Palo Alto Networks shares soar in yet another beat-and-raise quarter

The shares of Palo Alto Networks Inc. rose during the extended session on Thursday after the cybersecurity firm added another consecutive beat-and-raise quarter to its collection and may have renewed its M&A activity.

Palo Alto Networks PANW,
shares were up as much as 6% after hours, after falling 1.6% in the regular session to close at $156.56. All per-share numbers account for the company’s three-for-one stock split on Sept. 14.

The company said it expects adjusted earnings of 76 to 78 cents per share on revenue of $1.63 billion to $1.66 billion, and bills of $1.94 billion to $1.99 billion for fiscal second quarter. Analysts polled by FactSet had forecast 70 cents per share on revenues of $1.65 billion and bills of $1.99 billion.

Palo Alto Networks also said it has “broadly” raised its outlook for the year, now seeing full-year earnings of $3.37 to $3.44 per share, up from a previous range of $3. 13 to $3.17 per share when the split is taken into account. For revenue and invoices, the company slightly increased the upper limits of its target range for revenue from $6.85 billion to $6.91 billion and invoices from $8.95 billion to $9.1 billion.

Analysts expect $3.16 per share on revenue of $8.97 billion and bills of $8.58 billion for the year.

Speaking to analysts, Nikesh Arora, chairman and CEO of Palo Alto Networks, said customers are focusing on medium- and long-term projects, and the company needs to get more active with them and get them to close deals faster.

“We view cybersecurity spending as resilient, but not immune to customers adapting to the current environment,” said Arora. “Having said that, I continue to believe that we can overcome these macroeconomic impacts with strong and focused execution.”

Chief Product Officer Lee Klarich suggested to analysts not to look at product innovations during “a single quarter.”

“Most of our customers are large corporate customers,” says Klarich. “They make long-term decisions. These decisions take place over a time frame of one, two, three plus years. So these harder renewals happen in such cycles rather than in specific quarters.

It also appears that mass layoffs in the tech industry have helped solve Palo Alto Networks’ talent problem.

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“It’s only been six to nine months since we talked about the challenges we face and the battle for talent,” said CEO Arora. “We now find it easier to recruit and hire talent.”

For the fiscal first quarter, Palo Alto Networks reported net income of $20 million, or 6 cents per share, versus a loss of $103.6 million, or 35 cents per share, in the prior year period, for the second consecutive quarter of unadjusted profitability .

Adjusted earnings, excluding stock-based compensation and other items, were 83 cents per share, compared to 55 cents per share in the same period a year ago.

Revenue increased from $1.25 billion in the year-ago quarter to $1.56 billion. Invoices, which reflect future business under contract, were up 27% to $1.7 billion from a year ago.

Analysts had forecast earnings of 69 cents per share on revenues of $1.55 billion and bills of $1.69 billion.

The company has been posting beat-and-raise quarters lately. In August, the company closed its fiscal year on a strong note, after raising its full-year guidance for the third straight quarter in May.

Palo Alto Networks said it will acquire application and software supply chain security firm Cider Security for approximately $195 million in cash, with expected closing in the quarter ending January.

In August 2021, Palo Alto Networks took a break from what was becoming a series of new deals every quarter after acquiring 14 companies in about three and a half years.

Shares of Palo Alto Networks are down 16% this year. In comparison, the ETFMG Prime Cyber ​​Security ETF HACK,
is down 27%, the First Trust Nasdaq Cybersecurity ETF CIBR,
is down 24%, the S&P 500 index SPX,
down 17%, and the tech-heavy Nasdaq Composite Index COMP,
is 29% off.

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