Once again the earnings calendar is packed with many tech companies that ETR tracks in our quarterly Technology Spending Intentions Survey (TSIS) reporting over the next two weeks, such as Zoom, CrowdStrike, Salesforce, Elastic, Workday, and others. In advance of the earnings reports, ETR has compiled some recent data on a handful of those companies. Remember the full data sets and reports are all available on the ETR research platform. First, we'll take a look at Zoom.
Zoom (ZM) | ETR Outlook: Negative | Earnings Date: 11/21/2022. Going back a couple of years now, ETR caught a massive deceleration in spending intentions for Zoom, and the data set warranted a negative outlook. Unfortunately, the spending intentions data has only continued that trend in the most recent survey period, leading the ETR research team to state: Plummeting Net Score across all three sectors, shrinking Adoptions, high Replacement rates, and continued market dominance by Microsoft yield another Negative outlook for Zoom.
While Net Score (ETR's proprietary measurement for spending intentions) continues to decline, another key metric that we track is Pervasion, or customer concentration, among our survey base. In this metric, Zoom continues to be one of the most pervasive vendors in our entire survey universe with roughly 50% of all survey respondents indicating some spending intent with the vendor (whether positive, flat, or negative).
ETR tracks Zoom in three sectors, and while Video Conferencing and Productivity Applications continue to be mired in decelerating trends, the IP Telephony sector is showing more resilience. Unfortunately for Zoom, the beast that is Microsoft also competes in all three sectors. As the slide below illustrates, Microsoft is a formidable presence indeed, besting Zoom in all positive metrics across all three sectors.
From an equity perspective, shares of Zoom are down more than 50% year-to-date and now trade at a palatable 4x forward sales multiple; however, with sell-side consensus expecting less than 10% revenue growth going forward, the growth and valuation might still be too disparate for some investors. With that said, the more attractive 5% free cash flow yield could become too hard to ignore if Zoom can simply find a way to tap into its impressive pervasion rates and monetize its existing installed base to revive that growth.
Workday (WDAY) | ETR Outlook: Positive | Earnings Date: 11/29/2022. Next up is Workday, the Enterprise SaaS giant that began its empire in Human Capital management before diversifying into Financial Management. Based on the most recent data set, the ETR Research team stated: Contracting adoptions for the company’s Financial Management products are worth monitoring; however, increasing spend from existing customers and strong positioning within the Enterprise Apps sector continues to bode well for Workday resulting in another Positive outlook.
Below we review a single vendor view for Workday across all three products we track. As seen here, Net Score has risen year over year for the core Human Capital Management and Adaptive Insights segment, whereas the Financial Management application is seeing some decline since last year. Year to date, the stock is down ~46% and trading at 5x fwd sales with expectations for roughly 20% growth going forward. Based on our data, the Financial Management business line is an area that will be interesting to focus on when the company breaks out its numbers next week to see if sales expectations might need to be revised.
CrowdStrike (CRWD) | ETR Outlook: Positive | Earnings Date: 11/29/2022. This next vendor has maintained a positive outlook for the last year-plus based on resilient spending data and strong positioning within the Information Security sector. Not much changed for Crowdstrike in the most recent data set either, resulting in the ETR Research team stating: CrowdStrike continues its impressive performance in ETR surveys as Pervasion grows in large index cuts (F500, G2000) and existing customers plan to increase spend into year-end.
The slide below illustrates the vendor's strong positioning among its Infosec peers, with the second-highest Net Score across the entire sector, trailing only the ubiquitous Microsoft. In addition, Crowdstrike continued to grow its overall pervasion reaching levels in line with the seemingly omnipresent Splunk. The company, which is set to report next Tuesday, November 29th, has shown some resilience compared to other tech stocks but is still down more than 30% year-to-date while maintaining a forward sales multiple above 10x.
Salesforce (CRM) | ETR Outlook: Positive | Earnings Date: 11/30/2022. Another SaaS giant that has maintained its long-standing positive outlook within ETR posted a relatively stable data set in our most recent TSIS survey, resulting in the ETR Research team stating: Spend intentions for Salesforce remain healthy and stable across all sectors tracked, and particularly in higher citation sectors such as Enterprise Apps, Cloud Computing and Marketing. Commerce Cloud also remains stable y/y along with Tableau, albeit with a slight contraction for the latter. Slack, despite a sequential downtick, continues to remain higher than OCT21 levels. MuleSoft was the only segment with a more material y/y contraction in Net Score. In the slide below, we break out the spending intentions data for all sectors and product areas where we track Salesforce.
Snowflake (SNOW) | ETR Outlook: Positive | Earnings Date: 11/30/2022. Next up is Snowflake, where spending intentions have softened but still remain among the highest across the entire survey. Ultimately, the ETR research team stated: Snowflake is seeing further Net Score declines this survey, and its Net Score is falling more sharply than its closest competitors over the past year. These are important signs to watch, no doubt. Still, it floats in rarified air with a 60% Net Score, growing Adoptions, and the highest citation-weighted Net Score not just in the two sectors in which we track it but across the entire TSIS vendor universe. For its foothold in this dominant position, we maintain Snowflake’s Positive outlook.
Elastic (ESTC) | ETR Outlook: Positive | Earnings Date: 11/30/2022. Lastly, we come to the open-source-based Observability player, Elastic, where again the data set showed some signs of disparity. While noting some trepidation, the ETR research team stated: Strong market positioning versus peers and growth within Information Security Net Score and Pervasion offset concerns of declining Analytics spending, resulting in a continued Positive outlook for the remainder of 2H’22.
The slide below demonstrates that despite some deceleration in spending intent, Elastic's year-over-year rate of change was the best among all of its closest information security competitors.
Okta (OKTA) | Earnings Date: 11/30/2022. This data set saw further declines in spending intentions for both Okta and Auth0 across a wide citation base, including large and midsize organizations alike, resulting in an all-time low in Net Score for the vendor.
Splunk (SPLK) | Earnings Date: 11/30/2022. Splunk is certainly a stable, legacy player in the Information Security sector and the Analytics / B.I. / Big Data sector, with a Net Score that is gently drifting downward driven by large Flat spending indications. It remains one of the most pervasive vendors in both sectors, with respondents citing feature breadth, security, and technical capabilities as reasons for adoption, but chief complaints about the vendor focus on rising costs.
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Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to bring you actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at www.etr.ai