It's that time again. The earnings calendar is packed with many tech companies that ETR tracks in our quarterly Technology Spending Intentions Survey (TSIS) reporting next week, such as RingCentral, Akamai, Twilio, Rapid7, CyberArk, and others. In advance of the earnings reports, ETR has compiled some of the recent April 2023 TSIS data on a handful of those companies but remember that the full data sets and reports are always available on the ETR platform. If you don't have access to our research yet, you can change that with just one click. Let's get started in chronological order of earnings date with a data review on RingCentral.
RingCentral | Earnings Date: 5/8/2023. Over the last two years, spending intentions for RingCentral among ETR’s ITDM population have fallen dramatically from extremely healthy levels above 40% into negative territory. On an aggregate basis across all sectors we track the vendor, Net Score dropped to negative 1.1% this survey period, following a precipitous drop of 104% over the last three surveys. There is now more negative spend intent (32%) than positive spend (31%), driven by an astonishing 19% of total respondents stating plans to Replace the vendor. (see data illustration of RingCentral's Net Score below)
Small organizations were the lone bright spot in this data set, where ~30% of the total citations resulted in a Net Score of 17.3%, up slightly from 16.9% last survey and showing signs of rebounding from JUL22 lows of 5.5%. However, the positive impact from Small organizations was largely canceled out by spend among Midsize organizations, which accounted for 22% of the total citations for RingCentral. Net Score among this cohort plummeted to negative 14.5%, matching all-time lows from JUL22, driven by a shocking 23% of respondents from this cohort citing their intent to Replace the vendor.
Lastly, in ETR’s proprietary shared accounts analysis, we see that Microsoft dominates in multiple sectors among RingCentral respondents. The cloud giant had a 40% shared citation rate (overlap %) and an elevated Net Score of 40% within RingCentral accounts in the IP Telephony sector. In the Video Conferencing sector, Microsoft had a 91% shared citation rate and a Net Score of 58% among RingCentral respondents. The underlying equity has seen a similar trend line as our Net Score, with shares falling from above $300 to $26 as of press time, with a valuation of ~8x forward earnings. With concerns surrounding the company's debt levels in addition to the dwindling competitive positioning, we shall watch closely for cash flow levels in particular and the investor reaction to the company's guidance for the rest of the year. Read the full report here.
Akamai | ETR Data Outlook: Negative | Earnings Date: 5/9/2023. Next up is Akamai, who is scheduled to report earnings on Tuesday. There will be two main areas to look out for with Akamai's earnings and ensuing conference call; the security business and the cloud business. While the traditional (dare I say legacy) security business continues to be the primary revenue contributor, it is the cloud business that investors will scrutinize more closely, given its potential to drive future growth. Since Akamai acquired Linode in February 2022, the company announced its entrance into the infrastructure as a service (IaaS) market place pitting it directly against giants like AWS, Microsoft, and Google. The move is also trying to keep pace with its closest competitor Cloudflare, which also has its own IaaS offering. As part of the cloud strategy, the company is spending a lot of money to catch up to the more established players by building out cloud data centers. In fact, the company announced that more than 20% of revenues will transfer to CapEx for 2023, up from about 12-14% last year.
Moving to the most recent data, the updated 2023 spend on Akamai has seen a sharp decline from the data collected on JAN23 and is now below year-ago levels. Akamai’s Net Score dropped by over 30% since last year, driven by fewer customers planning to increase spend, with more keeping spend flat along with a slight uptick in replacement indications. While only in its second ETR survey, Akamai’s push into cloud computing with its acquisition of Linode is not gaining much traction, with a declining Net Score that is well below the sector average and its peer, Cloudflare (see data visualization below).
Within Information Security, Akamai's Net Score is below the sector average and trails far behind Cloudflare; however, based on our data, investors have reason for optimism with the company's recent acquisition of Neosec. Within ETR’s Emerging Technology Survey (ETS) data, Neosec has one of the highest Net Sentiment scores within the entire Information Security sector among Akamai’s customers. When analyzing the entirety of Akamai's April 2023 spending intentions data set, the ETR research team noted that although no apparent competitive wallet share shifts are behind the decline in Akamai spending intent, the drop in Net Score across all three product lines and most customer demographics, in addition to lackluster Linode traction, lead us to a Negative viewpoint on Akamai’s data. Read the full report here.
Also reporting on May 9th are Rapid7 and Twilio. Although ETR does not have a formal viewpoint on either vendor's data set during this survey period, both warrant a quick review. First up, Rapid7 plays within a competitive vulnerability management marketplace where all three of the top companies are seeing descending Net Scores. In the most recent Rapid7 report, based on April 2023 data, the ETR research team notes that customer metrics have stagnated with a flat Net Score on a year-over-year (y/y) basis, sitting below previously higher levels. Adoptions have waned over time, and Rapid7 is the only Vulnerability Management peer with falling pervasion from JAN23. Both Tenable and Qualys are seeing worse spend intent trends y/y, but Rapid7 continues to trail on an absolute basis. Read the full report here.
For Twilio, ETR tracks the vendor across three separate sectors (Productivity Applications, Contact Center, and Marketing), but unfortunately, the results are the same in each, with meaningful declines in spending intention Net Scores in every sector compared to the previous January 2023 survey. When reviewing the entire data set, the ETR research team wrote, "Spending intentions for Twilio have continued the fading trend we captured last survey across all three sectors. Despite pockets of slight improvements found among F500 and G2000 respondents, the lack of positivity across the rest of its subsamples results in a weak data set for the vendor." Read the full report here.
CyberArk | ETR Data Outlook: Positive | Earnings Date: 5/11/2023. Last up for this week, we check in on the Identity & Access player, CyberArk, which is predominantly viewed as the leading privileged account management tool in the marketplace. Expected to report earnings on Thursday, May 11, the stock is relatively flat year-to-date despite some volatility. After dropping to single-digit revenue growth in 2020 and 2021, the street is expecting revenue growth north of 20% for the next two years, a rate that investors are paying 6x and 5x sales for, respectively. Despite the recovering growth rate, the company is still expected to report negative earnings.
Transitioning to the recent spending intentions data, the ETR research team has a positive viewpoint on the April 2023 data set based on steady and healthy spend intent metrics. Absolute Net Score is strong relative to overall survey levels and continues to outpace competitors and peers within the information security sector. In addition, rising Global 2000 expansion rates (adopt + positive spend) offset overall softening within the index, as many of the company's peers in the space are seeing steeper declines in key index cuts and among All Respondents (see Global 2000 data visualization below). Read the full report here.
That's it for this week's earnings preview, but if you would like to review the data sets for the 400+ public companies covered in our Technology Spending Intentions Survey (TSIS), log in to the ETR Platform to view the data models or read the analyst-written research reports. Not yet a client? That's ok, you can get access with a free trial.
Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to provide actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at www.etr.ai