Palo Alto Networks Inc. shares gained more than 10% in Thursday’s extended session after the cybersecurity firm beat Wall Street expectations for its earnings report and raised its full-year guidance for a third straight quarter.
Palo Alto Networks PANW,
Executives raised their full-year outlook to adjusted earnings of $7.43 to $7.46 per share, revenue of $5.48 to $5.5 billion and billings of $7.11 to $7.14 billion -Dollar. Last quarter, the company raised its guidance for adjusted earnings to a range of $7.23 to $7.30 per share from a previous guidance of $7.15 to $7.25 per share and raised guidance for revenue and invoices again.
According to FactSet, analysts were expecting $7.29 per share on sales of $5.46 billion and billings of $6.82 billion after the latest raise. Chief Executive Nikesh Arora praised the widespread demand for the company’s security products.
“Based on this strength across our portfolio, we are again raising our guidance for the year in terms of revenue, billings and earnings per share,” Arora said in a statement, before going into more detail on how the company is performing despite macroeconomic concerns later Thursday in a conference call.
“As you know, the industry is grappling with unprecedented supply chain issues that are likely to continue for another year,” Arora told analysts on the earnings call. “Our team skillfully manages these with our partners.”
“Teams work hard with our suppliers and partners every quarter,” said Arora. “Not just this quarter, but over the next four quarters, and they are no longer dependent on item delivery times.”
“In terms of demand, backlog and our promises, we have a reasonable view of whether all things are working out in terms of what we expect to get quarterly, so our forecast is consistent with our best estimate of what’s available.” is, and that’s why we keep telling you this is not a demand problem, it’s the supply challenge that we’re trying to address as an industry,” Arora told analysts.
Going forward, the company’s navigation in the current supply chain environment will depend heavily on how to keep operating costs low while the company tries to keep prices reasonable.
“The cost pressure is really entirely in the supply chain realm,” Dipak Golechha, chief financial officer of Palo Alto Networks, told analysts. “We recently had an insight on pricing, which was good, but obviously the supply chain environment remains evolving. I think when it comes to where we’ve been able to focus on operational costs to offset that, it’s really just a laser focus.”
Part of that focus is keeping a close eye on the job market and the higher costs of attracting and retaining talent. The company reported that operating expenses have increased over the past eight quarters while gross margins have declined over the past three quarters.
Referring to the ongoing talent shortage in the cybersecurity industry at a time of heightened vigilance given Russia’s history of cyberwarfare, Arora was optimistic about the tight labor market ahead.
“My personal view is that labor markets will get easier over the next six to 12 months,” Arora said. “If you think about it, six months ago we lost people to startups. We lost employees to competitors whose share prices rose.”
“The rationalization of the market is causing people to take stock and say, ‘Wait, do I really want to take this step?'” Arora said. “As we’ve seen anecdotally, startups aren’t hiring anymore because they’re trying to hold on to their money because they don’t expect to be able to raise money in the market in the next 12 to 18 months.”
However, the company expects wage inflation as cybersecurity talent, while in high demand, is not “off the shelf.”
For the fiscal third quarter, Palo Alto Networks reported a loss of $73.2 million, or 74 cents a share, compared to a loss of $145.1 million, or $1.50 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation fees and other items, were $1.79 per share compared to $1.38 per share in the prior year period.
Revenue increased to $1.39 billion from $1.07 billion in the year-ago quarter. Billings, which reflect future contract business, rose to $1.8 billion compared to $1.27 billion a year ago.
Analysts had forecast earnings of $1.68 per share on sales of $1.36 billion and billings of $1.6 billion, while Palo Alto Networks was in the range of 1.65 to 1.68 $1.35 billion to $1.37 billion in sales and billings of $1.59 billion to $1.61 billion.
Palo Alto Networks expects fourth quarter adjusted earnings of $2.26 to $2.29 per revenue share of $1.53 to $1.55 billion and billings of $2.32 to $2.35 billion , while analysts polled by FactSet had forecast $2.22 per revenue share of $1.53 billion and billings of $2.23 billion.
Palo Alto Networks shares are up 30% over the past 12 months. In comparison, the ETFMG Prime Cyber Security ETF HACK,
is down 19%, the S&P 500 Index SPX,
is down 5% and the tech-heavy Nasdaq Composite Index COMP,
has fallen by 14%.
Back in December, Palo Alto Networks joined the Nasdaq 100 Index NDX,
which is down more than 10% over the last 12 months.
Hours later, other cybersecurity companies seemed smitten by the Palo Alto Networks report. CrowdStrike Holdings Inc. CRWD shares,
up 4.5% at last check, while shares of Zscaler Inc. ZS,
up 3.9%, Fortinet Inc. FTNT,
Stocks are up 2.3% and the HACK ETF is up 1.7%.
https://www.marketwatch.com/story/palo-alto-networks-stock-rockets-more-than-10-as-cybersecurity-company-hikes-annual-guidance-a-third-time-11652992158?rss=1&siteid=rss Palo Alto Networks stock climbs more than 10% as the cybersecurity company raises full-year guidance for the third time