As the cybersecurity space continues to heat up in light of headline data breaches and cyber crime worldwide, security companies are positioned to continue to grow, riding the wave of developing technology such as the Internet of Things (IoT). While some analysts say the golden days of high growth in the cybersecurity industry are over, others point to new cloud security offerings as a major growth driver for niche startups and older tech giants nudging into the security space. (See also: Now Is the Time to Invest in Cyber Security.)
Security Companies Kick off Earnings Season
Prooftpoint Inc. (PFPT) will announce Q3 earnings Thursday, closely following Fortinet Inc.’s (FTNT) less-than-encouraging profit warning last week. Fortinet, the cybersecurity software and services provider based out of Sunnyvale, Calif., lowered Q3 overall revenue and billings guidance noting slowed sales execution as a main contributor. To alleviate some of the shock to cybersecurity peers, Barracuda Networks Inc. (CUDA), released Q2 earnings which beat the Street’s earnings and revenues estimates, along with drawing attention to a 14% year-over-year surge in subscription revenue.
Investors should look for notable inclines in subscription-based services, signifying long-term revenues for cybersecurity players. Further, as the industry moves toward cloud-based models, with the adoption of hybrid and public cloud services, most significantly Amazon.com Inc.’s (AMZN) Amazon Web Services, security providers should harness substantial growth in cloud services. At this stage, security companies should be acting quickly to gain market share in the emerging cloud space, or else face the risk of losing out amid an industry reliant on virtual tech.
Enterprise Security Spending to Boost, Potential Growth Difficulties
In general, cybersecurity players are positioned to benefit from a predicted 6% growth of cybersecurity spending as a percentage of overall enterprise budgets, yet the breakdown matters. Despite foreseen gains, potential roadblocks for cybersecurity companies include heightened price competition as big players such as Cisco Systems Inc. (CSCO) and IBM Corp. (IBM) enter the space.
Notable earnings report dates include Check Point Software Technologies Ltd. (CHKP) slated to report on Oct. 31., with Nov. 3 to offer Q3 reports from CyberArk Software Ltd. (CYBR), FireEye Inc. (FEYE), Imperva (IMPV) and Symantec Corp. (SYMC). (See also: UBS: Cybersecurity Heyday is Over.)