Palo Alto Networks (NASDAQ: PNAW), a leading cybersecurity company, announced its third-quarter earnings results on Tuesday, revealing slower revenue growth and a cautious fourth-quarter outlook.
Following the announcement, the company’s shares experienced a significant decline in after-market trading, reflecting investor disappointment in its performance and guidance.
Palo Alto Reports Mixed Q3
Palo Alto Networks reported a 15% increase in revenue to $1.98 billion for the third quarter, the slowest growth since early 2020. The company’s fourth-quarter revenue forecast of $2.15 billion to $2.17 billion fell slightly below analyst expectations. However, the company’s fourth-quarter billings projection of $3.43 billion to $3.48 billion was largely in line with expectations.
Despite the mixed results, the company highlighted its strong performance in new subscription sales and next-generation product offerings. The company’s next-generation annualized recurring revenue reached $3.79 billion, exceeding the $3.71 billion estimate and growing by 47%. The remaining performance obligations also increased by 23% to $11.3 billion.
The company attributed the growth to its platformization strategy, although this approach has led to increased bookings with deferred payments due to higher client borrowing costs.
Stock Price Performance
As of the most recent market data, Palo Alto Networks’ stock was trading at $307.34, down 5.07%. The stock experienced a significant decline of up to 10% in after-market trading following the announcement of the earnings forecast. Before this decline, the stock had gained about 11% in the month leading up to the earnings announcement.
Despite the current volatility, the company’s stock has shown strong long-term performance, with a 1-year return of +62.91% compared to the S&P 500‘s +26.64%.
Analysts remain optimistic about the company’s long-term growth potential, especially with its focus on AI and new subscription models. Analyst price targets for the stock range from a low of $270.00 to a high of $385.00, with a market capitalization of approximately $99.302 billion and a PE Ratio (TTM) of 50.12.
The company’s earnings announcement also had a broader market impact, with shares of peers such as CrowdStrike (NASDAQ: CRWD), Zscaler (NASDAQ: ZS), and Fortinet (NASDAQ: FTNT) declining in extended trading.
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Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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