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Darktrace warns on revenue as customers turn cautious

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LONDON — British cyber-security company Darktrace cut its full-year revenue forecast on Wednesday after prospective customers turned more reluctant to run product trials due to the worsening economic environment.

The company, which listed in April 2021, said it now expected its constant currency annual recurring revenue (ARR) to increase by between 29.0% and 31.5% in the year to end-June, down from its previous forecast of 31% to 34%.

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It said ARR in the six months to end-December had increased by at least 36.5% to a minimum of $556.3 million, but there had been a noticeable slowdown in new customer additions recently.

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Chief Financial Officer Cathy Graham said profitability had been preserved, helped by operating efficiencies that it would maintain in its second half, resulting in an improvement to its full-year core earnings margin forecast.

“Clearly, however, the current macro-economic environment is creating challenges to winning new customers, with prospects more reluctant to run product trials and, in regions with historically higher conversion rates, those rates are starting to decline,” she said in a statement.

She said the slowdown was “very pronounced” in December, one of the strongest months in Darktrace’s annual sales cycle.

“This is largely a new customer win issue and it is more pronounced at the smaller end,” she told Reuters.

Shares in Darktrace, which uses artificial intelligence to detect cyber attacks inside customers’ networks, fell below their listing price of 250 pence for the first time since it joined the market after the revenue warning.

They regained some ground to trade down 11% at 260 pence at 0900 GMT, giving the company a valuation of 1.86 billion pounds.

Analysts at Jefferies, who rate the shares a “buy,” said the lower revenue outlook was “not materially different” from the modest slowdown seen across the rest of the security sector. (Editing by Kate Holton and Jason Neely)

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