FireEye (NASDAQ:FEYE) made a promising start to 2018 by surprising investors with a solid earnings report in February, but the enthusiasm started fading once it became clear that it is facing execution challenges. The cybersecurity specialist's patchy growth, thanks to the slow uptake of its new products and services, has dented investor confidence in recent quarters.

The company has been blaming the shift to a subscription-based model for this slump. But declining average contract lengths and weak deferred revenue growth have failed to assure investors that all's well with FireEye. As such, Wall Street will be looking for something more than just strong top- and bottom-line performances when the company releases its third-quarter results on Oct. 30.

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What's expected

Analysts expect FireEye's revenue to increase nearly 10% year over year during the third quarter to $208.4 million. More importantly, it is expected to report adjusted earnings of $0.02 per share as compared to a loss of $0.04 in the prior-year period. Both estimates are in line with the company's guidance, so it shouldn't have much difficulty in meeting them.

However, FireEye has the potential to surpass these numbers, as there has been an uptick in sales activity of late. More than half of its customers bought at least four products during the second quarter, while 95% of customers had purchased more than one product. Additionally, the count of FireEye's $1 million-plus deals increased 37% during the second quarter.

This is why FireEye's second-quarter results were at the higher end of its own expectations, and the company was also encouraged enough to increase its billings guidance for the full year. These good results could have continued in the third quarter.

However, it might take more than that to convince investors that FireEye is capable of competing in a cutthroat cybersecurity market.

What to watch

The good news is that recent developments could give FireEye a shot in the arm as cybersecurity is deemed more important. Facebook, for instance, is expected to outsource its cybersecurity work after the departure of its chief security officer back in August.

While there's some speculation that Facebook is looking to buy a cybersecurity company, other rumors suggest that FireEye could be a strong contender for this contract, as it has already helped Facebook in earlier campaigns in Russia and Iran. Another thing in its favor is that FireEye has the right tool in the form of the Helix cyberdefense platform that could help Facebook prevent data breaches.

Helix helps customers automate their cybersecurity infrastructure by integrating the necessary capabilities into a single solution. This cloud-based solution allows FireEye customers to detect threats, automate the threat response, generate compliance reports, and keep an eye on the health of their cloud infrastructure, all from a single dashboard.

Improvements to Helix should boost FireEye's subscription business and increase cross-selling opportunities. As it stands, FireEye's subscription business has grown just 4 percentage points over the last two years. Stronger growth on this front would be a welcome development for the company, as a higher proportion of the subscription business ideally leads to stronger margins.

FireEye's growth hasn't been as aggressive as some of its peers. This is a cause for concern, because slow growth in a fast-growing industry means that a company is losing ground to rivals. FireEye has the opportunity win back investor confidence later this month with a solid third-quarter report, and investors will have a close eye on that report. 

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends FireEye. The Motley Fool has a disclosure policy.