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In focus:Corero is moving into a potentially much faster phase of growth. After a transition year in FY25, the company entered 2026 with strong momentum, a more recurring revenue base and multiple growth initiatives starting to contribute simultaneously. Crucially, Edison’s forecasts do not yet assume full success from all of the growth initiatives, creating scope for upgrades.
Multiple growth levers: Traditionally, Corero has operated as a provider of distributed denial-of-service (DDoS) detection and mitigation solutions. This has been a very favourable area on which to focus given the rise over the last decade in both the frequency and size of DDoS attacks and the damage they can cause to online services. Corero has prospered and has continued to invest in new solutions such as the Corero Observability & Resiliency Ecosystem (CORE), a next-generation 400G platform, and Zero Trust Admission Control solutions. These new products materially expand the addressable market opportunity for Corero. Moreover, new strategic partnerships, geographic expansion and a strengthened channel strategy will continue to drive new customer additions along with upselling to existing customers. The key investments required to establish these growth engines have been made and the benefits are starting to be seen in 2026.
Estimates yet to capture the upside: Edison forecasts revenue growth accelerating to the mid-to-high teens, but believes these assumptions remain conservative. In particular, they do not fully capture the continued success from Corero’s enhanced sales strategy, which we believe should result in a more efficient conversion of larger pipeline opportunities.
Powerful operating leverage: Corero has gross margins around 90% and has already invested in its products, sales infrastructure and geographic reach. With tight control over operating expenses, as revenues expand the drop-through to operating profitability is very high. This has already been confirmed with the recent trading update and release of the provisional results for H126 and a sharp year-on-year increase in profitability.
Why now?
Key takeaway: The market appears to be valuing Corero on its current levels of profitability rather than giving the business credit for its operational leverage and likely medium-term profitability. Edison’s medium-term forecasts are realistic but also conservative, and the company will be shown to exceed expectations if it can successfully execute the growth levers.
Momentum building: Evidence of just how quickly momentum is building has been seen in the recent H126 trading update, with revenues showing year-on-year growth of 42%, solid growth in order intake and continued growth in annual recurring revenue.
Forecasts have room to move: The H126 results also showed the power of the operational leverage, with the sales growth achieved with only a modest 5% increasein opex that resulted in a marked increase in profitability. This is very encouraging given that, as yet, not all of the growth levers are fully contributing. In time as these growth levers begin to contribute, it seems highly likely that forecasts will need to be updated.
Valuation has not caught up: The shares have been weak in recent months, and the share price appears to have become dislocated from operational execution, which creates a good opportunity. Edison’s analysis highlights that Corero looks markedly undervalued on EV/sales relative to cybersecurity peers, by c 60% in its peer comparison. Moreover, a longer-term discounted cash flow indicates an upside of 50%. The mistake that some may be making is that valuing a business like Corero, at this stage in its development, using near-term profit multiples is far less appropriate and fails to appreciate the medium-term margin expansion.
The set-up: Corero’s current share price represents an attractive valuation asymmetry. Current estimates assume healthy growth, but the forecasts do not give full credit to the multiple growth initiatives that may see the company over deliver on revenue expectations. The fact that the business has already shown very high operational leverage, means that the under estimation of future profitability and cash generation is even greater.
What’s next: Corero will release full details of its H126 results in early September and we expect this to be a catalyst for forecast upgrades. We expect management will be able to highlight in more detail how some of the growth levers we noted are favourably impacting the business this year and how that is likely to continue. A key question is not simply whether Corero can deliver on current forecasts, but also how quickly forecasts need to increase to match the increasingly positive impacts of the growth strategy.
