Here’s why the Darktrace share price is falling

Darktrace (LON: DARK) share price crashed hard on Wednesday becoming the worst-performer in the FTSE 250 index. It slipped by over 8.5% and reached its lowest point since January 10th. 

The stock has come under intense pressure, falling by over 23% from the highest point in 2023, meaning it is now in a deep bear market.

Darktrace stock crashed even though it did not publish any news or earnings. Its next scheduled news will happen on March 7th when the company will publish its financial results for the past half year.

The main reason why Darktrace stock price is tumbling is that it has become guilty by association after Palo Alto Networks published weak financial results. 

In a statement, Palo Alto Networks said that its revenue rose by 19% in the second quarter to $1.98 billion. Product revenue jumped by 11% while its services jumped by 22%.

While the double-digit growth was good, the company provided a weak forward guidance. It expects that its billings in the current quarter will increase by between 2% and 4% or between $2.3 billion and $2.35 billion. Revenue will be between $1.95 billion and $1.96 billion (13% and 15%).

This growth forecast, while conservative, was lower than what most analysts were expecting. Besides, Palo Alto shares have more than doubled in the past few months. They dropped by over 19% in the pre-market.

Darktrace is not the only stock that is guilty by association. Crowdstrike stock price crashed by almost 10% in the pre-market session. Similarly, SentinelOne stock plunged by over 7%.

The most recent Darktrace trading statement showed that the company was doing well. It noted that its Annualised Recurring Revenue (ARR) rose to $701.7 million. It expects that its revenue for the 1H FY24 came in at $329.6 million.

Therefore, investors believe that the warning from Palo Alto Network means that the cybersecurity industry is going through a slowdown.