Qualys: Solid Quarterly Results Despite Disappointing Outlook

The provider of software for cloud security and compliance verification, Qualys, achieved results for the second quarter of fiscal year 2024 that met analysts' expectations. The company recorded a revenue increase of 8.4% compared to the previous year, totaling $148.7 million. Nevertheless, the revenue forecast for the upcoming quarter, also set at $148.7 million, fell 3.3% short of analysts' estimates. The non-GAAP earnings forecast was $1.52 per share, surpassing the $1.27 per share earnings from the previous year's quarter. Qualys, founded in 1999 as one of the first subscription-based security companies, offers organizations software to assess their vulnerability to cyberattacks. The growing need for security in the cloud, driven by the increasing migration of data and processes to the cloud along with the significant rise in remote work, has heightened the demand for such protection solutions. However, Qualys' revenues are growing only modestly: from $99.7 million in the second quarter of 2021 to $148.7 million in the current quarter. The continued increase of $2.90 million compared to the previous quarter indicates a certain acceleration in revenue growth. For the next quarter, Qualys aims for revenue growth of 4.7% compared to the previous year, signifying a slowdown compared to the 13.1% growth in the corresponding quarter of the previous year. Before the earnings release, analysts had projected a revenue growth of 9.2% for the next twelve months. Despite everything, young investors could benefit from the insights conveyed in 'Gorilla Game: Picking Winners In High Technology' to identify future winners in the tech sector. Qualys' generative AI capabilities could help the company achieve similar market dominance as Microsoft or Apple once did. Outstanding cash profitability has always been a strength of Qualys, enabled by a lucrative business model that provides ample funds for reinvestment and capital return. Last year, the company posted a free cash flow margin of an impressive 43.9%. In the second quarter, free cash flow amounted to $48.8 million, which corresponds to a margin of 32.8%. This downward trend was 3.7 percentage points lower than the previous year. Analysts forecast a decline in the free cash flow margin to 35.6% for the coming year. Despite a slight improvement in the gross margin in the past quarter, the revenue forecast for the next quarter was disappointing. Following the results announcement, Qualys' stock remained at $137.10. Although Qualys has had a challenging quarter, it could potentially represent an investment opportunity. In our comprehensive, free research report, we take a closer look at the company's valuation, business potentials, and recent developments.