Palo Alto Networks stock rallies on yet another beat-and-raise quarter

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

Palo Alto Networks also said it “broadly” raised its outlook for the year, and now sees full-year earnings of $3.37 to $3.44 a share, up from a previous range of $3.13 to $3.17 a share when accounting for the split. For revenue and billings, the company slightly raised the upper ends of its guidance ranges for revenue of $6.85 billion to $6.91 billion and billings of $8.95 billion to $9.1 billion.

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

On a call with analysts, Palo Alto Networks Chairman and Chief Executive Nikesh Arora said customers are focusing on medium- and long-term projects, and that the company needs to get more active with them, and get them to close deals sooner.

“We see cybersecurity spending as resilient but not immune to customers adjusting for the current environment,” Arora said. “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 that they not look at product refreshes over “a singular quarter.”

“Most of our customers are large enterprise customers,” Klarich said. “They make long-term decisions.  These decisions take place over one, two, three-plus years of time.  So these harder refreshes play out over cycles like that as opposed to on specific quarters.”

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

Read: Amazon, Cisco Roku, Meta, Twitter, Intel: Here are the companies in the layoffs spotlight

“It was just six to nine months ago that we were talking about the challenges we face and the competition for talent,” CEO Arora said. “We’re now finding it easier to recruit and hire talent.”

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

Adjusted earnings, which exclude share-based compensation charges and other items, were 83 cents a share, compared with 55 cents a share in the year-ago period.

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

Analysts had forecast earnings of 69 cents a share on revenue of $1.55 billion and billings of $1.69 billion.

The company has been racking up beat-and-raise quarters as of late. Back in August, the company closed its fiscal year on a strong note, after having raised its annual outlook for the third quarter in a row in May.

Palo Alto Networks said it will acquire application and software supply-chain security company Cider Security for about $195 million in cash, with an expected close in the January-ending quarter.

Back in August 2021, Palo Alto Networks took a break from what was becoming a streak of new deal every quarter, having acquired 14 companies in about three-and-a-half years.

Palo Alto Networks shares are down 16% for the year. In comparison, the ETFMG Prime Cyber Security ETF 
HACK,
-1.10%
is down 27%, the First Trust Nasdaq Cybersecurity ETF
CIBR,
-0.87%
is off 24%, the S&P 500 index
SPX,
-0.31%
  down 17%, and the tech-heavy Nasdaq Composite Index 
COMP,
-0.35%
 is off 29%.