Cyber security companies have been gaining immense popularly in recent years as this corner of the market represents one of the few growth opportunities left for developed market investors. With the extensive adoption of Internet usage in mobiles and computers, and ceaseless cyber attacks, demand for cyber security and overall spending by corporates and governments on Internet security are rising by leaps and bounds (read: Cybersecurity Threats from China Persist: ETFs in Focus).

As a result, the industry is flourishing and the latest quarterly earnings results bear testimony. Most of the cyber security firms beat our earnings and revenue estimates, and provided an upbeat guidance. Let’s dig into the earnings results of some of the cyber security firms that have the largest allocation to the ETFs in this industry:

Cyber Security Earnings in Focus

Proofpoint (PFPT - Snapshot Report) has been one of the major outperformers in the space as the stock has surged 30% to date following the earnings announcement on October 21 after the closing bell. The company reported loss per share of 47 cents, narrower than the Zacks Consensus Estimate of 51 cents while revenues also outpaced our estimate by $3 million. The company expects revenues in the range of $72.5–$73.5 million for the ongoing fourth quarter and $263–$264 million for the full year. Loss per share is projected at 11–12 cents for the fourth quarter and 35–36 cents for the full year.

Imperva (IMPV - Snapshot Report) has jumped nearly 17% since the earnings announcement on October 29 after the closing bell. Loss per share of 19 cents narrowed from our estimated loss of 52 cents and revenues of $63 million came ahead of our estimates by 8 million. For the fourth quarter, the company expects revenues in the range of $66–$68 million and loss per share of 10–16 cents. For the full year, revenues and earnings per share are expected in the range of $227.6–$229.6 million and breakeven to 7 cents, respectively.

VASCO Data Security International (VDSI - Snapshot Report) also reported solid Q3 results and shares have climbed nearly 11% to date post earnings results on October 27 after the closing bell. Earnings per share of 34 cents strongly outpaced the Zacks Consensus Estimate of 24 cents. Revenues grew 14% year over year to $60 million. The company reaffirmed its revenue guidance of $230–$240 million for the full year (read: 5 Tech ETFs to Watch on Strong Earnings).
 
Earnings per share at Qualys (QLYS - Snapshot Report) came in at 7 cents, a couple of cents ahead of the Zacks Consensus Estimate while revenues of $42 million matched our expectation. For the fourth quarter, Qualys expects revenues of $44.3–$44.8 million and earnings per share of 16–18 cents. It lowered the 2015 revenue guidance to $164.1–$164.6 million from $165–$166.5 million while raised the earnings per share outlook to 65–67 cents from 50–55 cents. Shares of QLYS are up 4.7% to date following its earnings announcement on November 2 after the closing bell.

Juniper Networks Inc. (JNPR - Analyst Report) beat on both the bottom and the top lines by a nickel and $0.02 billion, respectively. For the fourth quarter, the company expects earnings per share in the range of 57–60 cents and revenues in the range of $1.27–$1.31 billion. However, shares of JNPR are modestly down nearly 0.4% since its earnings announcement on October 10 after the closing bell.

ETFs in Focus
The string of earnings beat and solid stock performances have put this niche area of the technology sector in focus for the days ahead. Currently, there are a couple of cyber security ETFs that are detailed below (see: all the Technology ETFs here):

PureFunds ISE Cyber Security ETF (HACK - ETF report)

The fund offers global exposure to those companies that ensure safety to computer hardware, software and networks, and fight against any sort of cyber malpractice. It tracks the ISE Cyber Security Index, holding 35 securities in its basket. It is well spread out across components, as each security holds no more than 4.57% of total assets. From an industrial look, software and programming accounts for nearly 58% of the portfolio while communication equipment and IT consulting & data services round off the top three.

In terms of country exposure, U.S. firms take the top spot at 71%, followed by Israel (11%), the Netherlands (4%), Japan (4%), United Kingdom (3%), Finland (3%), South Korea (2%) and Canada (1%). The fund has amassed $1.1 billion in AUM and charges 75 bps in fees per year from investors. Volume is solid as it exchanges 883,000 shares in hand per day.

First Trust NASDAQ CEA Cybersecurity ETF (CIBR - ETF report)

This ETF has successfully accumulated over $97 million in its asset base just in four months of its debut. It charges 60 bps in annual fees and trades in good average daily volume of about 105,000 shares. The fund follows the Nasdaq CEA Cybersecurity Index, which measures the performance of companies engaged in the cyber security segment of the technology and industrials sectors (read: 3 Promising Tech ETFs Jumping to Rank #2 from 4).

In total, the product holds 34 stocks in its basket with the top five firms dominating the returns at 30%. Further, it is skewed toward software industry at 44.8%, while communications equipment and Internet software & services round off the top three with double-digit allocation each. Like HACK, American firms account for 68% of CIBR while the Netherlands, China, Israel and many others make up for a single-digit allocation.