When Palo Alto Networks reports fiscal fourth-quarter earnings on Monday, some financial metrics that lie below the radar for most investors will be key. And fiscal 2023 guidance for PANW stock will likely matter more than the results.
While not included in most media previews, two financial metrics to watch are product revenue growth and next-generation annual recurring revenue, or ARR. ARR comes from subscription-based services.
The cybersecurity firm usually provides full-year per-share earnings, revenue and billings guidance in final quarter earnings releases posted on the web. But on earnings calls with Wall Street analysts, the cybersecurity firm will likely touch on trends impacting product revenue growth and next-gen ARR.
Next-gen ARR provides insight into how well Palo Alto's acquisition spree is turning out. Through acquisitions, Palo Alto Networks has expanded into cloud computing-based cybersecurity products and services.
For the fourth quarter, analysts project year-over-year product revenue growth of 16% to $394 million. Analysts model nearly 53% next-gen ARR growth to $1.8 billion.
PANW Stock: Earnings Beats Could Move Shares
The cybersecurity firm reports July quarter earnings after the market close on Monday. The size of Palo Alto's expected beats could move the stock, but Wall Street will be looking ahead to full-year projections.
Analysts project fourth-quarter earnings growth of 42% to $2.28 a share and revenue growth of 26% to $1.54 billion. Billings, a sales growth metric, is expected to rise 25% to $2.24 billion.
For fiscal 2023, analysts project earnings of $9.27 a share, revenue of $6.74 billion and billings of $8.56 billion. That correlates to percentage growth of roughly 22%, 23% and 20%.
Analysts expect a drop-off in both product revenue growth and next-gen ARR, partly due to tougher year-over-year comparisons.
Analysts predict product revenue growth will slow to nearly 7% to $1.44 billion in fiscal 2023, down from 20% in fiscal 2022. Next-gen ARR growth is expected to dip to 37% to $2.46 billion from over 50% growth is fiscal 2022.
Relative Strength Rating At 90 Of 99
PANW stock has declined 8% in 2022. It holds a Relative Strength Rating of 90 out of a best-possible 99, according to IBD Stock Check-up.
Palo Alto Network's roots are in the network firewall market. There, it competes with Fortinet, Check Point Software Technologies and others.
Firewall appliances protect computer networks by blocking online intrusions and monitoring web-based apps. However, Palo Alto Networks has spent roughly $3.46 billion on acquisitions since 2018.
Through acquisitions, Palo Alto Networks has expanded into endpoint security, vulnerability management and other areas. Endpoint tools detect malware on laptops, mobile phones and other devices that access corporate networks.
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