Palo Alto Networks beats Q1 estimates, delivers in-line guidance; shares down

Palo Alto Networks (NASDAQ:PANW ) reported better-than-expected first-quarter earnings but still saw its stock drop over 5%

The cybersecurity leader posted adjusted earnings per share of $1.56 for the fiscal first quarter ended October 31, surpassing analyst estimates of $1.48. Revenue grew 14% YoY to $2.14 billion, slightly above the consensus estimate of $2.12 billion.

For the second quarter, Palo Alto Networks expects revenue between $2.22 billion and $2.25 billion, in line with analyst expectations of $2.23 billion. The company forecasts adjusted EPS of $1.54 to $1.56, compared to the $1.55 consensus.

"Our Q1 results reinforced our conviction in our differentiated platformization strategy," said Nikesh Arora, chairman and CEO of Palo Alto Networks. "We see a growing market realization that platformization is the game changer that will solve security and enable better AI outcomes."

The company raised its full-year guidance, now projecting adjusted EPS of $6.26 to $6.39 on revenue of $9.12 billion to $9.17 billion. This compares to analyst estimates of $6.28 EPS and $9.13 billion in revenue.

RBC Capital Markets analysts said they would be "buyers on any weakness" in Palo Alto shares, given the stock just hit an all-time high last week and expectations were high ahead of earnings. 

"Underlying momentum of the business remains strong, and we continue to like the opportunity for Palo Alto to be a cyber spend consolidator," analysts noted.

Similarly, KeyBanc Capital Markets reiterated an Overweight rating on PANW stock, saying the company is "faring better than many security peers."

"While there may be some near-term investor concerns on the sequential decline in deferred revenue as a potential headwind to free cash flow (FCF), we are positive the move to annualized invoicing is already quickening sales cycles, the annualized economics to Palo improve, and over the medium term, visibility into FCF improves."

Palo Alto Networks also announced a two-for-one stock split, effective December 16, which could improve stock liquidity and accessibility for retail investors.

Despite the positive earnings beat and raised guidance, the stock's decline suggests investors may have been expecting stronger results or guidance from the cybersecurity firm.

Senad Karaahmetovic contributed to this report. 

Source: Investing.com