Factors You Must Note Ahead of Citrix's (CTXS) Q3 Earnings

Citrix Systems CTXS is scheduled to release third-quarter 2020 results on Oct 22.

For the to-be-reported quarter, the company expects revenues in the range of $750 million to $760 million, while non-GAAP adjusted earnings are expected between $1.20 and $1.25 per share.

The Zacks Consensus Estimate for revenues is pegged at $756.3 million, which indicates growth of 3.2% from the year-ago quarter.

The consensus mark for third-quarter earnings has been steady at $1.23 per share in the past 30 days. The estimate suggests a decline of 19.1% compared with the prior year reported figure.

Notably, the company beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 24.98%.

Citrix Systems, Inc. Price and EPS Surprise

Citrix Systems, Inc. Price and EPS Surprise

Citrix Systems, Inc. price-eps-surprise | Citrix Systems, Inc. Quote

Factors to Note

Citrix’s third-quarter performance is expected to have benefited from robust adoption of its workspace and desktop virtualization solutions traction amid rise in remote work trends due to the ongoing pandemic. This is expected to have bolstered the revenues from subscription-based services and hybrid cloud offerings during the quarter under review. Further, traction witnessed by ShareFile deserves a special mention.

Notably, the Zacks Consensus Estimate for third-quarter Workspace revenues is pegged at $544 million, which indicates year-over-year improvement of 6%.

Also, the company’s third-quarter top line might reflect gains from the COVID-19 induced digital transformation across all industries, as more companies transition from on-premise to the cloud to improve efficiency. In fact, the company has extended its Remote PC Access solution to the cloud to capitalize on this demand.

Besides, Citrix’s efforts to enhance the security capabilities of its offerings amid increasing threat of cyber-attacks is likely to have driven incremental adoption of its products, which is expected to have contributed to the third-quarter performance.

Markedly, Citrix has collaborated with Check Point Software Technologies to unveil next-gen firewalls within Citrix SD-WAN. Moreover, the company added Citrix Web App and API Protection security service for customers using apps and APIs in multi-cloud environment.

Increasing popularity of the company's products instill optimism in the stock. Notably, shares of Citrix, currently carrying a Zacks Rank #3 (Hold), have returned 25.2% in the year-to-date period compared with the S&P 500’s gain of 8.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The introduction of burst capacity licenses to attract more small and medium businesses is likely to have bolstered the third-quarter top line.

However, the company is facing sluggish demand in its professional services business, which is likely to have limited top-line growth.

Also, increasing investments on portfolio expansion and product enhancements, amid stiff competition from VMware's Horizon, Workspace ONE, and AirWatch offerings and Amazon Web Service’s Amazon WorkSpaces, are anticipated to have put pressure on margins in the third quarter.

Partnerships to Expand Business Remain Noteworthy

In July, the company expanded its partnership with Microsoft MSFT to move its on-premise customers onto Microsoft’s Azure cloud platform. This will enable employees to work from anywhere and on any device.

Moreover, the companies’ joint offerings, which include Citrix Workspace, Citrix SD-WAN, Microsoft 365 and Microsoft Azure, will be used to enhance the overall remote work experience of employees. In turn, Microsoft selected Citrix’s Workspace platform as its preferred digital workspace solution

Prior to that, Citrix teamed with Upwork UPWK and unveiled new Upwork Talent Solution with Citrix Workspace solution, which can be availed through Citrix Service Provider and Solution Advisor A2K Partners. The solution offers easy access to a large pool of professional talent, secure remote infrastructure for the quick onboarding of talent and a flexible, pay-as-you-go model, among others.

As part of its continuing alliance with Alphabet’s GOOGL Google, the company has also extended the application of ShareFile workflows and connectors to G-Suite and Google Drive. Moreover, the company has deployed its Cloud services including XenDesktop and XenApp on Oracle Cloud Marketplace. This is likely to have led to customer additions and generated incremental revenues in the third quarter.

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