UPDATED 18:56 EDT / AUGUST 03 2022

SECURITY

Fortinet and Rapid7 shares drop on weak outlooks amid broader market issues

Fortinet Inc. and Rapid7 Inc. shares dropped in late trading after both reported lower-that-expected outlooks amid broader market issues, including negative economic growth and 40-year high inflation.

For its second quarter ended June 30, Fortinet reported a profit before costs such as stock compensation of $194.1 million, or 24 cents per share, up from $158.7 million, or 19 cents per share in the same quarter of last year. Revenue rose 29%, to $1.03 billion.

Analysts had been expecting a profit of 22 cents per share on revenue of $1.03 billion.

Fortinet’s product revenue in the quarter rose 34%, to $400.7 million, service revenue rose 25.2%, to $629.4 million, and total bookings rose 42%, to $1.38 billion. Deferred revenue as of the end of June was $3.93 billion, up 35%.

“We delivered strong revenue and billings growth in the second quarter driven by an over 50% year-over-year increase in the number of transactions larger than $1 million,” Ken Xie (pictured), founder, chairman and chief executive officer of Fortinet, said in a statement. “Large enterprise companies continue to favor Fortinet’s industry-leading cost for performance advantage and integrated platform strategy.”

For the third quarter, Fortinet is predicting an adjusted profit of 26 to 28 cents a share on revenue of $1.105 billion to $1.135 billion. Analysts had expected 27 cents and $1.13 billion. For the full-year 2022, earnings per share are predicted to be $1.01 to $1.06 on revenue of $4.35 billion to $4.4 billion. Analysts had expected a profit of $1.03 a share on revenue of $4.39 billion.

Fortinet’s figures were roughly in line with what analysts expected, but the company had previously said that it expected earnings per share of $5.00 to $5.15 for the full year and investors noticed. Fortinet shares were down almost 10% in late trading.

Rapid7 reported an adjusted loss of one cent per share on revenue of $167.5 million in the quarter. Analysts had expected a loss of four cents a share on revenue of $164.12 million.

Annualized recurring revenue rose 35% year-over-year, to $658 million, while the company’s number of customers ended the quarter at 10,624, up 14%. ARR per customer rose 18%, to $62,000.

“As customers prioritize spending around their modern cloud environments, Rapid7 continues to address their most urgent security challenges with our market-leading Insight platform,” Corey Thomas, chairman and CEO of Rapid7, said in the company’s earnings release. “In the current environment, there is a significant opportunity for consolidation across security operations from both a capability and economic standpoint, and our differentiated solutions are positioned to enable customers to accelerate that process while driving profitable, sustainable growth for Rapid7.”

For the third quarter, Rapid7 predicts an adjusted profit of three to six cents per share on revenue of $175 million to $177 million. Analysts had expected a profit of 14 cents a share on revenue of $177.8 million. For the full year, the company is predicting a profit of eight to 15 cents a share on revenue of $686 million to $690 million versus an expected 11 cents and $689.85 million.

The stronger-than-expected figures for the second quarter were outweighed by the miss in the third-quarter outlook. Rapid7’s shares were down 3% after the bell.

Photo: SiliconANGLE

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