volatility, is going to put an extra two or three cycles on, certainly, any meaningful purchase.

The benefit is in the headwind-tailwind category. The consistent tailwinds is we've seen the companies that have pivoted to be digital-first in any industry did super well and. Companies that were able to rapidly pivot-- in our earnings report, I talked about Tesco Stores, a very classic UK-based brick and mortar retailer. They pivoted really quickly. Splunk certainly helped them. So it was part of why we were talking about them. But it was awesome to see how rapidly they're able to go online and what a big impact that was, certainly for Tesco, but what a big impact it was for the UK citizens as well.