FireEye (FEYE) has maintained a stable gross margin in the last five quarters fueled by strong growth in its top line. During the same period, its gross profit increased at a CAGR (compound annual growth rate) of 1.8%.
The company’s margin may improve due to the strong growth in its number of customers belonging to the Forbes Global 2000. Moreover, the company’s striking new orders of over $1 million and the higher demand for its intelligence-based security products have further contributed to its stable gross margin.
In the chart above, we can see the company’s non-GAAP (generally accepted accounting principles) gross margin trend over the last five quarters. During the period, it maintained a stable trend.
Headwinds of margin growth
In the first quarter, FireEye’s gross margin stood at 74%, nearly flat YoY (year-over-year). However, in the quarter, the company’s operating expenses fell nearly 3% YoY to $5.7 million.
Higher costs related to research and development (or R&D) have driven FireEye’s operating losses. In the first quarter, the company’s R&D costs climbed 18% YoY to $8 million. Its strengthening employee base and strategy to boost its market presence through increased sales and marketing expenses also drove its operating expenses. FireEye’s latest acquisition spree may not only increase its integration costs but also put pressure on its margins.
Fortinet (FTNT) reported its first-quarter earnings results this month. Its gross margin stood at 77%, slightly higher than FireEye’s.