Updated 8:59 am EST
Palo Alto Networks (PANW) shares surged higher Friday following a better-than-expected third quarter earnings report and another solid near-term outlook for its cybersecurity products.
Palo Alto said non-GAAP earnings for the three months ending in April, its fiscal third quarter, rose 29.7% to $1.79 per share, well ahead of Street forecasts, while revenues jumped more than 29% to $1.8 billion. Around a quarter of the revenue tally came from new product sales, which were up 21% from last year, while subscription and services revenues rose 32% to just over $1 billion.
Billings grew 40% from last year, a pace that will slow modestly to between 30% and 31% for the full year, Palo Alto said, thanks in part to broad-based demand across its three platforms: Strata, which focuses on enterprise, Prisma, its cloud-based security operation and Cortex, its main security division.
Overall demand for its firewall products and security applications should take current quarter sales as high a $1.55 billion, the group said, with full year revenues in the region of $5.48 billion to $5.5 billion, modestly firmer than its February forecast.
"We were pleased that we were able to achieve these bottom-line results despite challenges in the supply chain," CEO Nikesh Arora told investors on a conference call late Thursday. "Speaking as a global backdrop whether it's supply chain, geopolitical conflict, or rising interest rates and inflation, this environment is creating challenges for our customers and testing our execution."
"We saw strength across our portfolio, both hardware appliances and software form factors. As you're all aware, the industry is dealing with unprecedented supply chain issues, which are likely to persist for yet another year," he added. "Our team is definitely managing these with our partners, allowing us to maintain better lead times than some in the industry."
Palo Alto Networks shares were marked 11.35% higher in pre-market trading Friday to indicate an opening bell price of $485.91 each, a move that would trim the stock's year-to-date decline to around 13%.
JMP Securities analyst Trevor Walsh, who carries a 'market perform' rating with a $620 price target on the stock, said Palo Alto's third quarter earnings were "bolstered by the ongoing refresh of firewall appliances where demand continues to outstrip supply,", adding that its main Cortex division reaching $500 million in annual recurring revenue "all contributed to notable billings acceleration and a raise of full-year guidance for both the top and bottom lines."
