A10 Networks, a cloud security software company, experienced a decline in stock value after announcing a third-quarter revenue forecast that fell well below expectations. The company revealed that it expects third-quarter revenue to be between $56.5 million and $58.5 million, significantly lower than the $73.7 million estimated by Wall Street analysts. In comparison, A10 reported revenue of $72.1 million in the same quarter last year.
A10 Networks is set to release its third-quarter financial results on November 7th. Chief Executive Dhrupad Trivedi acknowledged the challenges faced by the company, including customers grappling with increased cost of capital. These industry headwinds were previously discussed during the fiscal second-quarter earnings call held in July. Trivedi emphasized that delays arose in the third quarter due to North American service providers postponing capital expenditures, leading to deals intended to close at the end of the quarter being delayed to future periods.
As a result of the disappointing revenue forecast, shares of A10 plummeted by 29% to $10.80. This decline marks the largest percentage decrease since October 2014 and the lowest closing price since June 2021, according to Dow Jones Market Data.
Christian Schwab, an analyst at Craig-Hallum Capital Group, adjusted his price target for A10 Networks. While reducing the target from $19 to $15, Schwab maintained his Buy rating on the stock. He highlighted A10's resilient financial position, boasting robust gross margins of 80%+, EBITDA margins in the mid to high 20%'s, and a strong balance sheet with approximately $164 million in cash or $2.17 per share.
This year has proven to be challenging for A10 Networks, with shares falling by 35% so far. If this trend continues, it would mark the company's worst annual performance on record.