Palo Alto Networks' cloud computing platform drove fiscal fourth-quarter earnings and revenue that topped Wall Street's targets. Palo Alto stock rose as the cybersecurity firm's guidance also came in above expectations.
On the stock market today, PANW stock popped 7.2% to close at 368.01.
"Palo Alto noted an acceleration in bookings in second half following the rollout of its platformization approach," said Baird analyst Shrenik Kothari in a report. "Management noted that the intensifying threat landscape and the proliferation of individual point products are driving the need for integrated platforms."
In the quarter ended July 30, Palo Alto earnings rose 5% to $1.51 per share on an adjusted basis. Further, revenue for Palo Alto stock climbed 12% to $2.2 billion, including acquisitions.
Analysts had expected earnings of $1.41 a share on sales of $2.16 billion for PANW stock.
Next-generation annual recurring revenue from cloud computing products rose 43% to $4.22 billion, topping estimates of $4.1 billion.
"Next generation ARR had another very strong quarter, growing 43% year-over-year to $4.22 billion, led by strong demand across the board and now representing over 52% of Palo Alto's total revenue," said William Blair analyst Jonathan Ho in a report. "However, product revenue faced tough comparisons and declined 5%."
Palo Alto Stock: New Financial Metric
Palo Alto has de-emphasized billings guidance, a sales growth metric, and plans to provide an outlook for remaining performance obligations instead. RPO is the total value of contracted revenue that a company has not yet recognized as revenue on its financial statements.
In fiscal Q4, RPO rose 20% to $12.7 billion, just below estimates of $12.8 billion.
For the current quarter ending in October, the cybersecurity firm predicted adjusted profit of $1.48 per share, topping expectations of $1.42. Further, Palo Alto forecast revenue in a range of $2.10 billion to $2.13 billion, just above estimates of $2.1 billion.
" Management believes RPO is the best metric and therefore pivoted to guiding to it in place of billings," said Jefferies analyst Joseph Gallo in a report. "Management guided RPO to grow 19% to 20% year-over-year for both Q1 and fiscal 2025, implying an acceleration in bookings for both. Note that 19% to 20% RPO growth guided to for fiscal 2025 is significantly below the prior commentary for 25% growth annually through fiscal 2026."
Also, the company announced a $500 million buyback of its shares.
Network Firewall Market Growth Slows
"Palo Alto reported over $700 million in fiscal 2024 ARR from its cloud security business, including 30% growth in annual contract value from new cloud security business," said BMO Capital Markets analyst Keith Bachman in a report.
Meanwhile, sales for firewall network appliances have slowed. Firewall appliances protect computer networks by blocking online intrusions and monitoring web-based apps.
However, Palo Alto has built a broad cloud-based security platform through acquisitions. Cloud software revenue is becoming a larger part of overall sales.
Heading into the Palo Alto earnings report, PANW stock had climbed 13% in 2024.
Palo Alto stock holds an IBD Composite Rating of 89 out of 99, according to IBD Stock Checkup. Meanwhile, Palo Alto Networks is among AI stocks to watch.
Meanwhile, PANW stock stock had an Accumulation/Distribution Rating of C-minus, according to IBD MarketSmith analysis. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
