Palo Alto Networks on Wednesday reported fiscal first-quarter earnings that topped Wall Street's targets while revenue met views. But Palo Alto stock fell as the cybersecurity firm's guidance underwhelmed investors.
On the stock market today, PANW stock fell 5.8% to near 370 in extended trading. Also, the company announced a 2-for-1 stock split.
In the quarter ended Oct. 30, Palo Alto earnings rose 13% to $1.56 per share on an adjusted basis. Further, revenue for Palo Alto stock climbed 14% to $2.1 billion, including acquisitions.
Analysts had expected earnings of $1.48 a share on sales of $2.12 billion for PANW stock.
Annual recurring revenue from cloud computing products rose 40% to $4.5 billion, topping estimates of $4.37 billion. Chief Executive Nikesh Arora has leaned into a cloud platform strategy to drive next generation ARR growth. Some analysts have been concerned about price discounting tied to the strategy.
"While less relevant given the platformization shift, we note billings of $1.752 billion was well below consensus at $2,192 billion, up 13% year-over-year," said RBC Capital analyst Matthew Hedberg in a report. "We note that PANW stopped guiding to billings last quarter given the noise the platformization strategy has introduced to the metric."
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 Q1, Palo Alto RPO rose 20% to $12.6 billion vs. estimates of $12.48 billion.
For the current quarter ending in January, the cybersecurity firm predicted RPO of $12.95 billion, just above estimates of $12.92 billion.
Further, Palo Alto forecast revenue in a range of $2.22 billion to $2.25 billion, in-line with estimates of $2.23 billion.
Network Firewall Market
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 30% 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 had an Accumulation/Distribution Rating of C-plus, 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.
