Palo Alto Networks shares jump after strong outlook CEO calls 'cautious'

Shares of Palo Alto Networks Inc. rose in Thursday’s extended session after the cybersecurity company added another consecutive quarter of wins and raises to its collection and likely renewed its M&A habit.

Palo Alto Networks
PANW,
-1.59%

shares rose as much as 6% after hours, after falling 1.6% in the regular session, to close at $156.56. All per share figures account for the company’s three-for-one stock split on September 14.

The company said it expected adjusted earnings of 76 to 78 cents per share on revenue of $1.63 billion to $1.66 billion and billings of $1.94 billion to $1.99 billion for the fiscal second quarter. Analysts polled by FactSet had forecast 70 cents per share on revenue of $1.65 billion and billings of $1.99 billion.

Palo Alto Networks also said it “broadly” raised its outlook for the year and now sees full-year earnings of $3.37 to $3.44 per share, up from the previous range of $3.13 to $3.17 per share on reporting of the separation. On revenue and billings, the company slightly raised the upper end of its guidance ranges for revenue of $6.85 billion to $6.91 billion and billings of $8.95 billion to $9.1 billion.

Analysts were expecting $3.16 a share on revenue of $8.97 billion and bills of $8.58 billion for the year.

On a call with analysts, Palo Alto Networks Chairman and CEO Nikesh Arora said customers are focusing on mid- and long-term projects and that the company needs to become more proactive with them and get them to close deals sooner.

“We see cybersecurity spending as resilient but not immune to customers adapting to the current environment,” Arora said. “Having said that, I continue to believe that we can overcome these macroeconomic impacts with strong and focused execution.”

Chief product officer Lee Klarich suggested analysts don’t look at product refreshes in “one quarter.”

“Most of our customers are large corporate customers,” Klarich said. “They make long-term decisions. These decisions are made over one, two, three and more years. So these more difficult refreshes are done in cycles like this, as opposed to specific quarters.”

Mass layoffs in the tech industry also appear to have helped solve Palo Alto Networks’ talent problem.

Read: Amazon, Cisco Roku, Meta, Twitter, Intel: Here are the companies in the spotlight for layoffs

“It was only six to nine months ago that we were talking about the challenges we face and the competition for talent,” CEO Arora said. “Now we’re finding it’s easier to recruit and hire talent.”

For the fiscal first quarter, Palo Alto Networks reported net income of $20 million, or 6 cents per share, versus a loss of $103.6 million, or 35 cents per share, in the year-earlier period, for its second straight quarter of unadjusted earnings.

Adjusted earnings, which exclude stock-based compensation charges and other items, were 83 cents per share, compared with 55 cents per share in the year-ago period.

Revenue rose to $1.56 billion from $1.25 billion in the year-ago quarter. Fees, which reflect future contract business, rose 27% to $1.7 billion from a year ago.

Analysts had forecast earnings of 69 cents per share on revenue of $1.55 billion and billings of $1.69 billion.

The company has been racking up winning quarters and raises lately. Back in Augustthe company ended its fiscal year on a strong note, after raising its annual outlook for the third quarter in a row In May.

Palo Alto Networks said it will acquire application and software supply chain security company Cider Security for about $195 million in cash, with an expected closing in the quarter to the end of January.

Already in August 2021Palo Alto Networks took a break from what had become a flurry of new deals each quarter after acquiring 14 companies in about three and a half years.

Shares of Palo Alto Networks are down 16% for the year. In comparison, the ETFMG Prime Cyber ​​Security ETF
HACK,
-1.10%

is down 27%, the First Trust Nasdaq Cybersecurity ETF
CIBR,
-0.87%

is up 24%, the S&P 500 index
SPX,
-0.31%

down 17%, as did the Nasdaq Composite technology index
comp,
-0.35%

is reduced by 29%.

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