Qualys (QLYS, Financial) saw a significant rise in stock value following a robust Q3 earnings report. The company benefited from a stabilized selling environment and customer consolidation of cybersecurity tools onto its unified platform. The upcoming launch of Qualys TotalAI in Q4 positions QLYS to address the security risks associated with AI and large language models.

Despite ongoing budget scrutiny, the launch of new products like TotalAI and Enterprise TruRisk Management, along with positive trends in new business, are expected to sustain momentum. QLYS has issued optimistic Q4 EPS and revenue guidance of $1.28-$1.38 and $154.5-$157.50 million, respectively.

• New business achieved double-digit growth for the fifth consecutive quarter, highlighting the effectiveness of its cybersecurity products and marketing strategy. Revenue from channel partners increased by 17% in Q3, surpassing the 1% growth in direct sales.
• QLYS experienced stronger upsell activity, with its net dollar expansion rate rising to 103% from 102% last quarter, capturing a larger share of customer spending through new products and capabilities.
• Investments in data centers caused a 1% headwind to Q3 gross margin, which remained flat year-over-year at 83%. A similar 1% impact is expected in Q4.
• The strong earnings report is promising for competitors like CrowdStrike (CRWD, Financial) and Zscaler (ZS, Financial), who will release their quarterly results on November 26 and 27, respectively.

Despite a constrained IT spending environment, cybersecurity remains a priority. QLYS's beat-and-raise performance in Q3 reflects its status as a leading player in the cybersecurity sector, successfully acquiring new business in challenging conditions.