Darktrace falls as first half of year expected to be weaker

The cybersecurity business said that more of its revenue will be gained in the second half.

Cybersecurity firm Darktrace said it was hoping for a better second half to the year (Peter Byrne/PA) (PA Media)

Shares in Darktrace dipped on Wednesday as the cybersecurity business downgraded its outlook for the year and told shareholders that the second half of the 2024 financial year would be the more productive.

The Cambridge-based company said that the financial year would be a “tale of two halves”, warning that just 45% of the net annual recurring revenue it expects to add during the year will come in the first half.

It created suspicion, analysts said, that the company might struggle to hit loftier ambitions in the second half.

It’s understandable the market is not too enamoured with the AI-driven cybersecurity firm’s guidance for a year of ‘two halves’ with stabilisation followed by re-acceleration

Russ Mould, AJ Bell

“Bitter experience has taught investors to be suspicious of situations where a company expects a second-half weighting to its results – like the one Darktrace is pointing to in outlook commentary alongside today’s results,” said AJ Bell investment director Russ Mould.

“What typically happens is a quieter first half leaves the firm in question with too much to do to hit full-year guidance and the inevitable result is a profit warning.

“It’s understandable the market is not too enamoured with the AI-driven cybersecurity firm’s guidance for a year of ‘two halves’ with stabilisation followed by re-acceleration.”

The business also said that its margins would be lower than hoped due to a change in how it pays bonuses to its sales staff. The company used to pay half of the bonus up front, but now it will hand the full amount to staff straight away.

“This change has been made to better align with market practice, better supporting Darktrace’s ability to hire and retain key experienced talent,” the business said.

Revenue rose 31.3% in the year to the end of June, hitting around 545 million dollars (£434 million). Pre-tax profit rose from 5.3 million dollars (£4.1 million) to 41 million dollars (£33 million).

Shares dipped 3.7% following the news.

Mr Mould said: “Darktrace has had a volatile time as a public company – right from the start it was under pressure thanks to its associations with controversial tech entrepreneur Mike Lynch. Question marks over its transparency and a high-profile bear raid earlier this year also put it under the cosh.

“An independent audit of its accounts gave the company an apparent clean bill of health over the summer and it really needs a steady period of delivery to help win credibility with the market.”