As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at cybersecurity stocks, starting with Okta (NASDAQ:OKTA).
Cybersecurity continues to be one of the fastest-growing segments within software for good reason. Almost every company is slowly finding itself becoming a technology company and facing rising cybersecurity risks. Businesses are accelerating adoption of cloud-based software, moving data and applications into the cloud to save costs while improving performance. This migration has opened them to a multitude of new threats, like employees accessing data via their smartphone while on an open network, or logging into a web-based interface from a laptop in a new location.
The 9 cybersecurity stocks we track reported a slower Q2. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was in line.
Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.
While some cybersecurity stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.5% since the latest earnings results.
Okta (NASDAQ:OKTA)
Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ:OKTA) is a cloud-based software-as-a-service platform that helps companies manage identity for their employees and customers.
Okta reported revenues of $646 million, up 16.2% year on year. This print exceeded analysts’ expectations by 2.1%. Despite the top-line beat, it was still a mixed quarter for the company with a decent beat of analysts’ ARR (annual recurring revenue) estimates but a miss of analysts’ billings estimates.
“Okta is setting the standard for identity security by focusing on relentless innovation and expanding our product offerings within the Workforce Identity Cloud and Customer Identity Cloud,” said Todd McKinnon, Chief Executive Officer and co-founder of Okta.
Okta Total Revenue
Unsurprisingly, the stock is down 21.5% since reporting and currently trades at $75.86.
Founded by a duo of former Israeli Defense Forces cyber warfare engineers, Varonis (NASDAQ:VRNS) offers software-as-service that helps customers protect data from cyber threats and gain visibility into how enterprise data is being used.
Varonis reported revenues of $130.3 million, up 12.9% year on year, outperforming analysts’ expectations by 4.4%. The business had a very strong quarter with an impressive beat of analysts’ billings estimates and optimistic revenue guidance for the next quarter.
Varonis Total Revenue
Varonis delivered the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 15.4% since reporting. It currently trades at $55.88.
Founded in 2002 by three cybersecurity veterans, Tenable (NASDAQ:TENB) provides software as a service that helps companies understand where they are exposed to cyber security risk and how to reduce it.
Tenable reported revenues of $221.2 million, up 13.4% year on year, exceeding analysts’ expectations by 1.2%. Still, it was a disappointing quarter as it posted underwhelming revenue guidance for the next quarter and a miss of analysts’ ARR (annual recurring revenue) estimates.
As expected, the stock is down 14.6% since the results and currently trades at $39.30.
After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ:ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.
Zscaler reported revenues of $592.9 million, up 30.3% year on year. This print surpassed analysts’ expectations by 4.4%. Aside from that, it was a good quarter as it also produced an impressive beat of analysts’ ARR (annual recurring revenue) estimates.
Zscaler scored the biggest analyst estimates beat among its peers. The stock is down 10.7% since reporting and currently trades at $172.56.
Founded in 2005 by cybersecurity engineer Nir Zuk, Palo Alto Networks (NASDAQ:PANW) makes hardware and software cybersecurity products that protect companies from cyberattacks, breaches, and malware threats.
Palo Alto Networks reported revenues of $2.19 billion, up 12.1% year on year. This number topped analysts’ expectations by 1.2%. Overall, it was a satisfactory quarter as it also logged a decent beat of analysts’ billings estimates.
The stock is flat since reporting and currently trades at $340.
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