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What’s Driving FireEye’s Annual Recurring Revenue Growth?

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Key ARR drivers

FireEye’s (FEYE) gradual shift towards a subscription-based business model continues to act as a key catalyst for the company’s ARR (annual recurring revenue) growth. In the last five quarters, the cyber-security firm has witnessed strong growth in ARR driven by higher adoption of its intelligence-based cyber-security products. Moreover, the company’s strategy to deploy subscription-based pricing based on capacity usage may further boost ARR growth going forward. Its strategic alliance with leading cloud operators like Microsoft (MSFT) and Oracle (ORCL) could drive its subscription-based plan globally.

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The company’s new strategy to boost its channel sales can also become a key driver for ARR growth. In the second quarter of 2018, the cyber-security firm saw a 33% YoY (year-over-year) improvement in the number of contracts sourced by partners. Moreover, its go-to-market approach coupled with simplified pricing plans for its products is also contributing to the ARR growth.

ARR trends

The graph above shows the total ARR growth trend in the last five quarters for FireEye. During the period, it grew at a CAGR (compound annual growth rate) of 2.8%. It maintained an increasing trend in the last five quarters. In the second quarter of fiscal 2018, the ARR was $522 million, an 11.8% rise YoY.

The winning of a large number of deals is also contributing to higher ARR. The company ended the second quarter of fiscal 2018 with 37 orders above $1 million against 27 orders secured in the same period last quarter.

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