Shares of cybersecurity specialist FireEye (MNDT) got a much-needed shot in the arm after the company delivered a solid first-quarter beat, rising over 14% in one day. The company's adjusted net loss of $0.09 per share on revenue of $173.7 million easily beat  Wall Street estimates, while strong guidance also boosted investor sentiment.

The stock enjoyed additional momentum following reports of worldwide cyberattacks as security breaches once again became a focus for corporate and government entities. Now, FireEye expects to generate $730 million of revenue this year at the midpoint of its guidance, while its projected loss of $0.31 per share is much lower than the $0.48 analyst consensus. More importantly, key developments indicate that the rally is sustainable, thanks to an improving revenue mix and lower costs.

A hooded man sits in front of a laptop.

Image source: Getty Images.

The subscription business is gaining critical mass . . .

FireEye's subscription business jumped almost 12% year over year during the first quarter, offsetting a 30% product revenue decline. Subscription services now account for 86% of the company's business, compared with 80% in the prior-year period. FireEye was able to grow its overall top line despite the massive drop in product revenue.

Not surprisingly, FireEye's billings dropped 18% year over year as the transition continued. However, the value of subscription-related billings increased 20% annually. FireEye launched its Helix security platform at the end of quarter, so investors can expect stronger subscription billings growth as the year progresses.

On the other hand, deferred revenue jumped 12% year over year to $632 million, despite the overall drop in billings with short-term deferred revenue increasing 21% to almost $400 million. This revenue will be recognized on the income statement within the next year, indicating that a good half of management's top line guidance for 2017 is already covered.

. . . and driving the push toward profitability

FireEye's shift toward a subscription-led business model is expanding its margin as well. Its non-GAAP gross margin jumped 3 percentage points last quarter to 73%, thanks to a 4.6% drop in subscription-related cost of revenue. In addition, the subscription business is helping the company right-size its cost structure.

For instance, FireEye's total operating expenses fell close to 29% from the prior-year period, thanks to a massive decline in sales and marketing expenses. This isn't surprising, as the subscription business will ensure a steady stream of revenue without the need to spend heavily on customer acquisition.

The company has also taken note of the burden that massive stock-based compensation expense creates on its bottom line. Therefore, the company slashed this line item by 31% last quarter, helping it reduce the GAAP net loss to just $83 million, compared with $156 million in the first quarter of 2016.

FEYE EPS Diluted (Quarterly) Chart

Data by YCharts.

The new platform ensures long-term growth

FireEye's recently launched Helix cybersecurity platform will help it tap the growing demand for security-as-a-service in a cloud environment by integrating its threat prevention and analytics services into a single platform. In fact, Helix integrates over 300 technology operations into a single interface, such as next-generation firewalls and anti-virus, making it easy for partners and customers to deploy.

What's more, Helix is a scalable platform, and FireEye is offering it through a low-cost subscription model, so it can be deployed across organizations of all sizes. This could be a big deal for FireEye as Statista forecasts that the global security-as-a-service market will be worth $8.5 billion in 2020, compared with just $3.8 billion last year.

More importantly, Helix brings FireEye on par with rival cybersecurity companies such as Palo Alto Networks and Symantec, both of which offer integrated security platforms providing end-to-end solutions. Therefore, FireEye is now in a stronger position to fight for a bigger share of the cybersecurity market and accelerate its growth.