Cybersecurity firm Palo Alto Networks Inc. surged the most in two years after projecting stronger billings for the year than Wall Street anticipated, easing fears that a slowdown in demand may weigh on results.
(Bloomberg) — Cybersecurity firm Palo Alto Networks Inc. surged the most in two years after projecting stronger billings for the year than Wall Street anticipated, easing fears that a slowdown in demand may weigh on results.
The company sees billings for the fiscal year ranging from $10.9 billion to $11 billion, it said in a statement after markets closed on Friday. That compares with an average analyst estimate of $10.8 billion in a Bloomberg survey. The firm’s quarterly and annual revenue outlooks came in below analysts’ estimates.
Palo Alto’s outlook is a potential bright spot for the cybersecurity industry. Companies such as Fortinet Inc. and Check Point Software Technologies Ltd. had been reporting earnings that pointed to a slowdown across the space, hurt by a broader pullback in tech spending and a shaky economy.
Palo Alto Chief Executive Officer Nikesh Arora said in the statement that the company’s “strategy is resonating with a growing number of our customers, driving continued consolidation.” He added that the Santa Clara, California-based company was “pleased” with the reception of its artificial-intelligence-based security platform.
The stock gained as much as 16% to $243.50 in New York Monday. It was the biggest intraday gain since August 2021.
What Bloomberg Intelligence says:
Palo Alto’s robust top-line growth vs. rivals such as Fortinet, Check Point and Cisco points to market-share gains at enterprise customers amid success bundling firewall and cloud products like SASE and EDR. Its billings-growth outlook of 19-20% for fiscal 2024 is ahead of the overall market, even though a longer sales cycle in some industries could be a drag on RPO expansion, similar to Fortinet. Cloud is about 25-30% of the billings mix, with the company likely seeing faster traction by deploying its bundled virtual firewall and SASE and Cortex offerings for cloud workloads.
Mandeep Singh, BI senior technology analyst
In a departure from the company’s usual timing, the results came after the closing bell Friday, prompting speculation that the forecast might not be promising. The stock had fallen around 20% since that announcement.
At the start of an earnings call, Arora apologized for what he said was the “unique attention” the company had drawn over its decision to hold the call late on Friday afternoon. He said it was due to wanting to give ample time for one-on-one conversations with analysts before a sales conference started on Sunday.
Total revenue for the fiscal fourth quarter was $1.95 billion, just shy of analysts’ estimate of $1.96 billion.
Arora argued the cybersecurity industry needs to shift much more to solutions that can stop attacks in real time rather than the four to six days he said it takes now.
“That’s not acceptable,” he said. “This thing will have to go down to minutes.” Arora pointed out one reason to speed up cyber solutions: a new rule by the US Securities and Exchange Commission that will require publicly listed companies to disclose cyber breaches within four days of determining that they are material.
Artificial intelligence, which could help deliver such real-time autonomous solutions, would require further investment, Arora said, adding that it has a “dark side” that the industry will need to address to prevent abuse.
(Updates shares in first and fifth paragraph.)
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