In April, we collected updated Technology Spending Intentions Survey (TSIS) responses from a record 1,844 IT decision makers globally. With Q1 earnings over, we would like to reflect on those results for a handful of vendors from ETR’s Viewpoint List (published April 25, 2024) with notable earnings results, good and bad, in the past six weeks. We note that even companies with Positive outlooks on their data sets have come off from all-time highs given ongoing macro challenges.
As a reminder, our spending intention surveys are forward-looking (calendar year or second half periods) and highlight inflections or shifts in customer demand. These viewpoints were based on updated 2024 spending intentions data collected between March 5 and April 4, 2024.
Workday: Negative Data Outlook (Prior Survey: No Outlook) View APR24 TSIS Report
ETR's April 2024 Outlook: “Workday’s Net Score continues to trend lower y/y across all three segments tracked as elevated churn metrics are confirmed from last period. The previous stability in HCM has also waned sequentially as Adoptions also fell in that segment. Overall spend metrics remain higher than peers on an absolute basis, and some sequential momentum is noted within Financial Management and Adaptive Planning. However, with y/y trends trailing behind the vendor’s Enterprise Apps counterparts, and for the reasons above, we are moving to a Negative outlook on the Workday dataset.”
Quarterly Earnings Recap: Workday topped Q1 revenue estimates and realized better-than-expected profitability, but billings and Current Remaining Performance Obligation (cRPO) numbers disappointed investors as macro headwinds hurt sales cycles and lower enterprise headcount growth impacted billings. Subscription sales guidance for Q2 fell below consensus expectations while Workday trimmed its full year subscription guidance by 0.5%. Shares fell by over 15% the following day due to the macro impact on the outlook.
Our Take: We left the sidelines after viewing our April data results, issuing a Negative outlook on the data set following a decline in spending intentions to the lowest levels in full-year survey history. Elevated Decrease responses and lower Increase intentions seem to reflect management commentary around elevated sales cycle scrutiny and lower customer headcount growth.
ZoomInfo: Negative Data Outlook (Prior Survey: Negative) View APR24 TSIS Report
ETR's April 2024 Outlook: "Spending intentions remain persistently low in ZoomInfo’s updated data set. That said, marked improvement among larger organizations (Global 2000, Fortune 500) and broad Pervasion growth are bright spots worth keeping an eye on for the mid-year data update in July."
Quarterly Earnings Recap: While ZoomInfo beat revenue consensus in Q1, the company issued disappointing second quarter guidance while trimming its full year sales outlook. Large customer accounts continue to shrink, with $100K+ ACV customers down over 7% y/y. The stock declined almost 25% the following day after the report.
Our Take: ZoomInfo’s difficult quarter led to a guidance cut implying less than 2% revenue growth in 2024, decelerating from 13% last year. We have watched the company’s decaying Net Score over the past several quarters and think that the shrinking net dollar retention rate is indicative of this lower spending intent. While management believes Net Dollar Retention Rate (NDRR) is beginning to stabilize, the 85% mark in Q1 is down from 104% just one year prior.
Zscaler: Positive Data Outlook (Prior Survey: Positive) View APR24 TSIS Report
ETR's April 2024 Outlook: "Outside of marginal weakness in SMB accounts, Zscaler’s dataset looks spectacular with regards to larger enterprises continuing to increase their spend plans, thus warranting a continued positive outlook on the vendor’s data set."
Quarterly Earnings Recap: Zscaler reported a strong beat and raised FY sales guidance in the quarter. Billings in the quarter topped consensus by 7.5%, and the company again raised its full year billings guidance which now points to 28% y/y growth, up from 25% initial guidance at the start of the fiscal year. Markets reacted positively to the print, with shares rising by 8.5% the next day.
Our Take: We maintained our Positive outlook in April following a slight increase in positive spending intention data, giving Zscaler the fifth-best Net Score among cybersecurity vendors and the second-best among publicly traded, pureplay InfoSec vendors (behind CrowdStrike). While our survey results have shown more elevated levels of churn in the past two quarters (measured by Replacements), we note that is possibly due to the company’s revamped go-to-market model, and management expects stabilization moving into future quarters.
Rapid7: No April Data Outlook (Prior Survey: Negative) View APR24 TSIS Report
ETR's April 2024 Outlook: "While Rapid7 spend intent metrics remain near all-time lows, new Adoption indications and momentum within Global 2000 accounts, lead us to remove our Negative outlook on the vendor’s data set this period."
Quarterly Earnings Recap: Rapid7 reported Q1 revenue just above consensus last month, but fell below estimates on Annual Recurring Revenue (ARR), billings, and total customers. Total customers declined sequentially but increased on the company’s Insights platform as it focuses on driving ARR growth through platform upsell. Compounding this, Q2 revenue guidance fell below consensus estimates, also cutting its full year ARR guidance by ~4% and revenue guidance by over 2% at the midpoints. ARR guidance now points to only 6-7% y/y growth in 2024. Unsurprisingly, investors reacted negatively to the print, with shares declining by over 17% the next day.
Our Take: We removed our rating on Rapid7’s data set following a Negative outlook in the previous two quarters, citing incrementally better Adoptions and a Net Score that had marginally rebounded from all-time lows. However, the two-year trendline decrease through January was reflected in the underwhelming Q1 results and the full year guidance cut. As Rapid7 moves to compete further upmarket to gain larger customer accounts, we think this carries elevated risk from an execution standpoint. While expanding ARR per customer through upselling and cross selling is key to the vendor’s long term growth outlook, the metric decelerated to 6.7% y/y growth in the quarter, down from 9.5% in Q1 last year. Finally, we remain cognizant of declining IT spending intentions from our latest macro survey and believe that Vulnerability Management vendors will be less prioritized than Network, Identity, and Endpoint in zero sum cybersecurity spending decisions.
CyberArk: Negative Data Outlook (Prior Survey: Negative) View APR24 TSIS Report
ETR's April 2024 Outlook: “Net Score reached new lows driven by far lower Increase spend indications from the installed base and a doubling of churn indications sequentially. This, along with worsening metrics within the Global 2000 and other key indices, the Information Security sector leading declines and poor performance among C-level respondents, keeps our Negative outlook on the dataset for CyberArk.”
Quarterly Earnings Recap: This quarter, CyberArk reported solid revenue and ARR growth, with subscription ARR continuing its high momentum, up 54% growth y/y. Despite this, sequential net new subscription ARR remained flat compared with 1Q23. Second quarter sales guidance came in below the consensus midpoint, but the company raised its full year ARR and revenue ranges by just under 1%.
Our Take: Like we saw with Rapid7, it is difficult to determine precisely when multiyear spending intention declines translate to top line results. We maintained our Negative outlook as survey data from ITDMs reached another record-low Net Score. While we think that CyberArk undoubtedly holds a position as a best-of-breed Privileged Access Mgmt. (PAM) provider, increasing competition in the identity space from Okta, Ping-ForgeRock, BeyondTrust, Sailpoint, HashiCorp, and several smaller vendors are a threat to CyberArk’s premium pricing. The company’s longer-term growth is dependent upon expansion into adjacent identity products that it has aggressively built on its platform, but we cannot ignore the clear trendline in our data while CyberArk looks to gain traction in these areas.
Monday(.com) Negative Data Outlook (Prior Survey: Negative) View APR24 TSIS Report
ETR's April 2024 Outlook: "Low Net Scores across subsamples, with an aggregate decline of 56% year-over-year, and persistently elevated churn lead us to maintain our Negative outlook on Monday.com’s updated data set."
Quarterly Earnings Recap: Monday reported strong beat and raise results in the first quarter, with revised full year guidance now implying 29-30% growth, up from 27-28% initial guidance last quarter. Overall net dollar retention remained stable at 110%. The company saw strength in large customer additions, with paid customers of over $100K in ARR up 55% y/y compared with all customers with 10+ users up 18% y/y. The company’s shares traded up over 20% on the strong print.
Our Take: We reiterated our Negative outlook on the data set this quarter as spending intentions continued a choppy but clear multiyear Net Score decline. Digging into the discrepancy between this and first quarter results, we note substantially higher reported large customer growth compared with all 10+ user customers. Our cut data shows a lower Net Score decline in Large Organizations, which fell 12 points from April 2023 to this survey. At the same time, Small and Midsize Organizations saw a respective 25- and 23-point decline in Net Score (see below). With large organizations becoming more important to growth and better relative data in that segment, our overall Net Score trend decrease may imply less negativity.
The July 2024 Technology Spending Intentions Survey (TSIS) is Live
Looking forward to the back half of the year, we have launched our July 2024 TSIS survey to collect IT decision-maker spending plans for the remainder of 2024. Currently, more than 1,250 responses have been captured and preliminary data is pulling into the ETR Research Platform now.
The 2H24 survey polling period for July will run until July 7, and the preliminary data will be updated daily on the platform throughout the polling period. As this survey data begins to populate, be sure to reach out to service@etr.ai to discuss the data on your companies of interest with one of our analysts, schedule an expert call with one of our IT decision makers, or request access via your own 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
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