Amidst an ominous economic backdrop, an eerie earnings season descends upon us, but fret not ETR followers, our apotropaic data will shield you from the ghouls and navigate the ghastly gauntlet. ETR's macro data has captured declining tech budgets throughout the entire year and recent slowdowns in both PCs and Cloud numbers demonstrate just how widespread and indiscriminate these declines are hitting the enterprise tech market. Similarly, the most recent Spending Intentions Survey showed historic levels of Net Score lows. Given the broad decline, our analytics team added relational positioning analysis to this round of vendor-specific reports to help gauge the relative declines or advances of a particular vendor compared to their peer group. This useful tool combined with our decade of historical data, competitive analysis modeling, and customer growth metrics is all synthesized into ETR's quarterly vendor reports available to our clients in the report section of our marketplace. For non-clients, you can access the underlying data that supports our reports by initiating your own free trial.
With earnings season already underway, next week's calendar is packed with tech companies that ETR tracks. While attention spans and common sense dictate that I don't give away our research for all of them, I have tackled a healthy number of data summaries on reporting companies in this article. Please note that these snippets are purposefully written as high-level encapsulations of our detailed reports. If any reader would like to see the supporting data and analysis, please log on to the platform, or reach out to our service team at service@etr.ai for assistance. Let's dive in with a hand-picked group of vendors that ETR deemed worthy of an outlook based on the vendor's corresponding data set:
Alteryx. Alteryx is slated to report earnings on Tuesday, November 1st after the market close. Based on the most recent data set, the ETR research team had the following to say about the vendor's spending intentions for the remainder of the year: "Since the last survey period, where Alteryx posted its highest Net Score in two years, the vendor has seen contractions in Adoptions and Increase spend intentions in tandem with more Decrease spend intentions. Overall, Alteryx appears to have sustained a rebound from an all-time Net Score low one year ago, but the enthusiasm has softened, and Net Score now stands at a two-years-ago level of 22%." On the positive side, the data does not show any increasing competitive pressure impacting Alteryx, and the company's Pervasion (customer growth in our survey) has grown significantly among Global 2000 customers since last year. Despite those positives; however, the shrinking level of adoptions and increased spending indications have driven Net Score to the lowest levels in two years, resulting in a step down from a Positive to a Neutral outlook on the vendor's current data set.
Cloudflare (and Fastly). We follow a data set that warranted a step down with one that warranted a step up based on the relational analysis described above. In this survey, the updated 2H22 spend on Cloudflare was down slightly from both the data collected in JUL22 and one year ago; however, the declines in the company’s Net Score are not as severe as the decline in the overall survey and were largely driven by a flattening of customer spend, with negativity remaining low. The detailed vendor report examines the strong performance in the information security sector, growth among GLobal 2000 accounts, and rising customer acquisition rates. In sum, the ETR Research team stated: "Stable overall and improving among Global 2000 organizations, Cloudflare’s Information Security sector outlook, coupled with expanding Pervasion and above Consensus forecasts, puts the vendor's data set into the Positive outlook bucket once again."
Cloudflare is scheduled to report earnings on Thursday, November 3rd, but first, we will see numbers from its CDN peer, Fastly, which will report the evening before. As a way of comparison between the two vendors, we will leverage ETR's Expansion vs. Contraction ratio. Simply explained, Expansion is defined by the percentage of survey respondents indicating plans to Adopt + Increase as compared to the percentage of Decrease + Replace indications. For Cloudflare, the Expansion vs. Contraction ratio stands at a very robust 42:4. For Fastly, that ratio drops to 36:20. The negative spend intent for Fastly resulted in an all-time low Net Score of 15% in this survey period.
Lastly, below is a sneak peek at ETR's proprietary Sales Forecaster, which uses its forward-looking spending intentions data along with publicly available market data to produce a forward estimate for sales. As the chart illustrates, ETR’s Sales Forecaster, with a 90 Confidence Score, estimates the largest upside to Consensus for the vendor in over a year.
Datadog & Dynatrace. These two companies that play in the observability space also are expected to report earnings next week. As the saying goes, "age before beauty," so we begin with the more mature and established Dyntrace who is expected to print numbers on Wednesday, November 2nd before the market opens. The backdrop for the entire observability group in this survey was one of declining spend across the board. If a rising data tide lifted all observability boats throughout the last two boon years, we are clearly seeing the tide ebb right now. With that said, Dynatrace ebbed more than most of its peers on a relative basis, resulting in a Negative outlook on the vendor's data set. The ETR Research team had the following to say when analyzing the data: "Among all customers, Dynatrace’s Net Score is down from one year ago across both sectors in which ETR tracks the vendor; however, the decrease among Fortune 500 customer data is particularly concerning for Dynatrace. Furthermore, while it’s worth noting that other observability vendors are seeing a y/y decline in Net Score as well, the lower Net Scores for both Datadog and Elastic are driven by more ‘flat’ spending plans, whereas Dynatrace’s lower score is driven by more plans to decrease spend or replace the vendor."
Meanwhile, Datadog retained its Positive outlook on the recent data set, but just barely. The data set for Datadog this survey was dichotomous at best, with Net Score seeing declines in both sectors in which we track the vendor, but Pervasion (customer growth) showed meaningful increases. Further pushing the bi-directional nature, Datadog holds the top position among its observability peers within the Analytics sector but showed massive declines from its strong debut within the Information Security sector last year. Ultimately the ETR Research team stated: "Amidst broad budget declines, Datadog is seeing reduced spend intent; however, the vendor remains well positioned relative to its peer group, and Pervasion rates are robust. As such, we cautiously retain the Positive outlook while awaiting JAN23 data."
Below is an image illustrating the relative spending intention positioning mong observability peers within ETR's Analytics, Big Data sector. This particular analysis shows Contraction rates for the group where you see Dyntrace having the second highest spending contraction (behind Cisco's AppD) whereas Elastic (also a Positive data set) has the lowest spending contraction in this survey.
Qualys. Ok, we have time for one more. This vulnerability management vendor is expected to report after the market close on Wednesday, November 2nd, and warrants being highlighted here due to ETR initiating a Negative outlook on the company's dataset. Qualys Net Score saw further contractions in OCT22 that are even steeper than declines seen in JUL22. Net Score is now at the lowest level since OCT20. In addition, the sequential fall in Pervasion represents the first decline of this customer growth metric since JUL20. The ETR Research team neatly summed up the data set thusly: "Qualys is seeing the largest levels of Flat spend in recent survey history, contributing to further Net Score declines. This, combined with precipitous declines in spend intent within the Global 2000 and Fortune 500, pushes us down to a Negative outlook on the data set. Qualys is also the only Vulnerability Management player with falling Pervasion and is exhibiting the largest y/y drop in Net Score among the peer group."
Quick hits - CyberArk and Fortinet. Fortinet and CyberArk are two other security vendors scheduled to report next week that continued to warrant a Positiveout look based on their most recent data sets. Both companies have now carried this outlook for consecutive surveys, with CyberArk remaining near the top of the Information Security sector on both Net Score and Pervasion, and Fortinet actually growing its Net Score and Adoption indications amidst broader, survey-wide declines.
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Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to bring you 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