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Darktrace reports jump in revenue and notes growing cyber threats from AI

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A major cyber attack on a financial services payments system could cost trillions, Lloyd's has found, as demand for cyber insurance booms.

Shares in cybersecurity group Darktrace rose over 14 per cent on Thursday after it reported a 27.4 per cent jump in revenue for the first half of its financial year and upgraded full year forecasts.

For the six months to the end of December, the company which uses artificial intelligence (AI) to combat cyber threats recorded revenue of $330.3m (£259m) and a gross profit margin of 89.3 per cent.

The group’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) soared 87 per cent to $84.5m (£66.3m).

The company said its higher income represented “a change in trajectory following a period of transformation and stabilisation.”

Darktrace now expects revenue in its full financial year 2024 to grow between 23.5 per cent and 25 per cent, an upgrade on the previous estimate of between 23 per cent and 24.5 per cent.

The group has focused heavily on expanding its presence and capitalising on the booming demand for cybersecurity, as the number of attacks has been increasing globally, in part due to AI enabled phishing attacks.

In the first two months of 2023, Darktrace saw a 135 per cent increase in new kinds of attacks, which has continued to grow, according to the company’s data.

To help drive the shift to new markets, Darktrace reorganised its sales structure last year. It also rolled out its Go-to-Market strategy and teams, which were designed to drive customer growth and recurring revenue, in the first quarter of its current fiscal year.

Darktrace’s public image suffered last year as a result of a short seller attack and the company’s links to British entrepreneur Mike Lynch, who was extradited to the US last year on fraud charges, but it appears to have appeased investors today.

“What stands out is its exceptionally strong margin performance, which appears to be a result of both improving  scale  and stringent cost control measures,” said Ben Barringer, technology analyst at Quilter Cheviot.

“This could be one of the companies that would sit well within the new UK ISA announced yesterday for investors seeking growth and value in the field of AI and cybersecurity as well as sitting at more than a 50 per cent discount to US peers,” he added.

Announced by chancellor Jeremy Hunt in his Spring Budget on Wednesday, the new British ISA will allow savers to invest an extra £5,000 tax-free in UK equities, on top of the £20,000 ISA allowance.

Commenting on the results, chief Poppy Gustafsson said: “Following the impact in the first quarter of our significant Go-to-Market changes, I was very pleased to see the team adapt quickly, delivering significantly improved second quarter sales, which enabled our strong financial performance in the first half of the year.

“We see progress in longer cycle initiatives such as large strategic, channel and government pipeline development, and upsell momentum continues. In addition, ramped salesperson tenure has lengthened, increasing by 28 per cent, including a 31 per cent increase in our key North American markets.

“We continue to see the cyber-crime landscape evolve rapidly in a challenging geopolitical environment and as the availability of generative AI tools lowers the barrier to entry for hostile actors. Against this backdrop and in the period ahead, we are preparing to roll out enhanced market and product positioning to better demonstrate how our unique AI can help organisations to address novel threats across their entire technology footprint.”