Let’s dig into the relative performance of Varonis (NASDAQ:VRNS) and its peers as we unravel the now-completed Q2 cybersecurity earnings season.
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.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support 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 5.9% on average since the latest earnings results.
Best Q2: Varonis (NASDAQ:VRNS)
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. This print exceeded analysts’ expectations by 4.4%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ billings estimates and full-year revenue guidance exceeding analysts’ expectations.
Yaki Faitelson, Varonis CEO, said, "Our second quarter results reflect the growing momentum of our SaaS platform and recently introduced Managed Data Detection and Response offering, which helps customers automatically prevent data breaches with very little effort.”
Varonis delivered the weakest full-year guidance update of the whole group. Interestingly, the stock is up 25.6% since reporting and currently trades at $60.83.
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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, outperforming analysts’ expectations by 4.4%. The business had a very strong quarter with an impressive beat of analysts’ ARR (annual recurring revenue) estimates and full-year revenue guidance exceeding analysts’ expectations.
Zscaler achieved the biggest analyst estimates beat and highest full-year guidance raise among its peers. The market seems content with the results as the stock is up 2.7% since reporting. It currently trades at $198.54.
Weakest Q2: Tenable (NASDAQ:TENB)
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 slower quarter as it posted a miss of analysts’ ARR (annual recurring revenue) and billings estimates.
As expected, the stock is down 7.5% since the results and currently trades at $42.55.
SentinelOne (NYNYSE:SE:S)
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 was in line with analysts’ expectations. Taking a step back, it was a mixed quarter as it also recorded 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 8% since reporting and currently trades at $26.72.
CrowdStrike (NASDAQ:CRWD)
Founded by George Kurtz, the former CTO of the antivirus company McAfee, CrowdStrike (NASDAQ:CRWD) provides cybersecurity software that protects companies from breaches and helps them detect and respond to cyber attacks.CrowdStrike reported revenues of $963.9 million, up 31.7% year on year. This print met analysts’ expectations. However, it was a slower quarter as it recorded a miss of analysts’ billings estimates.
The stock is up 21.3% since reporting and currently trades at $320.50.
This content was originally published on Stock Story
