🔥 Palo Alto Networks: strong performance and important changes!🔒
On Wednesday, Palo Alto Networks $PANW announced results for 1st fiscal quarter. While earnings and revenue beat expectations, some changes in strategy have raised concerns.
Steady growth supported by acquisitions
Earnings per share: Adjusted earnings came in at $1.56, beating analysts' expectations (USD 1.48).
Revenue: up year-on-year by 14 % to $2.13 billion, driven significantly by the acquisition of QRadar.
Platform as the future
Palo Alto is changing its approach to cybersecurity - emphasizing the development of a cloud platform that will enable growth in so-called annual recurring revenue (ARR).
ARR from the cloud: Increased by 40 % to $4.5 billion (above expectations of $4.37 billion).
Goals: the company plans to achieve next-generation ARR of up to $15 billion in the coming years.
CEO Nikesh Arora explained that the strategy of reducing prices and giving discounts to customers who purchase multiple products is aimed at fostering long-term business relationships.
Moving to a new metric: RPO instead of billing
The company has decided to stop tracking billing (billings), which management says has ceased to reflect reality due to the shift towards platformisation. The new key metric is remaining performance obligations (RPO).
RPO: In the first fiscal quarter, RPO increased by 20 % to $12.6 billion (above estimates of $12.48 billion).
Outlook: For the next quarter, the company forecasts RPO of $12.95 billion, again above estimates.
Challenges and market reaction
Despite the positive results, Palo Alto stock is down more than 5% today.
However, the company believes that the transition to the platform will bring long-term benefits and help achieve its ambitious goals.
Long-term potential: from firewalls to the cloud
Sales of traditional network firewalls are slowing, but Palo Alto is responding by expanding cloud solutions. Cybersecurity is moving to the cloud, where the company sees its future.
By the year 2030 the company plans to increase the number of platforms from the current 1 100 at 2 500-3 500.
Palo Alto Networks offers solid long-term potential through its innovative approach to business and growth in the cloud.
What is your opinion of Palo Alto Networks?
I think it's a great company with a lot of potential and I think the stock is definitely going to be solid for a few more years.
The price is pretty high, but the stock is rising quite nicely and steadily. I might buy a few shares at the lower price.
Interesting business, but somehow this company did not interest me enough to include its shares in my portfolio.