Palo Alto Networks, Inc. (PANW) on Q4 2023 Results - Earnings Call Transcript

Walter Pritchard: Good day, everyone, and welcome to Palo Alto Networks Fiscal Fourth Quarter 2023 Earnings Conference Call. I'm Walter Pritchard, Senior Vice President of Investor Relations and Corporate Development. Please note that this call is being recorded today, Friday, August 18, 2023 at 1:30 Pacific Time. With me on today's call to discuss fourth quarter results are Nikesh Arora, our Chairman and Chief Executive Officer; and Dipak Golechha, our Chief Financial Officer. Following the Q4 session, we will take questions on our results in the 2024 guidance with Lee Klarich, our Chief Product Officer, also joining us. We will then continue with the forward-looking portion of our program. For this, Lee, along with several of his product leaders and BJ Jenkins, our President BJ Jenkins, our President, will present along with Dipak and Nikesh with additional Q&A session to follow. You can find the press release and other information to supplement today's discussion on our website at investors.paloaltonetworks.com. While there, please click on the link for Events & Presentations to find the fourth quarter 2023 earnings presentation and supplemental information. Following the event, we will post the full set of slides, including the forward-looking portion of our program. During the course of today's call, we will make forward-looking statements and projections regarding the company's business operations and financial performance. These statements made today are subject to a number of risks and uncertainties that could cause our actual results to differ from these forward-looking statements. Please review our press release and recent SEC filings for a description of these risks and uncertainties. We assume no obligation to update any forward-looking statements made in the presentations today. We will also refer to non-GAAP financial measures. These measures should not be considered as a substitute for financial measures prepared in accordance with GAAP. The most directly comparable GAAP financial metrics and reconciliations are in the press release and the appendix of the investor presentation. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. We also note that management is participating in the Goldman Sachs Conference on September 7. With that, I'll now turn the call over to Nikesh. Nikesh Arora: Thank you, Walter, and good afternoon, everyone. Thank you for spending your Friday afternoon or perhaps some part of your Friday evening with us. Our choice of Friday has definitely made us the topic de jure these past two weeks and has made for some very interesting reading of all the analyst notes. We apologize to people who are inconvenienced but as we had mentioned in our press release, we wanted to give ample time to analysts to have one-on-one calls with us over the weekend, and we have a sales conference that kicks off on Sunday. We want to make sure all of our information was disclosed out there. So again, we apologize for the unique Friday afternoon earnings call. But clearly, we have enjoyed the attention. Well, let me go and just straightaway dive into our Q4 results. We started off the year focusing on excellence and execution. We stayed true to that and delivered strong results in Q4, capping off a strong fiscal year 2023, where we met or exceeded our original top line guidance and significantly exceeded our profitability and cash flow guidance. This year indeed required clear focus across our company, and we're all proud that our team delivered throughout the year and especially in Q4. Our Q4 revenue grew 26% making our -- marking our 12th consecutive quarter of revenue growth north of 20%. Our billings grew 18% of a very strong 44% growth in Q4 a year ago, and RPO grew 30% ahead of our revenue growth. Our Q4 operating margins expanded by 760 basis points, driving $1.44 in non-GAAP earnings per share, and we achieved 39% adjusted free cash flow margins for the year. Our performance in Q4 did not come as a surprise to us. We've been investing in our next-generation security portfolio for some time now to position ourselves in the leadership position for the future of the cybersecurity market. It is this next-gen portfolio driving -- that is our growth transformation and enabling our leverage. Lee and his team will expand on this in the forward-looking part of our program. We achieved several important milestones in this quarter, especially in our software and cloud-based businesses this year. Our combined SASE, Cortex and cloud bookings were north of $1 billion in Q4. Our Cortex platform surpassed $1 billion in annual bookings last quarter, and we achieved the same milestone with SASE this quarter. We also exceeded $500 million in Prisma Cloud ARR. These product performances are all contributed to the strong growth we continue to enjoy in NGS ARR. Remember, that our NGS business is largely a capability new to us in the last five years and is primarily cloud delivered. This quarter, we added more new ARR than any other pure-play cybersecurity company. Our platformization is continuing to drive large deal momentum. One way to illustrate the traction of our next-generation security capability across network security, cloud security and SOC automation, so look at the makeup of some of our largest deals. When we deliver best-of-breed products that are also integrated into platforms, we help customers simplify their architectures, lower their cost of ownership and benefit from differentiated cross-platform capabilities. This is a win-win scenario. 8 out of our top 10 deals saw a significant contribution from our next-generation security capabilities, five were essentially next-generation security deals. Here are some examples: one, a large industrial manufacturer signed a transaction with a total value of $45 million. Our Prisma Access expansion led the transaction, but also included significant commitments to Prisma Cloud, XDR and our IoT security offerings. The customer success with Prisma Access and our executive level engagement were keys to winning this additional opportunity. A large professional services firm, standardized on Prisma Access and a transaction exceeding $40 million, securing their hundreds of thousands of users. The completeness of our offering, particularly our strong capabilities and private access, differentiates us from the competition by standardizing on Prisma Access to customer consolidated legacy security offerings from many competitors to a single solution. A large retailer also signed a landmark transaction for more than $40 million, led by XSIAM. In this deal, we displaced the incumbent SIEM offering and also added our threat intelligence and attack surface management capabilities. Rounding out the examples, a large technology service provider chose our XDR and XSIAM capabilities in a transaction worth over $30 million. This deal started as an independent evaluation of replacement for both endpoint security in their SIEM. This is the second quarter in a row where we have signed an 8-figure deal that was driven by a unique capability to provide both XDR and XSIAM, competing against separate competitors in each of these categories. This sample represents the success we see across industries and regions. As I mentioned, a critical part of our profitable growth formula is selling more to our largest customers. In Q4, we saw our larger deals grow faster than our overall business. Notably, we saw the number of deals greater than $20 million grow faster than our deals over $10 million as our go-to-market motion becomes more and more increasingly successful in selling the platform and building the sort of trusted relationships required to close this quarter of our business. Now for the surprise of this quarter, starting with Cortex. There are a number of things I'm excited about in this business as we ended this year. We launched XSIAM to general availability last October and set an aggressive goal of booking north of $100 million in our first year. The year is not over yet. We have closed out the year achieving $200 million in XSIAM. This is strong validation that our outcome-based value proposition on XSIAM is resonating well with security organizations and also a sign that interest in applying AI to transform security operations is very high. Lee will talk extensively about this in our forward-looking section. Our customers have told us loud and clear that the legacy products powering their SOCs are no longer working and they need to reduce their mean time remediation by an order of magnitude. This becomes increasingly important with the new SEC rules detailing that all public companies will be required to report material breaches within four business days. XSIAM is shaping up to be our fastest-growing offering outside our original next-generation firewall releases. XSIAM transactions are large and long term, which helped to further our goal of evolving our customer relationships from vendor to partner. As excited as we are about the early success of XSIAM, we are also seeing strong growth across the entire family of Cortex products, namely XDR, XSOAR and Expanse. We crossed the 5,000 customer milestone in Cortex as we continue to gain share in the market and see the opportunities for upsell to the platform. Our average Cortex deal size grew over 50% year-over-year, reflecting our success in cross Cortex adoption. Moving on to the next star of the quarter, SASE. SASE continues to become our standout offering. We're seeing strong customer awareness and momentum following our new leadership position in the Gartner SSE Magic Quadrant last quarter. We were recognized this quarter with a leadership position of the Forrester Zero Trust edge wave that was published earlier in the week, establishing Palo Alto Networks as a clear industry leader in SASE. We also have some breaking news on industry recognition, very excited that Palo Alto Networks has been recognized as the only, I repeat, the only leader in Gartner's first single vendor SASE Magic Quadrant just published on Wednesday. Our recent acceleration and external industry recognition has contributed to customer momentum, and we saw many new customers and large expansion transactions in Q4. This included four transactions over $10 million and many 7-figure deals that span numerous industries and regions. Not to be left behind, Prisma Cloud went past $5 million in ARR. Our cloud security platform, where we believe all companies will eventually to manage security across multiple cloud applications and providers through a single platform, continues to show strength, ensuring customers consume our capabilities after committing to the platform is vital. In Q4, we saw steady consumption growth with credits consumed up by 45%. We're also seeing strong growth in customer adoption of multiple modules this quarter. We are showing our growth in customers with five modules more as it is starting to become a meaningful trend with customers up 179% year-over-year. We continue to make significant organic investments in Prisma Cloud and grow the platform through acquisitions. We launched the CICD security module last week based on technology from the cybersecurity acquisition. This is our 11th module, and we continue to have the broadest cloud native application protection platform in the industry with capabilities spanning our customers' entire code to cloud needs. Later in our call, you will get a chance to see our exciting developments and glimpse into our plans for the future. Finishing where I started, I couldn't be more proud of our performance in Q4 and the year. Our teams helped drive steady performance, enabling us to maintain a strong outlook through macro challenges by focusing on crisply executing our differentiated strategy. We continue to drive platformization and capitalize on the opportunity the changing landscape presents for products like XSIAM. We continued with our go-to-market transformation. For example, we consolidated our SASE sales team into our core a year ago, and we had a strong outcome, as you saw, with some large transactions and opportunities across the pipeline. We have continued to not hold back on investing in innovation to ensure we can capture share in a market that constantly presents new opportunities. Lastly, we successfully accelerated some of our efficiency initiatives in fiscal year as we saw the environment change. I'll now pass the floor to Dipak to cover the detailed financial results and our 2024 guidance. Dipak Golechha: Thank you, Nikesh, and good afternoon, everyone. Beyond providing the detailed results this quarter, I also wanted to highlight some additional business insights through the Q4 numbers to help you understand our results and provide context for our go-forward plans. As Nikesh mentioned, we saw strength across our various metrics, starting with the top line. This was especially true in our NGS ARR and RPO. NGS ARR grew 56%, driven by strength across our portfolio. RPO grew 30%, well ahead of our revenue growth. Broadly, the industry has experienced an increase in deal scrutiny as well as deal pushouts. The environment has become more challenging this year, and we started telling you about that at the beginning of our fiscal year. We got ahead of this changing environment by front-loading our sales hiring for the year, training our teams to address the tougher procurement processes and by having our sales management teams apply additional scrutiny to the pipeline earlier in the quarter. As a result of these efforts, we did not see a significant impact in Q4 from unexpected deal delays. We did see, however, see two impacts on the top line from the changing environment: first, the rising cost of money has caused customers to hold on to their cash and more frequently seek deferred payment terms. These deferred payment terms are delivered in the form of annual billing plans and through our PANFS financing capability. The percent of bookings that included deferred payments increased approximately 45% year-over-year. Additionally, the proportion of our bookings have included billing plans more than doubled from Q3 to Q4. This quarter-to-quarter increase negatively impacted our billings as compared to what we forecasted 90 days ago in our guidance. As we see this shift in billing terms, RPO is becoming a more important leading indicator for our business as it's not impacted by billing terms. As a reminder, RPO represents the booked business we expect to recognize as revenue in future periods. Also, all customers' purchases, including an RPO, are noncancelable. Second, we have seen the market return to a more normalized growth rate in hardware-based firewalls, and I wanted to help further the collective understanding of this. As many of you are aware, there have been several factors that have impacted industry hardware revenue. These include the COVID pandemic, the reopening-related hardware demand catch-up, post-COVID supply chain challenges, price changes and backlog release following supply chain easing. Despite these positive and negative fluctuation, there's a relatively consistent level of underlying hardware growth that is in the low to mid-single digits. And we see the industry returning to those levels. This return to normalized appliance growth is also happening on the backdrop of a broader transition from hardware to software in network security and growth in new security markets. We are unique in being recognized as a leader across different network security form factors, including our software-based VMs and our cloud-delivered SASE. Our firewalls or platform billings growth captures our business across these form factors and grew north of 20% in the last three years. Within this business, we have seen the mix of software increase substantially. Over the medium term, this mix transition to software and cloud and network security as well as the growth we are seeing in the rest of our next-generation security portfolio and driving an increase in our occurring revenue mix. Our platform business model and our focus on efficiency drove significant improvements in operating margin in fiscal year '23, including 760 basis points of margin expansion in Q4. This higher operating profitability, strong bookings growth and interest income performed a baseline for our free cash flow at higher levels as we achieve 39% adjusted free cash flow margins in fiscal year '23. The same dynamic of higher deferred payment plans not only had an impact on our top line, but also on our free cash flow. As I mentioned in my discussion of RPO, it is noteworthy that we absorbed the impact of the higher mix of bookings with deferred payment terms in Q4 and fiscal year '23. And we were still able to exceed our cash flow margin target for the year. If you look on a multiyear basis, we've seen the proportion of our bookings that occur with deferred payment plans increase over 4x in the last three years, while we grew our free cash flow margins over the same period. As I will talk about when I come back in the second half of the program, this gives us confidence we can maintain our free cash flow margins at a high baseline. Moving on to the rest of the results. Product revenue grew 24% in Q4, driven by the impacts we noted last quarter from new go-to-market motions and SKUs that contributed more renewable software revenue to product than in the past. Total subscription and support revenue grew 27% with subscription revenue of $918 million, growing 31% and support revenue of $528 million, growing 20%. We saw consistent revenue growth across all our theaters with the Americas growing 26%, EMEA was also up 26% and JPAC growing 24%. Gross margin for Q4 of 77.3% increase over 400 basis points year-over-year. This caps off a year where gross margins expanded by 230 basis points as we saw a benefit from higher software mix and some scale synergies on our customer support spending. Our operating margin expanded well over 700 basis points in Q4 and over 500 basis points for the year. We saw the higher gross margins and efficiency across our three operating expense lines as we accelerated some of our efficiency initiatives. As happy as we are about the outcomes here, we're only part of the way through executing on these multiyear efforts. The result of all of this is that we continue to see strong non-GAAP EPS growth due to substantial operating leverage, which also translated to strength in GAAP EPS, which more than doubled quarter-to-quarter. We are now firmly GAAP profitable with GAAP net income of over $200 million in the quarter. Turning to the balance sheet and cash flow statement. We ended Q4 with cash equivalents and investments of $5.4 billion. We had our 2023 convertible notes mature on July 1, 2023, and we settled the principal obligation with cash of $1.7 billion. We settled the access in shares and had previously accounted for these in our non-GAAP diluted shares outstanding. Q4 cash flow from operations was $414 million with total adjusted free cash flow of $388 million this quarter. Stock-based compensation expense declined by 310 basis points as a percent of revenue sequentially. On a year-over-year basis, stock-based compensation expense was down 220 basis points as a percent of revenue. 'I'd like to provide the details of our fiscal year 2024 guidance as well as guidance for Q1 before we move on to the broader forward-looking section of the presentation, where we will provide context for this guidance and talk about our medium-term targets. Overall, we are pleased we capped a strong year of growth and margins and look forward for more to come. For the fiscal year 2024, we expect billings to be in the range of $10.9 billion to $11 billion, an increase of 19% to 20%. We expect NGS ARR to be in the range of $3.95 billion to $4 billion, an increase of 34% to 36%. We expect revenue to be in the range of $8.15 billion to $8.2 billion, an increase of 18% to 19%. For fiscal '24, we expect operating margins to be in the range of 25% to 25.5%. We expect non-GAAP EPS to be in the range of $527 million to $540 million, an increase of 19% to 22%, and we expect adjusted free cash flow margin to be 37% to 38%. For the first fiscal quarter of 2024, we expect billings to be in the range of $2.05 billion to $2.08 billion, an increase of 17% to 19%. We expect revenue to be in the range of $1.82 billion to $1.85 billion, an increase of 16% to 18%. We expect non-GAAP EPS to be in the range of $1.15 to $1.17, an increase of 39% to 41%. Additionally, please consider the following modeling points: first, we expect our non-GAAP tax rate to remain at 22% for the first quarter in fiscal year 2024, subject to the outcome of future tax legislation. We also expect cash taxes in the range of $230 million to $280 million. This is an increase as compared to the $150 million in cash taxes in fiscal year 2023. For the first quarter, we expect net interest and other income of $50 million to $55 million. We expect first quarter diluted shares outstanding of 336 million to 339 million shares. We expect fiscal year 2024 diluted shares outstanding of 338 million to 343 million shares. And we expect fiscal year 2024 capital expenditures of $160 million to $170 million. With that, I'd pass it back to Walter to start the short Q&A covering what we had discussed up to this point. Walter? A - Walter Pritchard: Thanks, Dipak. We'll take about 15 minutes now, and we'll have a few questions. [Operator Instructions] For the first question, we'll go to Matt Hedberg from RBC with Rob Owens from Piper Sandler on deck. Please go ahead, Matt. Matt Hedberg: Great, guys. Thanks for taking my question Maybe, Nikesh, with you, the macro. Good results in the quarter. I wonder if you could just talk a bit more broadly about some of the broader trends that you're seeing. There's been some other -- obviously some comments from some competitors that are maybe a little bit different. But just broad brush strokes on high-level demand trends. Nikesh Arora: I think as I said, and as Dipak elaborated, look, it's -- interest rates are higher. CFOs are scrutinizing deals, which means you have to be better prepared to answer their question and show the business value that you bring to them with your cybersecurity products. We are lucky that we have been focusing on our platform strategy. So we can usually walk in and say, here, you can consolidate the following five, it doesn't cost you anymore, but you get a better outcome and you get a modernized security infrastructure. So from that perspective, that strategy of ours is resonating. But there is more scrutiny. There are deals that go through multiple levels. There are some that get pushed. There are some that get canceled. And again, you just have to get more on the top of the funnel. And as Dipak very clearly highlighted that eventually end up and there's a conversation about saying, wait, I used to pay you upfront. And I need to understand the cost of money. And is there a way, either my cost has to be lower from you, so I can sort of account for the cost of money or you've going to allow me to pay you later. From a deferred plan perspective, those are really the two effects. And I think the biggest -- and if I summarize Q4 for us, great execution. There's a lot of demand out there, and the two things which are -- were different is: one, we saw the hardware cycle start to normalize much faster and, not like we told you so, but we've been very consistent. I think one of you guys actually was kind enough to cut and paste every time we talked about hardware into their note. We've been very consistent that we think underlying hardware grows at single digits, low single -- low to mid-single digits. So we've seen that main reversion. Other than that, honestly, we've just got to go out there and get more stricter on execution. That's the outcome from a macro perspective. Matt Hedberg: Great guys. Walter Pritchard: Thanks Matt. Next question will be from Saket Kalia of Barclays with Brad Zelnick from Deutsche Bank on deck. Go ahead, Saket. Saket Kalia: Okay. Great. Thanks for taking my question here. Nice end to the year to the team. Dipak, maybe for you. Great to see the free cash flow margin for next year. I think a couple of things that we were all thinking about, as we model next year were cash taxes and the deferred payment plans that you referenced in your prepared commentary, of course, the profitability here is well ahead also. But maybe you could just talk us through some of the puts and takes you thought about within that free cash flow margin guide for next year. Dipak Golechha: Yes. So I think -- thanks for the question, Saket. I think the primary driver really is the stronger profitability, right? So that's really what underpins a lot of the cash flow confidence. We've also seen benefits of higher interest rates on the cash that we have, right? And that also helps. That's another put and take. But I would say, you're right, we've absorbed the additional headwinds from deferred payment terms. We've modeled in the cash taxes. And when you put all the different puts and takes, we feel pretty confident of where we are. Saket Kalia: Thank you. Walter Pritchard: Sorry to skip you Rob. We're going to go back to Rob Owens at Piper Sandler and then go to Brad Zelnick at Deutsche Bank. Go ahead, Rob. Rob Owens: Thanks Walter, and you know Saket is much interesting than I am. But want to build on that question just a little bit relative to deferred payments. And is there discounting when you're doing these multiyear deals? And will we actually see a longer-term economic benefit as people start to move towards annual payments? And I guess, given the shift in the portfolio and what you guys are selling, this should be no surprise. So if you could just comment on if there is a broader economic benefit to kind of moving to annual terms and understand that we'll probably address the midterm guidance on the next portion of the call. Nikesh Arora: Rob, I'm going to give you a little macro flavor and then Dipak can jump in as well. Look, on the macro front, the part I'm really excited about that Dipak and his team have basically navigated a significant part of our business into annual billings effectively through these deferred payment plans, right? And we were able to hold our free cash flow in spite of those downward sort of pressure. And we think we're going to keep absorbing some of that as it goes. In the end, it's an economic argument. It's like there's a cost of money. I can take the money up front and let the customers get a discount, and I can go try and get a return on that cash or I can let them pay when they're ready to pay and I can extract a better economic outcome in that context. And I think it's important to understand, given our portfolio-based approach, our customers -- different products lend themselves to different discussions. On cloud, we see a lot more of the shorter duration discussions because cloud is more of a consumptive event. On XSIAM, they want longer deals. They don't want even 3-year deals. They only want 5-year deals and they want price locks. So there also is a counter effect they're worried about inflation. So if you put it all together, as Dipak said, we're very comfortable with the way we've modeled it. There's definitely levers that go in different directions. And our sort of aspiration and desire and hope is that we keep transitioning seamlessly into more and more annual billings over time while being able to hold these metrics and these outcomes for ourselves. And Dipak? Dipak Golechha: Yes. No, I think Nikesh mentioned it well. The only comment that I would say is we're probably more focused on the economics of the actual deferred payments versus the upfront. I understand the argument that if you're more of a SaaS business, then you don't have to make as much like discounts to pull the deal through. We haven't really built that in, right? At this stage, we'll see how that goes. We're still going through the transformation. Nikesh Arora: And don't forget, there's still a reasonable part of our business that still has to be paid upfront, which is the hardware business. Walter Pritchard: Thanks Rob. We're going to take our last question in this segment from Brad Zelnick at Deutsche Bank. The IR team is available to take questions offline, and we will return at the end of this program to take more questions from you all. Go ahead, Brad. Brad Zelnick: Thank you so much Walter. So many questions to ask, but I'm going to keep it high level. Nikesh, heading next week into sales kickoff, you're going to once again rally the troops to perform even better next year, topping a fantastic fiscal '23. What are the highest level messages that you're going to focus on to ensure that they really step up their game and can overachieve and do even better next year? Nikesh Arora: Brad, sort of how I worked in sales and interacted with salespeople, majority of my life, salespeople like to win. And I think what has become apparent in fiscal '23 for our teams that can -- that we can win in each of these categories. They were used to winning in firewalls. I will tell you, our win rates have gone up tremendously in SASE. I mean we did $1 billion in SASE this past year. Winning in XSIAM has been a phenomenal surprise and a delight to all of us. And literally, I'm telling you what's going to happen on Sunday, every salesperson is going say, I want to be able to sell that product. This product is selling with an average ACV of $1 million hasn't happened in security before. So I think the just generating enthusiasm towards all these capabilities and solutions is kind of a key message for our team. There are some structural changes. Like last year, we took the SASE team and merged that with the core team, and you saw the outcomes. We managed to do that seamlessly without an impact to our business, in fact grew faster. We're doing that next year with Cortex. We're taking our Cortex team, and making them part of core. That's why Dipak talks about these constant ability to improve operating margins is we've hit sort of scale economics in our business. We've hit scale. Everybody has to do these deals. It's no longer a firewall business. So our teams want to do cross-product deals. So the message really is, we're winning in major categories, go out and win those deals. The message is cross-platform is working for us. The message is you are now empowered and trained to sell everything. And every year, we use the opportunity to tweak certain things, which have worked better than the others. So I mean, honestly, like sorry to drag you out on a Friday day afternoon, but I think it's important for a few thousand people next week that we shared all these results with them, and we just got caught in the trap. We're trying to get a Board meeting done and do that on Sunday, so here we are on Friday. But all I -- if it gives you any comfort, Dipak and me and the team are going to be working all Saturday and Sunday as well. Brad Zelnick: Awesome. Thank you. Nikesh Arora: Thank you. Walter Pritchard: Thanks, Brad. Thanks, everybody, for your questions. We will come back at the end to do more. We're now going to move to the forward-looking portion of our program and talk about our medium-term update. And with that, I'll pass it back over to Nikesh. Nikesh Arora: Well, that's a wrap on our Q4 results. The reason we wanted to make sure you had the opportunity to enjoy our Friday evening celebrations in the context of a long-term or midterm outlook from us was we wanted to make sure that you see our FY '24 guidance in the context of where we believe we are in the next three to five year journey. I think what's important to understand is that over the last five years, the cybersecurity TAM has continued to rise. It has grown at approximately 14%, and it has grown twice the pace at which the IT market has grown. Now the reasons for that are, as we get down these transformations that are going on in the world, we get more and more reliant on e-commerce, as we get more and more reliant on digital transformation movement is about and possibly now with the sort of arrival of AI as a mainstream opportunity, every one of us is trying to make sure we grab that with both hands. So we will continue to see the pace of technology spend go sort of up or forward. Similarly, we're going to see that cybersecurity is going to get more than its fair share of growth. So from an opportunity perspective from what's going on in the market, we believe the cybersecurity market is robust and will continue to be so in the next three to five years. Having said that, if you look deeper, there are actually three things going on in that market: one, there are new markets being created. If you look at the last five years, we saw a sort of a surge in this concept called SASE. We saw SASE come on mainstream. Everybody is out there trying to build a SASE business. That's kind of been a big thing. As we had anticipated and talked about five years ago, cloud continues to become bigger and bigger. As companies go sign up with cloud service providers, they are beginning to go move their applications from on-prem or their hybrid cloud to the public cloud. Now it's important to understand is that approximately 80% of the applications in the world are actually homegrown applications, which are working on on-prem data centers. As we go forward, we're seeing enterprises take those applications, reimagine them, rewrite them, rearchitect them and move them to the public cloud. Now that work has to be done by 33 million developers around the world, which work for these companies. As they write new code, as they put together a code by looking at open source and having stuff from here and there, there is this real opportunity to make sure that, that code that is written is written in such a way that is secure, is secured by design. So you will continue to see that cloud security part of that market grow, but that's a market that's effectively been created in the last five years. Couple that with the arrival of IoT and OT as mainstream opportunities, we've seen even that market has been sort of a new market. Approximately it's a $30 billion market between those categories, which has been built over the last five years, driving some of the cybersecurity opportunity. Outside of that, in the underlying cybersecurity market, we've also noticed that some markets have undergone to transformation. We're seeing a large transformation in network security as people try and figure out how much to go in the public cloud, how much to leave in the data center, how much hardware to deploy, how much software to deploy. We're seeing that network security is beginning to evolve from a hardware-only market to effectively a faster-growing software part of the network security market. Not just that, what we're also seeing is things like SD-WAN, which are part of the networking TAM are now moving into cybersecurity because people want an integrated solution as a SASE solution between SD-WAN and your security protocol. So it's interesting. There are markets going -- undergoing inflection like network security. The market of endpoint has gone through a huge inflection in the last five years. We've seen people go from endpoint protection to EDR and XDR. We've seen an explosion, there are about 14 vendors at last count in the EDR XDR space, but you can see clear leaders emerging, which are down to two or three players in that space. And there's a huge inflection going on there. We think not just there. You're going to see a large inflection in effectively what is a 15-year-old market called SIEM and SOC. That market has been -- a technology that has not been evolved for the last 15 years. It's primarily been a reactive technology where if I am breached, I need to figure out what to do, and we collect a lot of data and analyze it. That's no longer going to work, the arrival of AI, they have the need for automation, the need for normalized data, actually going to force that market to inflect. And that's something we'll talk about more. And you saw already in our Q4 results at something like XSIAM, which is targeted to that market, is where the real opportunity is for that inflection to continue, for that market to go through its own transformation. Outside of that, there are still about $30-plus billion in sort of steady cybersecurity segments as well as about $80 million of services, which we think will also continue to evolve in the next three to five years. So with that in mind, I think it's important to think about where we were when we thought about the transformation of Palo Alto Networks five years ago, where we said, cloud is going to be big, AI is going to be big, and the networks are going to have to start getting reimagined as we go towards the cloud. So effectively, cloud was going to drive the cloud security market and the network transformation and AI and machine learning would have to start helping us do this transformation in the SIEM and SOC market. Now what we saw over the last three to five years is, we at Palo Alto Networks as well as, to some degree, different plays in the industry, started to look at the various parts of these markets and say, like, these things need to start getting integrated because you can't deliver great security outcomes without these things getting integrated. So this is the thing. We talked about this. We were told that market does not need platforms. We were told that integration is not key. Customers can deal with the integration. What we want is best-of-breed products. So we decided we're going to do both. We're going to have phenomenal success in best-of-breed categories. In addition, we're going to make sure our best-of-breed products were integrated. So in these three TAMs, in these three markets of network, cloud and SOC operation, what happened is we saw these point products, we started to get integrated into the larger platform vision we had, and we saw the TAM continue to grow because these are all markets which are undergoing transformation or rapid growth. Now where we are today, we believe this is about a $100 billion opportunity across these three platforms. So for us, the opportunity has grown. It's almost gone up 2x from five years ago where we believe it's a $100 billion market today, which allows us to deliver the superior growth you've seen and the continued consolidation in the market that we've had at Palo Alto Networks. What's even more exciting within these markets will continue to drive future growth. And you will see that because of the arrival of AI, the need for more real-time autonomous security, these markets will continue to drive opportunity. In the same period over the last five years, as I said, we have been able to transform Palo Alto Networks to get it to where it is today. A, we actually proved that platforms are relevant and important in the space of cybersecurity. Just imagine, it seems obvious now, possibly to many of us, but five years ago, we had customers who had more cybersecurity vendors than they had IT vendors. And it was a customer's responsibility to take these vendors, deploy them across their infrastructure, make them work together to deliver security outcomes. You're expecting 2,000 customers out there in the Global 2000 or possibly tens of thousands of customers having security experts trying to stitch together products made by fast growth cybersecurity companies, which are deeply technical and trying to figure out how to correlate what one vendor saw or one set of vendors is telling you versus another. It just seemed like a problem that could not be solved. But over the last five years, you've seen that starting to stitch these together, starting to take this disparate solutions for security, trying to provide them in a common fabric has actually allowed us to deliver better security outcomes And we've proven that by doing that in a way, they are -- each of those pieces work in a best-of-breed fashion are leading in their own category. However, they're kind of better together in the platform. So the last three years -- the last five years, as we just shared in our Q4 results, we have been able to build a $1 billion business in security operations under Cortex, which was 0. We have been able to build a $1 billion SASE business in the last 12 months to be able to show that integration across this remote and hybrid network space is actually working. Not only that, we actually built a $500 million ARR cloud security business, proving that, again, the ability to stitch across the entire cloud development life cycle is useful for our customers. So we think that we've established that these platforms are going to be around are important and necessary, and that is the way of doing security in the future. Not only that, we've also proven that in the last five years that you can teach an old dog new tricks. Palo Alto Networks, which was a single product in one lane, we had the best firewall technology in the world as well as had amazing services that worked in the firewall, we have been able to take that and build multiple products across multiple security swim lanes and make them work better together. And the only way you can do that in security is you have to keep driving innovation. You have to stay at the bleeding edge because you don't need your customers to be at the bleeding edge. It is our responsibility as a security company to make sure we take all the innovation, we distill it, we make it work in an integrated fashion and deliver it to our customers at the fastest pace possible because the bad actors are not waiting, they're constantly looking for ways to get to our customers, to get to penetrate their infrastructure and try and figure out how to go extract data from our customers or possibly hold them with ransomware. So we have taken what was an amazing company in one category and actually built what we'd like to say is an innovation engine that allows us to stay at the bleeding edge. We've also done that, to be honest, not just by doing it ourselves because the fact that the cybersecurity industry has 3,000 startups out there, which are constantly funded because they're all working in a specialist way to solve more problems, which they believe is important for the end customer, we have to be vigilant and make sure that we don't have any issues in either building it for our customers or partnering or acquiring something that's out there that is important as part of the security fabric that we need to deliver to our customers. So as a team, we're really excited that where we are in our sort of juncture today allows us to go forward and build an even better, larger and a more compelling business for our shareholders. Not only that, to deliver phenomenal security outcomes for our customers across all these categories that we see inflecting as well as categories that we believe will be created in the next three to five years. So with that in mind, if you think about what's our view going forward for the next three to five years or possibly the next decade, I said in the last five years, we saw that huge sort of technology trends, underlying it of cloud and AI allowed us to create the stitching to build what I would say, the building blocks of building the world's largest cybersecurity company actually prepares us phenomenally well for what we think lies ahead. What we think lies ahead is the need for security to stop bad actors mid-flight, real-time, as it's happening. If you think about security today, the industry is only 30% or 40% real time. You know a bad URL, you know a bad DNS. You know how to stop your customers from something that is bad that we know. What we still aren't good at as an industry is being able to figure out unknowns and stop them before they happen. To do that, it requires a fundamentally different way of thinking about security. Something we have been sort of leading having a point of view on. And that is the idea of having stitched products that work from end to end. The idea that as something is happening, you're able to analyze it real time, on the fly and understand it's good or bad. It is reducing the noise of security in the industry by eliminating all these super close alerts or the bad signal to noise ratio. So to get that right or to get security right, we will have to be more and more real time as an industry. Now we sit at a point where everybody is talking about AI. And actually, that is the solution. The solution is to make sure you ingest large amounts of data, you analyze them on the fly, and you're able to deliver superior security. Something we talked about just in our Q4 earnings call, right before this, you saw that everything we're doing in XSIAM is driving us to that vision. But that's not enough. We have to make sure every platform that we have continues to grow and continues to get more and more ubiquitous with our customers, at the same time, also stitches these things together. So we believe in the next five to 10 years, we're going to see this shift, which is going to be palpable. It is going to be big. It's going to be understandable where we have to become more and more real time. It will no longer be about putting a bunch of sensors and thinking about hygiene and security policies. It will be about how do you stop a bad act. And we'll talk more about this because today, the mean time to fix a bad act as we've talked to you about in our earnings is four to six days. That's not acceptable. This thing will have to go down to minutes and near real time. So that's a big shift we see that's going to drive a lot of the innovation in our industry. That's going to drive a lot of our strategy and our vision because we think we're on our way to be able to deliver that future to our customers as the world's largest cybersecurity company. In that context, we talked about those three categories. We think those three categories are going to continue to become bigger. And if you look at it, the biggest opportunity is that big green circle of security operations and automation because we think the current paradigm is broken. The current paradigm is a reactive security paradigm. It's the paradigm we say, let's hire three more million people to solve security problems. No, I don't think that's going to solve the problem. What's going to solve the problem is, let's collect good data, let's analyze good data. Let's find out the anomalous behavior. Let's block it while it's happening, so our customers have a better security outcome. I think that's where we're going to be going. And we're going to have a phenomenal opportunity at Palo Alto Networks to go ahead and address a $200 billion market, which is primarily going to be a software-based market, which has its own benefits across the board because it's a lower cost of ownership for our customers, lower cost of integration for our customers. It's easy for us to go deploy and keep our customers all at -- what is the best and current best in -- sort of best-in-class capability. So a future that is driven by software capability, a future that's driven by software solutions with security and a future which has integration as part of so -- as part of it as a key tenet with the objective of delivering a real-time autonomous security outcome. So that's where we think the world is going, that's where we'd like to be, and we think we're best positioned in the industry to be able to deliver that future. Not only that, to deliver great security outcomes to our customers. So with that in mind, how are we going to do this? What are we doing in the next three years, how is that going to translate into numbers that are loved by our shareholders? So it's really the five things, part of it is something which we've been doing and some things we're going to have to keep pivoting harder. For example, one, we want to maintain this notion of being an evergreen innovation company. Our biggest insight is that if you want to lead in cybersecurity, you always have to be on the bleeding edge because the bad actors are. You always have to be scanning the market understanding, where the world is going, where technology is going to see what potential security risks are going to get created in the adoption of that technology, in the deployment of that technology to make sure we're ahead of the curve, and we start delivering security by design. As in we're not going to come in and try and bolt it on afterwards as our customers have been through the transformation, it's to work with them, embed our architectures with customers as they go through their innovation journey, we're in lockstep with them delivering security innovation. I think the second part, which we talked about is we want to make sure that our platforms, which are now deployed in sort of different stages or different amount of sort of capacity with our customers, they become ubiquitous. We want to make sure that our customers have wall-to-wall platforms that allow them to look at it as a data problem, as an AI problem, not have to stitch our platform with five other security solutions out there and trying to build their own outcomes because it's impossible for every customer to go to a secure integration by themselves. I think the way -- the best analogy I can come up with, I think in the next decade, we will see sort of a standard platform for security out there, just the way we've seen platforms in CRM or we've seen platforms in HR, as you've seen platforms and financial sort of software. We think it's time that in the next decade, we will see a security platform in our future, which just works for our customers, and the customers are not spending time integrating multiple vendors trying to stitch their own. I just think that's the only way we're going to get to the future that we need for real-time and AI-based security. Third, the topic du jour, everybody is talking about AI. We're talking about AI. We are not only talking about it, we will demonstrate that we can deliver security outcomes and the vision and the future that security needs using AI across Palo Alto Networks, and we'll talk more about that. Well, that's great. We can build amazing products, but also as a company, for our shareholders, we have to make sure that we can deliver all this innovation to our customers, both effectively; and two, we have to make sure that it's easy to consume and deploy for our customers. And we're going to have to make changes as we go forward on how we actually go deliver all the wonderful capability to all of our customers, not just by ourselves, but actually working together with some of the bleeding edge partners in the world who are in this journey. Our partners are delivering these great security outcomes for our customers. And last but not the least, and one of the key things is we cannot do this unless and until our employees are fully bought into our strategy, our vision, feel excited every day to come to work and deliver a better security outcome to our customers to make them secure and be their cybersecurity partner choice. So with that, let's take a quick look into each of these categories to see how we're going to get there. And it sort of boils down to these five key strategic sort of requirements and directions from our perspective, innovation, continued platformization, leveraging AI, continue to transform our go-to-market capabilities. And last but not the least, again, is to make sure our team is along with us every step of the way. So getting into the topic of innovation. I think I'm very proud of the track record we have so far. We've gone from 13 products/acquisitions that we've integrated in 2019, to delivering 74 in 2023. It sounds like a lot, but actually, these 74 are delivered in an integrated fashion. So it actually improves the efficiency of security for our customer. It actually makes usability better. It actually makes it much easier for us to deliver security outcomes. So really excited about that. I think this whole AI revolution that we're undergoing or we're looking at, witnessing, it's going to require us to keep investing, looking once again as to what capability AI is going to deliver across all of our products because we do collect the world's most amount of security data. So we will keep driving innovation by underpinning more and more machine learning and AI under our platforms. We'll keep looking at how to deliver more capability with the sensors that we have out there with our customers from an innovation perspective. We've talked about this. We are happy to make sure that we deliver innovation and security outcomes to our customers. It does not all have to be invented in Palo Alto. We will constantly keep scanning the market to make sure that there's something out there that our customers need to get and somebody else is doing really well. It's our job to make sure we partner, collaborate, integrate or acquire to deliver the outcome that the customer needs from an innovation perspective. And last but not the least, being at the bleeding edge of security. Being one of the largest players, it is our responsibility to make sure we're looking at all new technologies to see how they're going to impact our customers and their states, whether it's quantum, whether it's AI because there is a dark side to AI. It's our job working with our partners and the industry to make sure we deliver innovation in how to protect against AI getting abused or misused in the market. So I strongly believe for us to deliver on the next three to five vision of Palo Alto Networks, we are going to have to continue to be an evergreen innovation company, which I think will give this company longevity and sustainability forever in the future and being the leader in cybersecurity. We talked about platformization or you've heard that word, you will keep hearing it to the next sort of 45 minutes from our team because we believe that's the way to deliver security, is resonating with our customers. Our customers are seeing it. My team is going to show you some amazing UI. I think you're going to start seeing not only just we're talking about this sort of the next level of platformization. You will start seeing, right after me, how we actually bring it to life. So I cannot be more excited about some of the work we're doing on the product side, stuff that we haven't shown anybody yet. You are going to see it today because it's important for us not just to talk about it, be able to show you how we're going to deliver. So you will see a next level of integration and how we can deliver security outcomes. You'll see sneak peeks into how we're going to leverage AI copilots in each of our products to create the simplicity and usability that security has not had, to be honest, so far. So I couldn't be more excited about how our teams are going to keep driving more and more platformization, more and more integration, where things of integrating best-of-breed vendors as sort of DIY or do it yourself or do it home is going to be a thing of the past. So moving on to leveraging AI, I talked about this. But again, clearly, there's no Analyst Day out there today that you cannot -- you must talk about AI. So I think the reason is different for us. As a security company, we are always focused on figuring out how to leverage data. We have north of 100 machine learning models that run today at Palo Alto Networks across our products. So this is not new news. But the way I think about it is, let's call all of that precision AI. That's AI where I cannot afford for it to be wrong. If it's wrong, lives matter. If it's wrong, ransomware happens, if it's wrong, bad actors get in. So we have to be right 100% of the time. And to me, that's the definition of precision AI. And to deliver that future, we have to build a lot of our own models. We have to train them. We have to collect first-party data. We have to understand the data. Today, we collect approximately 5 petabytes of data. Yes, 5 petabytes of data on behalf of our customers and analyze it for them to make sure we can separate signal from noise and take that signal and go create security outcomes for our customers. We still have 1.5 million net new attacks every day across our 60,000 customers. So we know how to use AI, and we believe we are uniquely positioned in the industry given our presence in end points, our presence in firewalls, our presence in the cloud, our presence across the entire network security stack to be able to deliver those AI-based outcomes to our customers. And we're doubling down, we're quadrupling down to make sure that Precision AI is deployed across every product in Palo Alto, and we open up the floodgates of collecting good data with our customers for them to give them better security because we think that is the way we're going to solve this problem, to get to real-time security. But let's not underestimate the opportunity generative AI puts in front of us. On a very personal basis, I believe generative AI is amazing for data summarization, for natural language interaction, for doing all the things where there was an information decay between our products and our customers. We build great products. By the time they get to our customers, there's a lot of translation that happens between our product developers and the customer and sometimes the breaches happen because the customers don't fully understand our product because they cannot configure them right. All those things can be eliminated if we can implement generative AI effectively through our products. So our customers can interact with our products in natural language. They don't have to have complex security understanding to operate our products. They don't have to have complex security understanding to fix a problem. We can fix all of that if we, in our company, learn how to deliver generative AI-based interfaces, generative AI-based outcomes through our products. And you know what, our teams are going to show you a glimpse of that. We have been working diligently over the last five months across the board at Palo Alto Networks. And I couldn't be more excited about some of the stuff that you're going to see just after this from our product teams to give you a sneak peek. At the same time, we're going to do it in a deliberate fashion. We're going to crawl, walk, run. We think we are on the right path. We're going to work in lockstep with the industry. We have people analyzing and working with almost everybody out there. We understand where the best-in-class LLM activity is. We understand where technology is. We also understand what might be going in the next three to six months. So all I can say is that I think the combination of precision AI and generative AI is going to fundamentally change the way security outcomes are delivered to our customers because it will take away the complexity. It will take away the confusion, the sort of usability problems that you have with security, and it will start helping deliver great outcomes to our customers. I think it's just going to make our platforms amazing as we go forward. On the go-to-market side. In the last five years, we have done a phenomenal job, I think, of building the products that our customers need. Yet, we have to make sure that every customer understands our capability. Every customer has a road map with us where we can take them to deliver real-time security outcomes. For that, we need to skill -- upskill our team in some areas, which we have been doing very effectively. As you saw, our team was able to deliver some amazing results for Q4, and I think we're going to keep doing that. We are going to go from being just a security vendor to being a solution partner. For that, we have to work harder with many players out there, which is something we've geared up to do, and we're having some amazing early success. We've got to figure out how to institutionalize that capability at Palo Alto Networks. And that's one thing BJ and his team are going to focus very effectively on in the next three to five years. Not just that, as I said, we need to figure out how to deliver architectural outcomes to our customers. Our customers are tired of spending too much money in cybersecurity and ending up with the same mess and saying, wait, my security outcomes aren't getting much better, but I seem to be spending more money. It's important for us to work with every one of them to deliver those capabilities in a architectural way so they understand the long-term road map because I think it's fair to say that where we are today is not where we were five years ago. I think we have enough confidence in our customers to partner with us for the long term because they believe we're going to be around or we're going to be an evergreen cybersecurity company. And last but not the least, I think it's very important as part of our go-to-market efforts, we have a large team that delivers customer delight. Well, I just think we're about to see a step change in customer delight with the application of generative AI. Again, we've been working really hard. You'll see a bit of a glimpse of that in some of the things that teams are going to show you. And over the next possibly three, six, nine months, you will see more and more capability delivered to our customers using that generative AI framework or predictive AI or precision AI framework. I think in the next three to five years, that is going to fundamentally change what Palo Alto is able to do out there in the market. And as I said, we cannot do this without the best people. Our employer brand has become phenomenal in the last five years. As we continue to deliver great innovation, great outcomes, people want to come work at Palo Alto Networks. People want to be part of the success of being the cybersecurity partner of choice for our customers. So we can only do this, we can only deliver our strategy if we have the best team. We continue to track the best, we continue to empower them. We continue to make sure that they can deliver great outcomes for our customers. We plan to keep doing that over the next three to five years because we believe this is a mission-driven opportunity. It's an opportunity that allows us to make the world a better place by making sure that our customers can be secure. So as I said, you will notice in the next three to five years, we will continue to transform Palo Alto Networks from where we are to where we would like to be. We will continue to focus on the demand function at the top. We believe the market is continuing to inflect, as I said, in the area of security operations. It's highly likely that some of the other steady areas are going to see some inflection as well. We're going to continue to relentlessly innovate and keep making our platforms more ubiquitous. We're going to make sure that we can deliver the amplification from our go-to-market teams. And also, we're going to make sure that we have the best team in the industry to deliver solutions to our customers. I couldn't be more excited about the prospects of Palo Alto Network. I couldn't be more excited that we are seeing tremendous success in our software-driven capabilities. I think we are going to continue to be able to transform this company from where we started as a hardware vendor to a software-delivered security with real-time security outcomes. I believe we will continue to be the best cybersecurity partner of choice for our customers. With that, I'm going to hand over to Lee because he's going to show you some really cool stuff, which is hopefully going to excite you about our ability to deliver the future we've talked about. Lee Klarich: Thank you, Nikesh. Now in a second, we're going to go into more detail on our three leading platforms. But first, I want to share some context. After all, we're a cybersecurity company, what's happening in the threat landscape. And I'll just give you the really obvious answer, it's bad. The threat landscape is intensifying. $8 trillion of cost due to cybercrime. Attackers are becoming very sophisticated with the tools they use, whether that's automation, attacking the supply chain, et cetera. And just the sheer volume is off the charts, growing about 20x since 2011 to over 1 billion new malicious programs. This is incredible. So clearly, that is a challenge, but it's even more challenging than that. It wasn't that long ago when it took an attacker on average about 44 days from initial compromise to exfiltration. Now 44 days is basically the time period that an organization would have to detect, disrupt and potentially prevent the breach from happening. So in 44 days goes down to hours, which is what we're now starting to see. That is a huge problem. That requires a very different approach. But on average, the industry is able to respond and remediate attacks in about six days. That doesn't work. And even more challenging now with the SEC new rules of being able to disclose within four days, none of the math adds up. Now before we get comfortable in just solving these problems, there's one m

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Palo Alto Networks: A Leader in Cybersecurity

Palo Alto Networks (NASDAQ:PANW) has executed a 1-for-2 stock split, making its shares more accessible to a broader range of investors.
The company's stock price stands at $393.12, with a trading range for the day between $392.36 and $402.50.
With a market capitalization of approximately $128.98 billion, PANW showcases its strong position in the cybersecurity industry.

Palo Alto Networks, trading under the symbol NASDAQ:PANW, is a prominent name in the cybersecurity industry. Founded in 2005, the company has carved a niche for itself by offering a wide array of cybersecurity products through its "platformization" strategy. This approach has made it a key player in the sector, where cybersecurity is considered a critical investment due to its high-margin business model.

On December 16, 2024, PANW executed a 1-for-2 stock split, a move that has piqued the interest of investors. Stock splits can make shares more affordable and accessible to a broader range of investors, potentially increasing liquidity. As the split date approaches, many investors are evaluating the potential benefits of investing in PANW, given the essential nature of cybersecurity services.

Currently, PANW's stock is priced at $393.12, reflecting a decrease of $7.09 or approximately 1.77% today. The stock's trading range for the day has been between $392.36 and $402.50. Despite today's decline, the stock has shown resilience over the past year, with a high of $410.23 and a low of $260.09, indicating significant growth potential.

Palo Alto Networks boasts a market capitalization of approximately $128.98 billion, underscoring its strong position in the market. The company's trading volume today is 1,915,154 shares, suggesting active investor interest. As cybersecurity remains a critical concern for businesses worldwide, PANW's stock continues to be an attractive option for investors seeking exposure to this essential sector.

Palo Alto Networks (NASDAQ:PANW) Announces 2-for-1 Stock Split

Palo Alto Networks (NASDAQ:PANW) is set for a 2-for-1 stock split, aiming to make shares more affordable.
The stock has seen a 47% increase in its price this year, with significant growth ahead of the split.
Stock splits have sparked interest among investors, with notable companies like Nvidia experiencing substantial growth post-split.

Palo Alto Networks, trading on NASDAQ under the symbol PANW, is a prominent player in the cybersecurity industry. The company is set to undergo a 2-for-1 stock split on December 16, 2024. This means that for every share an investor currently holds, they will receive an additional share, effectively halving the price per share while maintaining the overall value of their investment.

Stock splits, like the one PANW is planning, have become less common in recent years. However, the past year has seen several notable splits, including those by Broadcom, Chipotle Mexican Grill, Sony, and Walmart, as highlighted by 24/7 Wall Street. One of the most anticipated was Nvidia's 10-for-1 split in June, which occurred during a period of fluctuating stock prices.

Despite the stock split, Nvidia's share price was more significantly impacted by investor concerns over delays in new chip shipments. Interestingly, Nvidia's stock has seen a remarkable 175% increase in 2024, with most of this growth occurring before the split. This trend has sparked renewed interest in stock splits and their potential benefits in the current market landscape.

Palo Alto Networks has experienced a significant 47% increase in its stock price this year. The stock is currently priced at $405.90, with a recent change of $2.87, reflecting a 0.71% increase. The stock has traded between a low of $402.62 and a high of $409.16 today, with the latter marking its highest price over the past year. The lowest price in the past year was $260.09.

The company's market capitalization stands at approximately $133.18 billion, with a trading volume of 1,934,449 shares for the day. The upcoming stock split could make shares more affordable and enhance liquidity, potentially attracting a wider range of investors. This development raises questions for investors about whether to invest now or wait until after the split.

Palo Alto Networks Tops Q4 Earnings and Provides Strong Guidance

Palo Alto Networks (NASDAQ:PANW) shares rose more than 2% pre-market today after the company delivered strong guidance after reporting fiscal fourth-quarter results that exceeded Wall Street expectations, driven by a surge in deal-making and increased demand for cybersecurity solutions.

The company posted earnings of $1.51 per share on $2.2 billion in revenue, outperforming analyst estimates of $1.41 per share and $2.16 billion in revenue.

The company's Next-Generation Security annual recurring revenue grew by 43% year-over-year, reaching $4.2 billion, as deal-making activity increased.

Looking forward, Palo Alto Networks projected fiscal first-quarter adjusted earnings between $1.47 and $1.49 per share, beating analyst estimates of $1.42 per share. Revenue guidance for the quarter is set between $2.10 billion and $2.13 billion, aligning with the consensus forecast.

For the full fiscal year 2025, the company expects adjusted earnings in the range of $6.18 to $6.31 per share, with revenue expected between $9.10 billion and $9.15 billion.

Palo Alto Networks' Fiscal Fourth Quarter Results Surpass Expectations

Palo Alto Networks (NYSE:PANW) reported adjusted earnings of $1.51 per share, exceeding Wall Street expectations.
Scotiabank upgraded Palo Alto Networks to Outperform, raising its price target from $337 to $385.
The company's performance reflects the growing demand for cybersecurity solutions and its strong position in the competitive landscape.

Palo Alto Networks (NYSE:PANW), a leading cybersecurity company, recently announced its fiscal fourth quarter results, which caught the attention of investors and analysts alike. The company, known for its advanced security solutions that protect organizations across cloud, network, and mobile devices, reported adjusted earnings of $1.51 per share. This figure notably surpassed the Wall Street expectations of $1.41 per share, as highlighted by Yahoo Finance. This performance underscores the company's robust operational efficiency and its ability to exceed analyst predictions, marking a significant achievement in its financial journey.

The positive earnings report comes at a time when cybersecurity is more critical than ever, with businesses and governments worldwide increasing their investments in security infrastructure to protect against growing cyber threats. Palo Alto Networks' ability to outperform expectations reflects not only the increasing demand for cybersecurity solutions but also the company's strong position in the competitive landscape. This performance could be a key driver in attracting more investors and customers to the company, bolstering its market position further.

Following this announcement, Scotiabank upgraded its rating on Palo Alto Networks to Outperform while maintaining a hold position previously. This upgrade, announced as the stock was trading at $333.23, signifies a vote of confidence in the company's future prospects. Scotiabank's decision to raise its price target for Palo Alto Networks from $337 to $385, as detailed by TheFly, further emphasizes the optimistic outlook on the company's performance. This adjustment by Scotiabank reflects a broader market recognition of Palo Alto Networks' growth potential and its ability to sustain momentum in the competitive cybersecurity industry.

The upgrade by Scotiabank, coupled with the company's impressive fiscal fourth quarter results, paints a promising picture for Palo Alto Networks. It suggests that the company is not only navigating the challenges of the cybersecurity market successfully but is also positioned for continued growth. The raised price target by Scotiabank indicates an expectation of upward movement in Palo Alto Networks' stock price, hinting at the potential for significant returns for investors.

Overall, Palo Alto Networks' recent achievements highlight its strength and resilience in a rapidly evolving market. The company's ability to exceed Wall Street expectations and the subsequent upgrade by Scotiabank underscore its solid financial health and the positive outlook for its future. As Palo Alto Networks continues to innovate and expand its offerings, it remains a key player in the cybersecurity space, well-positioned to capitalize on the growing demand for security solutions.

Palo Alto Networks Shares Plunge 6% on Weak Billings Outlook

Palo Alto Networks (NASDAQ:PANW) saw its shares fall by more than 6% in pre-market today as its underwhelming billings outlook overshadowed a solid fiscal third-quarter earnings performance.

The cybersecurity firm's revenue increased by 15% to $2.0 billion, surpassing both the analyst consensus of $1.97 billion and the previous year's $1.7 billion. Adjusted earnings per share (EPS) for the quarter came in at $1.32, beating the forecasted $1.25.

The company's remaining performance obligations grew by 23% year-over-year to $11.3 billion, slightly above the expected $11.28 billion. CEO Nikesh Arora attributed the strong results to customer interest in the company’s platform strategy, which incorporates artificial intelligence into security solutions.

CFO Dipak Golechha pointed to disciplined execution and investments in market and innovation as key factors driving the company's steady, profitable growth.

Looking ahead, Palo Alto Networks provided guidance for Q4 with an EPS range of $1.40 to $1.42, which is in line with the Street estimate of $1.41. Revenue is projected to be between $2.15 billion and $2.17 billion, matching the Street estimate of $2.16 billion.

However, the billings forecast for both the fourth quarter and the full fiscal year, with ranges of $3.43 billion to $3.48 billion for Q4 and $10.13 billion to $10.18 billion for the year, came in slightly below analyst expectations, contributing to the drop in stock price.

For the full fiscal year 2024, the company revised its guidance, projecting revenue between $7.99 billion and $8.01 billion, an increase from the previous range of $7.95 billion to $8.00 billion, compared to the Street estimate of $7.98 billion. Adjusted EPS is expected to be between $5.56 and $5.58, exceeding the consensus estimate of $5.52.

Palo Alto Networks' Fiscal Third-Quarter Earnings Overview

Palo Alto Networks reported an EPS of $1.32, surpassing the estimated EPS of $1.25 and marking the fourth consecutive quarter of beating consensus EPS estimates.
The company announced revenue of approximately $1.98 billion, a 15% increase from the previous year, exceeding both the estimated revenue and the Zacks Consensus Estimate.
Despite strong financial results, PANW shares dropped by more than 8% in extended trading, reflecting the complex dynamics of investor expectations and market sentiment.

Palo Alto Networks recently made headlines with its fiscal third-quarter earnings report, which not only surpassed analysts' expectations but also showcased the company's robust financial health and growth trajectory. As a leading entity in the cybersecurity sector, Palo Alto Networks has consistently demonstrated its ability to navigate the competitive landscape, outperforming estimates and reinforcing its market position. The company's latest earnings report is a testament to its operational efficiency and strategic initiatives aimed at driving growth.

On May 20, 2024, PANW reported an earnings per share (EPS) of $1.32, beating the estimated EPS of $1.25. This performance not only reflects an improvement from the previous year's earnings of $1.10 per share but also marks the fourth consecutive quarter where Palo Alto Networks has exceeded consensus EPS estimates. Such a streak of positive surprises, including a notable 5.60% earnings surprise this quarter, underscores the company's consistent operational excellence and ability to exceed market expectations.

In addition to its impressive EPS, Palo Alto Networks reported revenue of approximately $1.98 billion for the quarter, a figure that not only surpasses the estimated revenue of roughly $1.97 billion but also represents a significant 15% increase from the previous year. This revenue growth is a clear indicator of the company's expanding market presence and the increasing demand for its cybersecurity solutions. The reported revenue also exceeded the Zacks Consensus Estimate by 0.91%, marking the third time in the last four quarters that the company has outperformed consensus revenue estimates.

Despite these strong financial results, PANW shares experienced a more than 8% drop in extended trading following the announcement. This reaction may seem counterintuitive given the company's positive performance, but it highlights the complex dynamics of investor expectations and market sentiment. Additionally, Palo Alto Networks provided revenue guidance for the upcoming period that aligns closely with analysts' estimates, suggesting a steady outlook for its financial performance.

Palo Alto Networks' valuation metrics, such as its price-to-earnings (P/E) ratio of approximately 52.94 and price-to-sales (P/S) ratio of around 18.02, indicate a premium valuation compared to some of its peers. These ratios reflect investors' willingness to pay a higher price for the company's shares, based on its growth prospects and market position. The enterprise value to sales (EV/Sales) and enterprise value to operating cash flow (EV/OCF) ratios further highlight the company's premium valuation in the market. Despite a moderate level of debt, as indicated by a debt-to-equity (D/E) ratio of around 0.34, Palo Alto Networks maintains a solid financial standing, with an earnings yield of roughly 1.89% and a current ratio of approximately 0.84, pointing to potential challenges in covering short-term liabilities with short-term assets.

Palo Alto Networks Fiscal Third-Quarter Earnings Preview

Projected quarterly revenue of $1.97 billion and an EPS estimate of $1.25, highlighting the financial health and expectations for Palo Alto Networks.
The company's adjustment of its outlook is due to "spending fatigue" among clients, setting a cautious tone for the upcoming earnings amidst economic headwinds.
Focus on Palo Alto Networks' "platformization" strategy as a means to consolidate its position as a leading cybersecurity solutions provider.

Palo Alto Networks (NASDAQ:PANW) is on the brink of revealing its fiscal third-quarter earnings, a moment that has garnered significant attention from Wall Street and investors alike. The cybersecurity behemoth, known for its comprehensive suite of security solutions, faces a critical juncture as it navigates through an environment marked by client spending concerns. With an earnings per share (EPS) estimate set at $1.25 and projected quarterly revenue of $1.97 billion, the stakes are high. This upcoming earnings report is not just a reflection of the past quarter's performance but a litmus test for the company's strategic direction amidst economic headwinds.

The backdrop of this earnings release is particularly intriguing, given Palo Alto Networks' recent adjustment of its outlook, citing "spending fatigue" among its clientele. This adjustment has set the stage for a quarter where, despite anticipated year-over-year growth in revenue and net income, there's an expectation of a sequential dip from the second quarter. This scenario underscores the challenges faced by the cybersecurity sector at large, where customer spending patterns are increasingly unpredictable. Analysts, as compiled by Visible Alpha, are keenly awaiting not just the numbers but also insights into how Palo Alto Networks plans to navigate these choppy waters.

A focal point of interest for those tracking PANW's performance is the company's "platformization" strategy. This ambitious approach aims to consolidate its position as a one-stop cybersecurity solutions provider. By offering a broad spectrum of services under a unified platform, Palo Alto Networks is betting on its ability to attract and retain customers looking for comprehensive security solutions. This strategy is pivotal, especially at a time when businesses are looking to streamline their cybersecurity investments in response to broader economic pressures.

The financial metrics surrounding Palo Alto Networks further paint a picture of a company at a crossroads. With a price-to-earnings (P/E) ratio of approximately 44.47, investors are showing a willingness to pay a premium for the company's earnings, a sign of confidence in its future growth prospects. However, the price-to-sales (P/S) and enterprise value-to-sales (EV/Sales) ratios suggest a market that is closely scrutinizing the company's revenue generation capabilities. Moreover, the debt-to-equity (D/E) ratio of about 0.50 indicates a balanced approach to financing, leveraging both debt and equity in its capital structure. These financial indicators are crucial for investors as they assess the company's valuation, profitability, and financial health in the lead-up to the earnings announcement.

As Palo Alto Networks (NASDAQ:PANW) prepares to unveil its fiscal third-quarter results, the broader narrative extends beyond the numbers. It's about the company's ability to adapt and thrive in a fluctuating economic landscape, the effectiveness of its strategic initiatives, and its ongoing quest to redefine the cybersecurity industry. With projected revenues of $1.97 billion and an EPS estimate of $1.25, all eyes are on PANW as it seeks to reassure stakeholders of its resilience and strategic foresight in an ever-evolving market.

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