It has been about a month since the last earnings report for NortonLifeLock (GEN Quick QuoteGEN - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is NortonLifeLock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Gen Digital’s Q2 Earnings Meet Estimates, Sales Beat

Gen Digital reported strong second-quarter fiscal 2023 results. The consumer cyber safety provider reported non-GAAP earnings that matched the Zacks Consensus Estimate, while revenues surpassed the same.

Moreover, the top and bottom lines marked a year-over-year improvement.

Gen Digital was formerly known as NortonLifeLock Inc. and was trading under the NLOK ticker symbol. NortonLifeLock changed its name and ticker symbol, effective from Nov 8, 2022, following the completed merger of NortonLifeLock and Avast Plc.

The newly named company unites trusted consumer safety brands, including Norton, Avast, LifeLock, AVG, Avira, CCleaner and ReputationDefender.

Coming to the second-quarter performance, Gen Digital reported non-GAAP earnings of 45 cents per share, which matched the Zacks Consensus Estimate. The bottom line improved by 5% from the year-ago quarter’s earnings of 43 cents per share.

The company’s quarterly non-GAAP revenues increased 8% year over year to $748 million, which surpassed the Zacks Consensus Estimate of $699.7 million. Constant currency-adjusted revenues on a non-GAAP basis were $779 million, 12% higher than the year-ago quarter’s reported figure.

Revenues were primarily driven by improved customer experiences. The international business expansion contributed to the quarterly results.

Direct customer revenues increased to $660 million from the $619 million reported in the year-ago quarter. Partner revenues improved by 16% to $74 million from the $64 million reported a year ago.

Quarterly Details

The monthly direct average revenue per user decreased to $6.98 from $8.63 in the year-ago quarter. The continued stabilization of the direct customer count was an upside. The quarterly bookings increased 6% on a year-over-year basis to $719 million.

Gen Digital’s average direct customer count increased to 38.6 million from 24 million in the year-ago quarter. NortonLifeLock’s customer retention rate was slightly more than 85% as new initiatives were launched for the improvement of overall retention and within specific products and customer cohorts.

However, including Avast’s customer base and online customers, the aggregate retention rate for Gen Digital was 75% at the second-quarter end.

The non-GAAP gross profit grew 6% year over year to $646 million from $607 million. However, the gross margin contracted by 90 basis points (bps) to 86.4%.

The non-GAAP operating income for the second quarter of fiscal 2023 totaled $388 million, up 7% year over year. The non-GAAP operating margin contracted by 30 bps to 51.9%, mainly due to a lower gross margin, partially offset by a reduction in operating expenses as a percentage of revenues.

Non-GAAP operating expenses increased 6% year over year to $258 million. However, as a percentage of revenues, non-GAAP operating expenses reduced 60 bps to 34.5% from 35.1% in the year-ago quarter.

Non-GAAP EBITDA plunged 42% year over year to $289 million. Meanwhile, the non-GAAP reported EBITDA increased 7% to $392 million.

Balance Sheet & Other Details

Gen Digital exited the second quarter with cash and cash equivalents of $1.1 billion compared with the previous quarter’s $1.29 billion. The long-term debt was $9.88 billion, up from $2.71 billion in the previous quarter.

The company used cash worth $88 million for operational activities and had negative free cash flow of $90 million in the second quarter.

Gen Digital authorized a quarterly cash dividend of $0.125 per share, payable on Dec 14, 2022, to shareholders of record as of Nov 21.

Third-Quarter Fiscal 2023 Guidance

For the third quarter of fiscal 2023, GEN anticipates revenues in the band of $925-$940 million. Gen Digital projects non-GAAP earnings between 42 cents and 45 cents in the third quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, NortonLifeLock has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NortonLifeLock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

NortonLifeLock belongs to the Zacks Technology Services industry. Another stock from the same industry, Seagate (STX Quick QuoteSTX - Free Report) , has gained 3.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Seagate reported revenues of $2.04 billion in the last reported quarter, representing a year-over-year change of -34.7%. EPS of $0.48 for the same period compares with $2.35 a year ago.

For the current quarter, Seagate is expected to post earnings of $0.17 per share, indicating a change of -93% from the year-ago quarter. The Zacks Consensus Estimate has changed +20% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Seagate. Also, the stock has a VGM Score of B.