Wall Street finished the month of May on a down note, with major market benchmarks giving back a portion of their recent gains. Declines for the Nasdaq Composite (^IXIC +0.89%) and S&P 500 (^GSPC +0.29%) were slightly worse than the daily drop in the Dow Jones Industrial Average (^DJI 0.31%), but overall, the Nasdaq posted strong gains for the month even as the Dow fell significantly.
|
Index |
Daily Percentage Change |
Daily Point Change |
|---|---|---|
|
Dow |
(0.41%) |
(135) |
|
S&P 500 |
(0.61%) |
(26) |
|
Nasdaq |
(0.63%) |
(82) |
Data source: Yahoo! Finance.
After the closing bell, investors got a taste of how a pair of important cybersecurity stocks fared. Some had hoped that artificial intelligence trends would help bolster results for companies like CrowdStrike Holdings (CRWD +2.19%) and Okta (OKTA +2.89%), but both of those stocks fell sharply in after-hours trading as shareholders weren't satisfied with what they heard. Read on to learn more about what's behind the decline and whether investors should worry about the longer-term prospects for cybersecurity companies.
CrowdStrike sees growth slow
Shares of CrowdStrike Holdings were down more than 11% in after-hours trading late Wednesday. The cybersecurity software specialist reported solid gains in revenue and an impressive rise in adjusted net income, but investors nevertheless seemed concerned at decelerating growth rates that could limit CrowdStrike's long-term potential.
CrowdStrike's results for the fiscal first quarter that ended April 30 looked impressive from an objective standpoint. Revenue climbed 42% year over year to $693 million, driven by similar-sized gains in subscription-based sales and annual recurring revenue. Gross margin improved slightly, and adjusted profits of $136 million were up 82% from year-ago levels, producing earnings of $0.57 per share.
NASDAQ: CRWD
Key Data Points
CrowdStrike also paid homage to the AI trend, mentioning its generative AI security analyst product. Dubbed Charlotte AI, the system uses platform security data to assess threats and detect potential problems before they arise. In addition, CrowdStrike is working with Amazon (AMZN +1.21%) Web Services to make new generative AI applications more broadly.
Yet even a slight increase to revenue guidance for the full 2024 fiscal year to between $3 billion and $3.04 billion wasn't enough to restore confidence in CrowdStrike's longer-term promise. Even with the downward move in the share price, though, CrowdStrike is still up sharply since the beginning of 2023.
Okta has investors worried about the future
Shares of Okta did even worse, losing 15% of their value after hours. The identity verification specialist reported fiscal first-quarter results for the period ended April 30 that signaled a potential slowdown ahead.
Okta's quarterly numbers were somewhat encouraging. Okta had revenue of $518 million, up 25% year over year. Adjusted net income came in at $38 million, reversing a loss of $43 million in the year-ago period and working out to $0.22 per share. However, subscription backlog figures came in relatively weak, with the overall figure of $2.94 billion rising just 9% year over year.
NASDAQ: OKTA
Key Data Points
Okta also projected some potential headwinds from macroeconomic conditions. The company provided full-year fiscal 2024 revenue guidance of between $2.175 billion and $2.185 billion, which would be up 17% to 18% from fiscal 2023 levels. Adjusted earnings of $0.88 to $0.93 per share would imply a lofty valuation based on forward profit estimates.
Investors have hoped that Okta would stay strong, but even with ongoing demand for protection from various cybersecurity threats, investors weren't satisfied with the company's progress. Okta needs to take full advantage of favorable industry trends to get itself back in Wall Street's good graces.
