What Happened?

Shares of cloud security and compliance software provider Qualys (NASDAQ:QLYS) jumped 20.6% in the pre-market session after the company reported a "beat and raise" quarter. Qualys results below past most of the key top-line metrics we track, including billings, EBITDA, and adjusted EPS. 

Adding to the good news is that revenue guidance for next quarter came in above expectations, and the company also raised full-year EPS guidance. The results suggest the company is doing a great job at meeting the needs of its customers, which should help drive strong customer retention and expansion. The recent launch of Qualys' TruRisk Eliminate for security remediation and Qualys TotalAI solutions also demonstrate the company's focus on adding value to its customers. Overall, this was a strong quarter for the company, highlighting the company's strengths in the competitive security space.

Is now the time to buy Qualys? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Qualys’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. Moves this big are rare for Qualys and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 9 months ago when the stock dropped 11% on the news that Microsoft will be replacing a cybersecurity solution provided by Qualys with its own. 

Wall Street analyst Hamza Fodderwala added, "Microsoft has also been cited as a large customer for Qualys over the years, and though the announcement does not indicate a termination of their relationship with Qualys as a customer, we see risk of Microsoft having its own [vulnerability management] solution leading to a potential downsizing or replacement of its existing Qualys deployment." 

With Microsoft being one of the largest tech companies in the world, the prospect of losing such a big customer could significantly impact Qualys's business, including revenue, especially if its security solutions are widely deployed across Microsoft's network.

Qualys is down 22.8% since the beginning of the year, and at $148.30 per share, it is trading 28% below its 52-week high of $205.89 from December 2023. Investors who bought $1,000 worth of Qualys’s shares 5 years ago would now be looking at an investment worth $1,764.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.