“A clever person solves a problem. A wise person avoids it.”
It’s that time of year when things begin to wind down—office parties and long lunches take precedence over work. There’s always that one colleague—usually a guy—who thinks it’s a good idea to bring his Tinderella as a plus-one to provide the entertainment. So, how long have you two known each other?
Rubrik Q3 Beats, Stock +19% in After-Hours Trading
NOTE: Due to potential conflicts of interest, we refrain from commenting on stock investment returns. However, we will remain candid in assessing Rubrik's earnings calls and business prospects.
We often find ourselves explaining tech concepts to the finance community or out-of-hours equity market trading to tech workers.
Rubrik Inc. (RBRK), the Palo Alto-based zero-trust cybersecurity and data recovery firm we’ve previously covered, comfortably beat Q3 earnings expectations, sending its stock up by +19% in after-hours trading. This represents more than a doubling since its IPO in late April of this year. Investing in Rubrik is easier, more educational, and less risky (due to regulations) than speculating on Bitcoin over a six-month timeframe—at least for me.
Rubrik’s net free cash flow unexpectedly turned positive in Q3, and its annual recurring revenues surpassed $1 billion. Congratulations to the team at Rubrik and the (few) investors who bought and held the stock since its IPO.
Our observations:
- CEO Bipul Sinha and the CFO Kiran Choudary struggle with investor presentations. Their quarterly investor calls are painful to listen to—more akin to product engineers hesitant to dive into technical details while simultaneously failing to convey the big picture to investors. This results in unnecessary waffle that satisfies neither technically minded analysts nor holistic investors. In general, the cyber industry consists of the geekiest of the computer geeks.
- That said, the Rubrik team is innovating, winning major customers, and delivering impressive financial results.
- The growth outlook and fundamentals remain strong—but also a consensus view.
Post-IPO earnings calls can be awkward as management teams adjust to life as a publicly listed company from a startup. It typically takes time for them to gain confidence and refine their messaging. Smart teams figure it out or make necessary changes to smooth out investor relations. An inauthentic, smooth-talking cyber entrepreneur lacking deep domain knowledge would be worse.
Other Cyber CEOs
The CrowdStrike CEO's handling of the global IT outages earlier this year exemplifies good, effective crisis communication skills, even though some company insiders accuse him of not being particularly detail-oriented. Matthew Prince at Cloudflare is another strong example of an effective leader in the cyber and web security space. Cloudflare is able to attract top talent from across a wide range of industries, including former top Wall Street executives. (The author has no financial interests in CrowdStrike or Cloudflare.)
Investor Relations: Lessons from the Titans
There’s no single “right way” to manage investor relations as long as it’s authentic and complies with regulations. At the end of the day, it's about consistently producing good numbers to meet or beat market expectations. For example:
- Jeff Bezos maintained Amazon's lofty stock valuations by emphasizing a long-term vision and a series of short-term deliverables.
- Apple, by contrast, does not provide quarterly revenue guidance by product category. Despite this, analysts use historical results to infer future prospects, keeping the stock valuation multiples lower than other tech giants.
We would have liked to hear new participants on Rubrik's Q3 investor presentation, beyond the usual major Wall Street banks covering the stock and pitching softball questions. The analysts' questions were more incisive this time compared to the previous quarterly call—which was something of a disaster. There was a notable improvement in the quality of the investor presentation between Q2 and Q3, and we hope the momentum continues into Q4.
Current Investor Sentiment
We suspect Rubrik's shareholder base primarily consists of cybersecurity specialists, not generalist thematic investors.
- A former cybersecurity operative turned financial analyst we consulted believes the stock was already expensive at $35–40 but acknowledges that management has delivered an exceptional performance over the past six months. He admits he was wrong.
- However, Q3 results are unlikely to persuade this investor to buy the stock above $60.
- Concerns about post-IPO stock underperformance after employee lock-up expiries are also common. Yet, we’d be surprised if Rubrik’s top management sold shares at current prices, potentially catching short sellers off guard.
Rubrik's Unique Edge
Rubrik has achieved the hardest part of building a business: creating a highly successful product in a fast-growing cybersecurity domain while rapidly gaining market share. The company must now refine its messaging to appeal to non-tech investors if it wishes to do so. For example, highlighting Rubrik's relevance to the AI revolution or innovations in hardware upgrades for microprocessors could capture broader investor interest.
Congratulations to Bipul Sinha and the Rubrik team on another fantastic quarter. We look forward to many more successes.
P.S. A majority of the American workforce might not understand cricket, much less relate to an Australian cricket captain giving a pep talk. Cyber resilience/recovery professionals are akin to Paralympians—unsung heroes who overcome significant obstacles.
Martin Wolf on U.S. Exceptionalism
Here’s a recent article by Martin Wolf of the Financial Times, offering an alternative perspective to Alan Brazil on “U.S. exceptionalism”:
What Makes the U.S. Truly Exceptional
By Martin Wolf
The difference between the U.S. and Europe lies in an upside/downside perspective—or an American versus European outlook. For financial markets, the primary emphasis is often on headline or aggregate economic figures, with less focus on disparities, social effects, or distributional outcomes.Europe, before World War II, endured centuries of bitter conflicts and bloodshed, which shaped its cautious and equitable approach to governance. In contrast, the U.S. focuses on headline economic figures that directly impact voter intentions and election outcomes. For example, Craig's voter-weighted CPI (Consumer Price Index) measure was an early predictor of voter preferences and the U.S. election outcome, reflecting how individual economic experiences remain central to the American electorate.
Here's an interesting charts taken from Wolf's column:
The following chart explains why authoritarian leaders can remain popular as long as they demonstrate marginal improvements in living standards:
The figures for Pakistan seem to mirror those of China. Eight out of the top ten countries ranked as the happiest in the world are European:
Even for those considered the happiest people in the world, satisfaction often hinges on incremental positive changes. It's said that the formula is
