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KeyBanc Capital Markets lowered its revenue estimates on several cybersecurity firms ahead of the earnings season as survey results show some generative artificial intelligence initiatives crowding out IT budgets.
“Results from our 2Q24 IT VAR survey suggest a similar or even slightly more challenging quarter than 1Q,” KeyBanc said. “The IT budget outlook for 2024 moderated to 1.6% growth from 2.6% in our prior survey. Thirty-nine percent of respondents said the macro worsened in the last 90 days (vs. 27% in our prior survey) and the timing of an expected rebound in IT spend was pushed out yet again.”
Of those surveyed, 42% said they believe gen-AI initiatives are crowding out IT budgets, affecting spending on back office, public cloud and security.
The results led KeyBanc to slightly lower revenue estimates for several cybersecurity firms. For example, Fortinet’s (NASDAQ:FTNT) revenue estimate was lowered to $1.404B from $1.405B, while Check Point Software Technologies (NASDAQ:CHKP) fell to $621M from $622M.
CrowdStrike Holdings was reduced to $959M from $960M. While SentinelOne’s (NYSE:S) overall revenue estimate remained the same at $197M, its estimated net new ARR was lowered to $39M from $40M.
Meanwhile, Palo Alto Networks (NASDAQ:PANW) revenue estimate was revised to $2.157B from $2.165B.
One of the few beneficiaries from the survey results was Arista Networks (NYSE:ANET), which had its upcoming quarterly revenue estimate increased to $1.657B from $1.645B. Its price target was also increased to $432 from $349.
More on Arista, Check Point Software Technologies, etc.
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