As Q3 earnings season comes to a close, it’s time to take stock of this quarter's best and worst performers amongst the cybersecurity stocks, including Palo Alto Networks (NASDAQ:PANW) 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 8 cybersecurity stocks we track reported a mixed Q3; on average, revenues beat analyst consensus estimates by 2.1%, while on average next quarter revenue guidance was 0.45% under consensus. Tech stocks have been under pressure as inflation makes their long-dated profits less valuable and cybersecurity stocks have not been spared, with share prices down 11.2% since the previous earnings results, on average.
Palo Alto Networks (NASDAQ:PANW)
Founded in 2005 by a cybersecurity engineer Nir Zuk, Palo Alto Networks makes hardware and software cybersecurity products that protect companies from cyberattacks, breaches and malware threats.
Palo Alto Networks reported revenues of $1.56 billion, up 25.3% year on year, in line with analyst expectations. It was a decent quarter for the company, with a significant improvement in gross margin but underwhelming revenue guidance for the next quarter.
"Our growth in Q1 was driven by customers continuing to increase their commitments to our security platforms as they are able to choose our best-of-breed capability and simplify their security architecture," said Nikesh Arora, chairman and CEO of Palo Alto Networks.
The stock is down 13.7% since the results and currently trades at $135.1.
Is now the time to buy Palo Alto Networks? Access our full analysis of the earnings results here, it's free.
Best Q3: 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 $355.5 million, up 54.2% year on year, beating analyst expectations by 4.33%. Despite the stock dropping on the results, it was a very strong quarter for the company, with exceptional revenue growth and very optimistic guidance for the next quarter.
Zscaler scored the strongest analyst estimates beat and highest full year guidance raise among its peers. The stock is down 24.1% since the results and currently trades at $109.91.
Is now the time to buy Zscaler? Access our full analysis of the earnings results here, it's free.
Weakest Q3: Rapid7 (NASDAQ:RPD)
Founded in 2000 with the idea that network security comes before endpoint security, Rapid7 (NASDAQ:RPD) provides software as a service that helps companies understand where they are exposed to cyber security risks, quickly detect breaches and respond to them.
Rapid7 reported revenues of $175.7 million, up 25.6% year on year, missing analyst expectations by 0.12%. It was a weak quarter for the company, with revenue guidance for the next quarter and full year missing analysts' expectations.
Rapid7 had the weakest performance against analyst estimates and weakest full year guidance update in the group. The company added 167 customers to a total of 10,791. The stock is down 12.5% since the results and currently trades at $34.25.
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 $125.5 million, up 19.6% year on year, in line with analyst expectations. It was a weaker quarter for the company, with underwhelming revenue guidance for the next quarter.
Qualys had the slowest revenue growth among the peers. The stock is down 23.2% since the results and currently trades at $102.73.
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 $115.3 million, up 105% year on year, beating analyst expectations by 3.89%. It was a decent quarter for the company, with exceptional revenue growth but a decline in net revenue retention rate.
SentinelOne pulled off the fastest revenue growth among the peers. The company added 72 enterprise customers paying more than $100,000 annually to a total of 827. The stock is up 4.8% since the results and currently trades at $14.82.
The author has no position in any of the stocks mentioned