As the Q2 earnings season wraps, let’s dig into this quarter’s best and worst performers in the cybersecurity industry, including Zscaler (NASDAQ:ZS) and its peers.
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 satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was in line.
The Fed cut its policy rate by 50bps (half a percent) in September 2024, the first in roughly four years. This marks the end of its most pointed inflation-busting campaign since the 1980s. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be assessing whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Thankfully, cybersecurity stocks have been resilient with share prices up 5.1% on average since the latest earnings results.
Zscaler (NASDAQ:ZS)
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 exceeded analysts’ expectations by 4.4%. Overall, it was a mixed quarter for the company with an impressive beat of analysts’ ARR (annual recurring revenue) estimates and full-year revenue guidance exceeding analysts’ expectations. On the other hand, its revenue guidance for next year suggests a slowdown in demand and its full-year revenue guidance slightly missed Wall Street’s estimates.
“We ended a successful Fiscal 2024 with Q4 results exceeding the high end of our guidance across all metrics,” said Jay Chaudhry, Chairman and CEO of Zscaler.
Zscaler Total Revenue
Zscaler achieved the biggest analyst estimates beat and highest full-year guidance raise of the whole group. Unsurprisingly, the stock is up 1.7% since reporting and currently trades at $196.69.
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 an exceptional quarter with an impressive beat of analysts’ billings estimates and full-year revenue guidance exceeding analysts’ expectations.
Varonis Total Revenue
The market seems happy with the results as the stock is up 24.6% since reporting. It currently trades at $60.35.
Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ:QLYS) provides organizations with software to assess their exposure to cyber-attacks.
Qualys reported revenues of $148.7 million, up 8.4% year on year, in line with analysts’ expectations. It was a softer quarter as it posted underwhelming revenue guidance for the next quarter and a miss of analysts’ billings estimates.
Qualys delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 8.2% since the results and currently trades at $125.93.
With roots in the Israeli cyber intelligence community, SentinelOne (NYSE:S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.
SentinelOne reported revenues of $198.9 million, up 33.1% year on year. This print met analysts’ expectations. Zooming out, it was a mixed quarter as it also produced full-year revenue guidance exceeding analysts’ expectations but a miss of analysts’ billings estimates.
SentinelOne delivered the fastest revenue growth among its peers. The company added 40 enterprise customers paying more than $100,000 annually to reach a total of 1,233. The stock is up 6.7% since reporting and currently trades at $26.41.
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 surpassed analysts’ expectations by 2.1%. Taking a step back, it was a satisfactory quarter as it also produced full-year revenue guidance exceeding analysts’ expectations but a miss of analysts’ billings estimates.
The stock is down 19.2% since reporting and currently trades at $78.04.
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