By Geoffrey Smith
Investing.com -- Shares in Darktrace (LON:DARK) tumbled nearly 20% in early trading on Tuesday after the cyber-security company lowered its growth forecasts for the year, due to the weak economy.
Darktrace said that the impact from the slowdown on new business had become more evident toward the end of last year. As a result, it now expects annualized recurring revenue, adjusted for foreign exchange swings, to rise by between 29% and 31.5%, down from a range of 31%-34% previously.
"Clearly...the current macro-economic environment is creating challenges to winning new customers, with prospects more reluctant to run product trials," chief financial officer Cathy Graham said, adding that, conversion rates have also started to decline in some regions where customers have in the past more likely to commit to contracts after their initial trials.
Darktrace may be doing less business than expected, but the dollar's recent fall is at least allowing it to make slightly more money on the business Darktrace does. The company raised its underlying operating margin forecasts to a range of 16%-18.5% from 15%-18% previously.
Markets chose to concentrate on the revenue forecast, pushing Darktrace stock down by as much as 19%. That meant that the stock dipped below its IPO price of 250p briefly before recovering to trade down 13% by 03:35 ET (08:35 GMT).
Analysts at Berenberg still described the stock as a "key multiyear pick" despite evidence of the slowdown. They noted that while the number of new deals signed by the company was down some 24% from a year earlier in the final quarter of 2022, the average deal size was much larger, suggesting it is gaining traction with bigger businesses.
The company also announced on Wednesday that it has hired Denise Walter as its new chief revenue officer. An industry veteran, Walter was most recently vice president for sales, enterprise and globals at VMware (NYSE:VMW). She will be based in California and take "global responsibility for all aspects of revenue generation, including new business growth, particularly in the U.S.," Darktrace said.