Investing.com — Shares of Palo Alto Networks (NASDAQ:) fell more than 8% in premarket trading in the US on Tuesday, after analysts said the group’s latest billing forecasts disappointed high expectations.
Like other cybersecurity companies, Palo Alto has seen weak spending from customers concerned about an uncertain economic environment. Customers, wary of the potential risks of placing all their digital security needs in the hands of one company after a recent wave of high-profile breaches, are also investing in multiple vendors.
In a post-earnings call with analysts, Chief Executive Nikesh Arora noted that Palo Alto’s ongoing effort to consolidate its users on one centralized system — a process called “platformization” — has enjoyed “initial traction.” However, he said this strategy has led to an increase in deferred bookings and is impacting billing. He added that this trend is “something we expect to continue.”
Palo Alto’s billing outlook ranged from $3.43 billion to $3.48 billion for the fiscal fourth quarter and $10.13 billion to $10.18 billion for the financial year, roughly meeting expectations. EPS for the current quarter, meanwhile, is estimated at $1.40 to $1.42, matching the consensus estimate of $1.41. Revenue is projected between $2.15 billion and $2.17 billion, in line with the $2.16 billion consensus.
“It’s clear that investors were hoping for more as the stock price has been creeping higher since early April in anticipation of earnings reports,” Bernstein analysts said in a note to clients. As of Monday’s close, Palo Alto’s stock price had risen nearly 15% over the past month.
Revenue rose 15% to $2.0 billion in the three months ended April 30, surpassing both the consensus forecasts of $1.97 billion and the $1.7 billion from the previous year. Adjusted earnings per share for the quarter came in at $1.32, compared to Wall Street forecasts of $1.25.
The company’s remaining performance obligations grew 23% year over year to $11.3 billion, slightly above estimates of $11.28 billion. Chief Financial Officer Dipak Golechha said returns were partly boosted by “disciplined” execution and investment in innovation.
For the full fiscal year 2024, Palo Alto expects to generate revenue of $7.99 billion to $8.01 billion, up from the previous range of $7.95 billion to $8.00 billion. Analysts expected $7.98 billion.
“While there is some logic to Palo Alto Networks’ platformization strategy, we can’t help but wonder if all the external talk has more to do with simply a slowdown in the business, partly related to the macro backdrop, but perhaps there is more. than this,” Guggenheim analysts said in a note. “But if we sift through all the noise, the results are fine.”
Senad Karaahmetovic contributed to this report.
