Darktrace Lifts Guidance After Returning to Growth – Shares Up 6% In Early Trading

Cybersecurity firm Darktrace (LON: DARK) raised its annual revenue and margin forecasts for the third time this year after the company's third-quarter revenue rose 26.5%. DARK shares soared on open, pushing their way up to 477 before pulling back slightly, still more than 6% above yesterdays' close.

Demand for the company's services was strong, with 9,402 customers by 31 March 2024, representing year-over-year growth in the customer base of 11.9%. DARK added 170 customers in the third quarter for a total of 999 net new customers since March 2023.

The company said it expects new customer ARR additions to increase once the economic environment begins to improve.

Revenue for the company's third quarter was $176.1 million, while annualised recurring revenue (ARR) at 31 March 2024 was $731.1 million, up 23.5% year-on-year. Darktrace added an ARR of $29 million for year-over-year growth of 6.2%, marking a return to growth and the second consecutive quarter of upward trajectory.

Looking ahead, Darktrace again narrowed its guidance range for year-over-year constant currency ARR growth to between 22.25% and 23.0% (previously 21.5% and 23.0%).

In addition, it raised its expectations for revenue growth and adjusted EBITDA margin. It now sees FY 2024 revenue growth of at least 25.5%, 0.5 percentage points above the high end of its previous 23.5% and 25% range, reflecting continued strong ARR to revenue conversion and a relatively stable exchange rate environment.

Darktrace now sees its adjusted EBITDA margin at a minimum of 23%, up from the previous expectation of at least 21%).

“Today's results reinforce our view of first half stabilisation and second half re-acceleration, with a return to Net ARR added growth supporting our view that Darktrace has a sustainable opportunity for ARR, revenue and margin expansion,” said Cathy Graham, Darktrace's CFO.

“Our strong margin and cash generation profile enables us to continue making smart investments in our product pipeline and positioning, Go-to-Market effectiveness and business foundations.”