Cybersecurity is no longer a safe haven for investors.
Shares in Dyantrace Inc., Fortinet Inc. and Rapid7 Inc. fell despite solid quarterly earnings reports amid a broader market slump that saw the Dow plunge 500 points and the Nasdaq fall 3% amid ongoing inflation concerns and rising interest rates.
Dynatrace was the first of the three companies to report, with a profit before costs such as stock compensation of 22 cents a share for the quarter that ended Sept. 30, up from 18 cents a share in the same quarter last year. Revenue rose 23%, to $279.32 million. Analysts had expected earnings per share of 18 cents on revenue of $272.5 million.
The strong headline figures were slightly balanced by an annual recurring revenue figure of $1.065 billion — up from $864 million this time last year. However, analysts had been expecting ARR of $1.07 billion.
For the quarter ahead, Dynatrace is predicting an adjusted profit of 21 to 22 cents a share, revenue of $283 million to $286 million, and total ARR for fiscal 2023 of $1.164 billion to $1.172 billion. The ARR figure was down $52 million at the midpoint from the company’s previous fiscal 2023 guidance.
“Observability solutions are becoming increasingly mandatory as digital transformation, in particular cloud modernization, remains one of the most durable areas of investment for enterprises,” Rick McConnell, chief executive officer of Dynatrace, said in a statement. “At the same time, we are not immune to the macro-environment and believe it is appropriate to take a more cautious approach to ARR growth in the back half of fiscal 2023.”
Dynatrace shares dropped more than 6% on the news to close regular trading at $32.
At the close of the regular trading, Fortinet reported an adjusted profit of of 33 cents a share, up from 20 cents in the third quarter of 2021, on revenue of $1.15 billion, up 28% year-over-year. Analysts had expected a profit of 27 cents a share on revenue of $1.12 billion.
Fortinet’s figures were positive across the board, with product revenue up 38% year-over-year, to $468.7 million, service revenue up 28%, to $680.8 million, billings up 33%, to $1.41 billion, and deferred revenue up 35%, to $4.19 billion.
“We continued to gain market share in the large addressable and fast-growing cybersecurity industry,” Ken Xie (pictured), founder, chairman and CEO of Fortinet, said in a statement. “Revenue and billings growth of over 30% in the third quarter significantly outpaced industry growth rates.”
For the fourth quarter, Fortinet predicts a profit of 38 to 40 cents a share, revenue of between $1.275 billion to $1.315 billion, and billings in the range of $1.665 billion to $1.720 billion. Analysts had been expecting revenue of $1.27 billion and billings of $1.74 billion.
The slight miss on the billings outlook, despite other better-than-expected figures, sent Fortinet shares down nearly 11% in extended trading.
It was a similar story at Rapid7, which reported an adjusted profit of 14 cents a share, up from six cents in the same quarter a year ago, on revenue of $176 million, up 26% year-over-year. Analysts had expected an adjusted profit of five cents per share on revenue of $176.08 million.
ARR in the quarter came in at $684 million, up 24% year-over-year, and ARR per customer grew 14%. Product revenue rose 27%, to $166.5 million, while professional services revenue was up a more modest 6%, to $9.3 million.
“Amid an evolving macroeconomic backdrop, customers are searching for the most effective and efficient ways to secure their traditional and cloud environment,” Corey Thomas, chairman and CEO of Rapid7, said in a statement. “Rapid7 is as focused as ever on delivering the platform of choice for consolidated SecOps management to help customers manage this dual mandate.”
For the fourth quarter, Rapid7 predicts an adjusted profit of 17 to 20 cents a share on revenue of $179 million to $181 million.
Of the three companies, Rapid7 was the only one with a revenue miss, albeit a very small one, but it was enough to trigger investors. Rapid7 shares were down more than 11% in late trading.