Palo Alto Networks Faces Stock Plunge After Lowered Guidance Despite Strong Earnings

Shares of cybersecurity firm Palo Alto Networks experienced a significant downturn of 19% in after-hours trading on Tuesday, following the company’s earnings report which surpassed expectations on both the top and bottom lines. However, Palo Alto Networks revised its full-year guidance for revenue and billings downwards.

Here’s a breakdown of the company’s performance compared to estimates from LSEG, formerly Refinitiv:

– Earnings per share: $1.46, adjusted, exceeding the expected $1.30

– Revenue: $1.98 billion, slightly surpassing the anticipated $1.97 billion

CEO Nikesh Arora of Palo Alto
CEO Nikesh Arora cites strategy shift, platform migration, and AI leadership activation.

For the quarter, net income amounted to $1.7 billion, equivalent to $4.89 per share, in contrast to $84 million, or $0.25 per share, reported for the fiscal second quarter of 2023.

Palo Alto Networks now forecasts full-year total billings to fall between $10.1 and $10.2 billion, down from the previous guidance range of $10.7 to $10.8 billion. Additionally, the company anticipates full-year revenue to range from $7.95 to $8 billion, a decrease from the previous projection of $8.15 to $8.2 billion.

During a conference call with analysts, CEO Nikesh Arora attributed the adjusted guidance to a “shift” in strategy, emphasizing the desire to expedite growth, migrate and consolidate platforms, and assert AI leadership. He noted the anticipation of encountering challenges with certain customers due to the company’s evolving stance.

Expects 10-11% growth, with revenue growth lowered to 15-16%.
Full-year billings guidance revised down; expects 10-11% growth, with revenue growth lowered to 15-16%.

Projections for the upcoming quarter also fell short of consensus estimates. While analysts surveyed by LSEG had anticipated fiscal third-quarter revenue of $2.04 billion, Palo Alto Networks now expects revenue to range between $1.95 billion and $1.98 billion.

The revised billings guidance indicates a full-year growth rate of 10% to 11%, compared to the prior estimate of 16% to 17% growth. Similarly, the company now expects full-year revenue growth to be between 15% and 16%, down from the initial projection of 18% to 19% growth.

These downward revisions come at a time when the AI craze is driving up cybersecurity stocks and the wider technology sector. Arora highlighted the company’s intention to leverage its “AI leadership strategy” in the earnings release.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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