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A Lookback At Q1 Cybersecurity Earnings

FEATURED REPORT

The cybersecurity and data privacy sectors have continued to boom throughout the last year as cyberattacks amid the pandemic hit record-breaking numbers. From an investment standpoint, reporting season has so far not disappointed and whilst the Covid-19 pandemic certainly accelerated growth in the cybersecurity sector, growth is showing no signs of abating any time soon.

As cloud technologies and many other digital solutions, as well as digital devices continue to emerge and develop, we are increasingly becoming connected with accelerating 5G deployments, the expanded scope of connected devices and the internet of things, all of which will fuel demand for cybersecurity solutions. The benefit of digitalisation is clear to most but there are drawbacks – cybercriminals are now able to nefariously obtain our data via more access points than ever before and the attacks are becoming ever-more sophisticated. For these criminals, the pay-off can often be huge, for individuals and companies, it can be devastating and, in the case of corporations, can cost them dearly both in terms of reputation and financially.

 

Major attacks in 2021

The COVID-19 pandemic accelerated the digital transformation that was already underway for many companies as the adoption of work and learn from home, greater interconnectivity of their workforce, and the shift to the cloud, all led to a surge in cyberattacks. Findings from Forrester consulting revealed that since the start of the pandemic total cyber losses among affected firms rose to $1.8 billion, a 50% increase compared to the prior year. [1] A separate report from Hiscox found companies in the UK and Europe doubled cybersecurity spending to combat the increase in cyberattacks during 2020[2].

There were a number of high-profile attacks that occurred during the first quarter of 2021 alone.[3] Notably, Microsoft’s Exchange Server was hacked resulting in at least nine government agencies and 60,000 private companies in the US alone being affected.

Computer giant Acer Inc., suffered a ransomware attack and was asked to pay a ransom of $50 million.

Australian broadcaster Channel Nine was attacked too, leaving the company unable to air its Sunday news bulletin and several other shows.

Cybercriminals also engineered an attack on a Florida water treatment facility seeking to poison the plant’s water supply by increasing the amount of sodium hydroxide to a potentially dangerous level.

In 2020, 30,000 websites were hacked per day and every 39 seconds there is a new attack somewhere on the web.[4] To combat the “growing cyber challenge” as the scale of the problem continues to both change and grow, businesses are allocating more resources, including a 39% increase in cybersecurity spending.[5] That increase is leading to favorable year-over-year revenue and earnings metrics that have already reported in many of the quarterly results so far and is poised to look similar for those who are yet to report.

Cybersecurity Earnings Q1

Bumper earnings season

According to Zacks Investment Research, during the month of April, more than 1,500 companies reported their quarterly results and a few key themes emerged across the reports:

  • Revenue and Earnings Per Share (EPS) for the year ending March came in ahead of consensus expectations;
  • Upward revisions were made to earnings guidance;
  • Warnings that the number of attacks continue to grow even as ‘bad actors’ (cybercriminals) continue to innovate new attack strategies.

Here are some of the highlights from earnings season so far:

Check Point Technologies – the UK-based leading provider of cyber security solutions to governments and corporate enterprises across the world, reported revenues up 5% year-on-year to $508 million, while EPS for the quarter rose 9% to $1.54. Deferred revenue for the quarter climbed 8% compared to the March 2020 quarter, reaching $1.458 billion.

F5 Networks –  the US firm, which specialises in app delivery networking and app security, topped expectations with their results reporting revenue for the quarter up 10% year-on-year to $645 million. According to the company, it is seeing stronger than anticipated demand across the board as “Business and consumers increasing reliance on applications has accelerated all prior expectations about the pace of digital transformation.”

FireEye – another US-based company, offering a single platform that blends innovative security technologies and nation-state grade threat intelligence, beat consensus expectations with $246.3 million in revenue – a 10% increase year-to-date. It increased its 2021 earnings guidance to $1.01-$1.03 billion from $941 million in 2020 and $889 million in 2019.

Fortinet – as a provider of firewalls, software and services such as anti-virus protection and intrusion prevention systems, the firm reported quarter revenue that climbed 23.1% compared to last year. Revenue for the year was $710.3 million, well ahead of the consensus forecast. EPS for the quarter cruised past consensus expectations as well hitting $0.81 per share.

We can clearly see a pattern emerging here. Growth expectations for the cybersecurity sector are being smashed. We continue to see consensus growth expectations moving higher over the coming quarters too as the increasingly pervasive nature of attacks is once again realized, while the combination of new technologies, new business models and sadly new types of attacks expands the addressable market even further.

 

This Featured Article has been produced by Tematica Research LLC. Rize ETF Ltd make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability of the information contained in this article.

 

Related ETF

CYBR: Rize Cybersecurity and Data Privacy UCITS ETF

 

References:

[1] “Firms are Spending More on Cybersecurity To Combat Growing Threats” available at https://digit.fyi/firms-are-spending-more-on-cybersecurity-to-combat-growing-threats/

[2] IBID

[3] “10 Major Cyber Attacks Witnessed Globally in Q1 2021” available at https://securityboulevard.com/2021/04/10-major-cyber-attacks-witnessed-globally-in-q1-2021/

[4] “How Many Cyber Attacks Happen Per Day in 2020?” available at https://techjury.net/blog/how-many-cyber-attacks-per-day/

[5] “Firms are Spending More on Cybersecurity To Combat Growing Threats” available at https://digit.fyi/firms-are-spending-more-on-cybersecurity-to-combat-growing-threats/

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