FireEye's (NASDAQ:FEYE) excellent run in 2017 was brought to an abrupt halt by the company's disappointing third-quarter results. The cybersecurity specialist shocked investors with conservative guidance despite the launch of its new Helix platform, indicating that its new products are failing to strike a chord with customers.

Not surprisingly, some FireEye investors sold, booking profits instead of risking more capital erosion and sending the stock down 10% the day after the earnings report. Will the company win back investors when it reports its fourth-quarter results after the market closes on Feb. 8? Let's take a look.

Hacker in a hoodie looking at a laptop.

Image Source: Getty Images.

The headline numbers

Wall Street expects $193 million in revenue and a loss of $0.01 per share from FireEye for Q4. Analysts were originally expecting $196 million in revenue from the company, but reduced their expectations to match the company's guidance.

However, FireEye has a habit of underpromising and overdelivering with its quarterly results. In fact, the company has beaten Wall Street's bottom-line estimates by big margins in the last four quarters. The trend could continue in Q4 thanks to an improvement in the company's margin profile.

FireEye exceeded its non-GAAP (adjusted) gross margin guidance by 1 percentage point in the last reported quarter. This helped it reduce its operating margin to negative 2%, as compared to negative 14% in the prior-year period. What's more, the company substantially reduced its full-year guidance for adjusted loss per share from the prior range of $0.19 to $0.24 to $0.16 to $0.19.

The improvement in FireEye's margins is a result of the company's strategy of pivoting toward subscription sales. Last quarter, subscriptions accounted for 84% of the company's total revenue as compared to 76% in the prior-year period. So as FireEye boosts its subscription business, it should be able to reduce its losses.

The top-line performance, however, might show some weakness. FireEye reduced its 2017 billings guidance by 2% at the midpoint back in November. This implies that its revenue growth will take a hit, because billings refer to the amount to be collected from customers that have already entered into a contract for FireEye's services.

So expect a mixed showing from FireEye when it releases its Q4 results and know that all eyes will be on FireEye's guidance, as the company needs to reassure investors that it can get its revenue growth back on track.

Gauging the guidance

FireEye's customers are signing shorter contracts, forcing the company to adjust sales expectations. For instance, its average contract length fell from 27 months in last year's third quarter to 25 months in this year's third quarter. FireEye expects the average contract length to stabilize between 20 months and 24 months as the subscription business gains more traction, so it might have to face some short-term revenue challenges.

The good news, however, is that FireEye's billings guidance for the new year indicates that the weakness won't last long. The company estimates its 2018 billings will increase 13% as compared to an estimated decline of 9% last year.

As a result, FireEye investors can expect the company to give strong guidance. The company looks well positioned to grow at a stronger pace in 2018 thanks to higher billings, while its improving margin profile indicates that it will get closer to profitability this year as the subscription business gains momentum.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.