Palo Alto Networks, Inc. (PANW) on Q1 2021 Results - Earnings Call Transcript
Karen Fung: Good morning. And thank you for joining us on today’s conference call to discuss Palo Alto Networks’ Fiscal First Quarter 2021 Financial Results. I am Karen Fung, Senior Director of Investor Relations. This call is being broadcast live over the web and can be accessed on the Investors Section of our website at investors.paloaltonetworks.com. Nikesh Arora: user conference which stats tomorrow morning. This is my tenth quarterly call at Palo Networks. The one thing in common between the first and the tenth is they were both 5 am calls. I finally feel that we're turning the corner on all that we've over the last few years. We have a lot of interesting stuff in store for you on this call. In addition to sharing our first quarter results, we will discuss the financial impact of our proposed acquisition of Expanse. Since Luis joined us last quarter, he and I have had the privilege and opportunity to talk to a lot of you. And based on the feedback, we've come up with a more transparent approach to understanding our business. And hopefully, it gives you a better understanding of what we have been up to and a way to think about Palo Alto Networks 2.0. Over the last 7 months, I've been cautious on the pandemic, and our teams have continued to deliver and surprised me to the upside. I'm delighted to report this is no longer a coincidence. Our customers are investing, our teams are executing and our strategy of innovating in our firewall business and focusing on the next-generation of products around cloud and AI in the industry is working. As you can see, we had a great start to fiscal year 2021 as we exceeded guidance across all metrics in Q1. Here are some of the highlights. We delivered strong billings of $1.08 billion, up 21% year-over-year with strong growth across the board, driven by continued strength in Next-Generation Security or NGS Billings growing at 53% year-over-year and NGS ARR of $719 million. Revenue was up 23% to $946 million, driven by strength in our cloud-based subscription and support revenue businesses. Non-GAAP EPS was from last year. EPS expansion was driven by revenue growth and operating expense leverage due to efficiencies as we have seen across the industry from lower spend associated with travel and events around COVID. Adjusted free cash flow margin was 53.4%. As mentioned last quarter, we expected a strong cash quarter following the record Q4 2020 billings. We think some of this will continue into the next quarter, but we expect this to normalize for the year around our full year guidance. This continued strength during the pandemic makes me cautiously optimistic about the future prospects of the business. While we expect the winter will try all of our collective resolve with COVID, the worst-case scenarios are unlikely to unfold, and we expect our customers to continue to invest in technology. I also feel that the strategic bets we made a few years ago are right for our customers in the current environment. Luis Visoso: Thank you, Nikesh, and good morning to everyone. Before I start, I'd like to know that except for revenue and billings, all financial figures are non-GAAP and growth rates are compared to the prior year periods unless stated otherwise. As Nikesh indicated, we had a great first quarter as we delivered – as we continue to deliver winning innovation and add new customers. The strength gives us confidence to raise our guidance for the year. In Q1, total revenue grew 23% to $946 million. Looking at growth by geography, the Americas grew 27%, EMEA grew 16%, and APAC grew 11%. Q1 product revenue of $237 million, increased 3% compared to the prior year. Q1 subscription revenue of $428 million, increased 34%. Support revenue of $281 million, increased 26%. In total, subscription and support revenue of $709 million, increased 31% and accounted for 75% of total revenue. Turning to billings, Q1 total billings of $1.083 billion, net of acquired deferred revenue increased 21%. Strength was broad based, as we continue to see strong execution across the company. The dollar weighted contract duration for new subscriptions and support billings in the quarter was up slightly and remained at approximately three years. Total deferred revenue at the end of Q1 was $3.9 billion, an increase of 31% year-over-year. Remaining Performance Obligation or RPO was $4.4 billion, an increase of 40% year-over-year. In addition to adding approximately 2,200 new customers in the quarter, we continue to increase our wallet share with existing customers. Our top 25 customers, 24 of which made a purchase this quarter, spend a minimum of $57.2 million in lifetime value through the end of fiscal Q1 2021, a 37% increase or the $41.7 million in the comparable prior year period. Q1 gross margin was 75.8%, which was down 80 basis points compared to last year, mainly driven by higher mix of our NGAs products, which are less mature. Q1 operating margin was 21.7%, an increase of 590 basis points year-over-year. The operating margin expansion is driven by operating expense leverage as we benefit from lower travel and event expenses due to COVID, which more than offset the incremental investment in headcount. We ended the first quarter with 8,376 employees, including 156 from Crypsis at the close of acquisition. On a GAAP basis for the first quarter, net loss increased to $92.2 million or $0.97 per basic and diluted share. Non-GAAP net income for the first quarter increased 51% to $158.1 million or $1.62 per diluted share. Our non-GAAP effective tax rate for Q1 was 22%. Turning to cash flow and balance sheet items. We finished October with cash, cash equivalents and investments of $4.1 billion. During the first quarter, we purchased $500 million or 2.1 million shares of common stock at an average price of approximately $242 per share. We have returned $2.7 billion to shareholders since Q1 2017 through the repurchase of programs and ASR where we repurchased 15.1 million shares of common stock at an average price of approximately $179 per share. Q1 cash flow from operations of $535 million, increased by 138% year-over-year. Free cash flow was $505 million, up 184% at a margin of 53.4%. As we mentioned last quarter, this was driven by the strong cash collections, following Q4 2020 record billings. DSO was 81 days, an increase of 18 days from the prior year period. We expect another strong collections quarter in Q2, which is expected to bring our DSO down to historical levels. Turning now to guidance and modeling points. For the second fiscal quarter of 2021, we expect billings to be in the range of $1.17 billion to $1.19 billion, an increase of 17% to 19% year-over-year. We expect revenue to be in the range of $975 million to $990 million, an increase of 19% to 21% year-over-year. We expect non-GAAP EPS to be in the range of $1.42 to a $1.44 using 98 million shares to a 100 million shares. Additionally, I would like to provide some modeling points. We expect our Q2 non-GAAP effective tax rate to remain at 22%. CapEx in Q2 will be approximately $30 million to $35 million. As Nikesh reviewed earlier, for the full fiscal year 2021, we will be raising our guidance across all metrics. We expect billings to be in the range of $5.08 billion to $5.13 billion, an increase of 18% to 19% year-over-year. We expect next-generation security, ARR to be approximately $1.15 billion, an increase of 77% year-over-year. We expect revenue in the range of $4.09 billion to $4.14 billion, an increase over 20% year-over-year. We expect revenue – product revenue to be flat year-over-year. We expect operating margins to improve by 50 basis points year-over-year. We expect non-GAAP EPS to be in the range of $5.70 to $5 80 using 99 million to 101 million shares. Regarding free cash flow, for the full year, we expect an adjusted free flow margin of approximately 29%. With that, I’d like to open the call for questions. Operator: In the interest of time, please limit Q&A to one question. Our fist first question comes from Walter Pritchard from Citi Group. Walter Pritchard: Hi, thanks. Can you hear me? Nikesh Arora: Yes. Hey, Walter. Walter Pritchard: All right. Great. Thanks. So I guess, you've seen really strong customer ads around Cortex and around Prisma and have – I think your Global 2000 Fortune 500 penetration is pretty strong here. Can you talk about where you are in terms of standardization amongst some of those clients and how you think about revenue from those products around up-sell versus new customers going forward? Nikesh Arora: Look, we have a different answer for both of them. As you know that our Cortex XDR platform is only about two quarters old and we're delighted that we're crossing 1,000 customers in that category. We continue to see opportunity in penetrating both our existing customer base and new customers as far as XDR’s concern. As you know, we keep launching more capability in our XDR platform. We want to go from being able to just normalize data across their endpoints and firewalls to more and more data sources. And with the combination of Expanse, we think that's a very powerful proposition, we think in the future, it's no longer about aggregating data and throwing it into a large data lake and running analytics. It's about being able to normalize the data. So I think we are early in the transformation of data and AI-based security around Cortex, and this is a very long runway ahead of it. In terms of Prisma Cloud, what's fascinating, as we highlighted an example in the call, where we had a customer who kind of estimated how much workload and how much capacity they need into cloud as they ran through it in a quarter. That's what we think over time happens to all the cloud customers because it's kind of interesting. The gap between how much people have actually sort of move to the cloud versus how much is ahead of them is huge. I'd say it took us two years to get to the cloud, to get 70% of the capacity of our data centers in the cloud. We had to buy everything two years ago to start ramping up to get there. So we think all of our customers are early in their ramps, relatively speaking. Some of them are further along. But we think most customers are early or maybe in the first or second innings of a ramp. And we think there's a long runway ahead as well for the cloud part. So in cloud, we're really focused on customer acquisition and landing customers. That's why we keep sharing with you 70% of the global Fortune 100 or 20% of Global 2000 because we think the more customers we can have, we expect consumption to keep growing for each of those customers. Hence, we have a consumption base order for most of our products now because the more they consume, we expect recurring remediates show up. Does it give you a better sense for it? Walter Pritchard: Yes, thank you. Operator: Our next question comes from Keith Weiss from Morgan Stanley. Keith, I think he might be on mute. Nikesh Arora: Are you went back to sleep? I know it was a long call, Keith, not that long. Operator: We will move on to the next caller Sterling Auty from JPMorgan. And then we'll move back to Keith afterwards. Sterling Auty: Thanks, guys. Thank you very much for the additional disclosure, incredibly helpful, but just want to make sure I understand how should we think about, you gave the guidance for total product revenue improved to flat year-over-year, but I'm just kind of curious what impact you're seeing from SD-WAN and other areas that might actually provide some further improvement in that product growth rate as we move through the year? Nikesh Arora: Sterling, thank you. We include the SD-WAN revenues mostly in our Prisma SASE product, which goes in the overall firewall as a platform billing. So you will see the impact of SD-WAN and our firewall as a platform billings number. Then we continue to see strengthen the SD-WAN category, as well as the entire SASE categories I mentioned. I think most remote work transformation, network transformations are not done. They're early in their sort of journey. And I think most of our customers are realizing that they're going to have to migrate their network infrastructure to more of an SD-WAN style infrastructure, as well as then we'll probably have to sustain a 100% percent capacity for remote working for much longer than anybody thought. Sterling Auty: But I thought with the two products, one of it was on box. I didn't know if that was going to have the ability to provide some pull-through for some additional product, as well as we moved through the year? Nikesh Arora: Even that on box SD-WAN subscription is part of our subscriptions number, which again shows up in the FY billings number. In this new left-hand side we just showed you. Sterling Auty: Understood. Thank you. Nikesh Arora: No problem. Operator: We will try this again. The next question comes from Keith Weiss from Morgan Stanley. Nikesh Arora: Good morning, Mr. Weiss. Keith Weiss: Good morning. Can you guys hear me now? Nikesh Arora: Yes. Luis Visoso: Yes. Keith Weiss: Excellent. So I thank you for taking the question, bearing with me and my technical difficulties. Very nice quarter. Loved the Expansive disclosure. I think it's a really good view on the overall business. I wanted to get a little bit more onto the firewall side of the equation. I think it's going to surprise guys as both the growth in sort of the overall customer base. I think it was up 8,000 on a year-on-year basis, as well as sort of the overall and a billings growth in that business. Can you talk to us a little bit about one kind of where the customers are coming from, how you guys are expanding that overall firewall base? And then two, what are the kind of vectors of growth we should be thinking about on a going forward basis? Like where are we in terms of subscriptions per customer? How far can that go on a going forward basis? As well as kind of like the virtual versus physical mix, like how much further is that taking up your spending per customer? Nikesh Arora: Yes, I think, Keith, the best way to think about it is that the software side of that business continues to see strong growth. The SASE pieces, Prisma access pieces, the SD-WAN capability and CloudGenix, that is also where we capture our subscription growth. Our subscriptions have gone from four to eight. We just launched the LP, which is getting sort of lots of interesting – a lot of interest from our existing customers. IoT which is very early still for us. It's also getting a lot of interest from our customers. SD-WAN ends up being part of a larger SD-WAN sort of infrastructure deal where they will turn on the SD-WAN capability in the firewall, and then they will also buy pure SD-WAN with CloudGenix and the architectures work, so they work together. So we expect most of the growth is going to come from the software side of the house. As we shared the VMs, I have gone over 10,000 customers. We've seen a lot of interest and activity there in the VM space. As we highlighted, we've launched the 5G capability, containerized firewall 5G capability, which is unique in the industry. We're going back to our service provider partners and saying, look, this is what you need to get 5G done, right? And to help your customers leverage 5G use cases that they're deploying. So I expect a lot of the growth should come in the software side. The hardware customers are mostly refresh and some are existing customers. In some cases, you'll see people go away from legacy vendors who provide hardware firewalls. Sometimes we will see hardware wins, which come as part of an overall platform deal where people want to deploy the entire Palo Alto blueprint across their infrastructure. So hardware is harder than software, especially in the current environment. Keith Weiss: Got it. Excellent. Super helpful. Thank you guys. Operator: Our next question comes from Fatima Boolani from UBS. Fatima Boolani: Good morning. Thank you for taking the questions. Can you hear me? Nikesh Arora: But just for you, because you didn't believe that we were growing a business on the other side. Fatima Boolani: I could see that. Thank you for that. I'll keep it tight. Nikesh, if I can ask you to put a mix hat on for a second. Into fiscal 2021, you're going to have an even bigger portfolio than you did in fiscal 2020. So I'm wondering if you can speak to, or at least quantify to what extent enterprise adoption agreements or enterprise licensing style agreements are becoming a bigger part of your overall sales motion particularly as you look to drive more next-gen solution adoption activity? Nikesh Arora: Yes, the enterprise agreements typically kick in stronger in renewables than in the first phases of our deal. So a lot of the deal – a lot of the original, the only business comes as on a product by product basis until we get to a scale where customers is, wait a minute, it makes much more sense for me to go consolidate all that stuff. It's rarely you'll see somebody walking in salon a $20 million, $30 deal. And let's go rip out everything in our infrastructure and replace with Palo Alto Networks. We see that it happens incrementally over time with our customers, as they get one product, they enjoy it, they get the next set of products, and we've seen that happen on a recurring basis in the last two, two and a half years I've been here. We expect they will continue to be important, but they're typically kicking in renewal. So we have reasonably good visibility as to which customers are up for renewal where it makes sense for them to be pitched enterprise agreement. But they play their fair role in our renewal capability. Well, we make sure that our teams understand that you cannot just renew somebody and call it an enterprise agreement. There has to be a significant amount of upsell and deployment of new products into the customer base before qualifies for enterprise agreement. And this hat is a little smaller. I tried on the weekend. Operator: Our next question comes from Jonathan Ho from William Blair. Jonathan Ho: Hi, good morning. And congrats on the strong results. I just wanted to start out with, getting a sense for how the integration with CloudGenix is going and maybe what the initial customer feedback has been with the combined products? Thank you. Nikesh Arora: I'm going to have my friend Lee Klarich to answer that question, since he's been sitting, just smiling. Go ahead, Lee. Lee Klarich: Thank you, Nikesh. Good question, Jonathan. We’ve seen in the SD-WAN space in particular is even though it provides obviously a lot of value to customers, it's still can be very clunky. It can still be very difficult to roll out deploy operationalize. And obviously the approach for CloudGenix, we think we address many of those challenges, but further the integration with Prisma Access, where we can also deliver the cloud network and integrate those two together. And as you heard Nikesh stated earlier, we recently introduced an ability for those to be deployed with basically one-click integration. And so all of that combination that we bring together as SASE is starting to resonate with our customers, and we see that as the future architecture for how customers are going to connect their branch offices, remote sites to a cloud of our network with cloud security and address those deployment challenges while gaining the best security they can. Operator: Our next question comes from Brian Essex from Goldman Sachs. Brian Essex: Hey, good morning. And thank you for taking the question. Thank you for me as well, and the additional metrics around NGS. It's really helpful. I know investors have been waiting a while for that. Maybe, Nikesh or Luis, how should we think about two things, one the gross margin progression is that just a function of the delivery on cloud infrastructure? And then two, seasonality, so comparing this to your overall business from a margin perspective, at what rate might this business be in parity with the rest of the business? And then from a seasonality perspective, I noticed that billings were seasonal this quarter similar to the larger business. How do we think about that on a go-forward basis? Thank you. Luis Visoso: Yes. I think we – to the second part of your question, we will always see a little bit of seasonality with Q4 being stronger than Q1, right. So that would be kind of normal. In terms of gross margin, yes, we have strong plans, as you would imagine. And as Nikesh mentioned, we do expect to get very competitive gross margins over the next few years. We have very clear plans that include efficiencies in our cloud and AI business, so you should expect that business to significantly improve over time. And as I said, we have very concrete plans to achieve that. Brian Essex: Is that maybe just on infrastructure side? Or is there something else driving that margin? Nikesh Arora: As I mentioned, Brian, on the last call, the two largest parts of the gross margin are clearly are cloud infrastructure pieces. And we have worked hard both in Luis' team and in Luis' efforts in trying to lease those cost down. And we have a very clear line of sight as to how and when those costs will go down, so we're very comfortable saying that those gross margins should improve significantly in the next two to three years, that’s one part of it. The other part is, as you know, this is the revenue against cost metric and revenue comes in ratably, the costs come in front-loaded in customer success. Our deployment costs and customer deployment requirement is like we have to deploy $1 million deal in two months right now. At our cost to point the deal is now the $1 million come over two years. So you will see as that business scales, the customer success pieces in the pre-course gross margin numbers become relatively smaller compared to the total revenue side, but that also gives you a natural margin progression in the right direction. Brian Essex: Fair enough. Thank you. Operator: Our next question comes from Philip Winslow from Wells Fargo. Philip Winslow: Great, thanks for taking my question. And again, thanks for the added transparency in terms of disclosure. Obviously, it's a very strong quarter with a lot of very positive metrics here. One that really stood out to me was on Prisma Cloud. Customers using compute – shift to cloud security is something that we've been focused on for a while. But it feels like that's hitting an inflection point. So I guess a question for Nikesh and Lee. What are you hearing from customers about sort of adoption of computes or understanding of sort of the evolution of security in the cloud? Nikesh Arora: I think we've maybe mentioned before the – I think a lot of early cloud adoption from enterprises was sort of more lift and shift. We saw take an application in the data center and simply move it to the cloud without rearchitecting it, without leveraging a lot of the benefits of the cloud. And the more mature companies, from a cloud perspective, are now taking more of a cloud-native approach. And those cloud-native approach sometimes is obviously leveraging PaaS services, but one of the key aspects is increasingly using containerized security architectures and deployment architectures. Interesting enough, that also sometimes comes back on-premise as well. And so as there is a greater and greater usage of containerized architectures, cloud-native architectures, the Prisma Cloud compute security capabilities become very important. And this obviously, for us, comes from the acquisition of Twistlock. We made about 1.5 years ago. And at the time it was best-in-class. We continue to invest in it and continue to receive great feedback from our customers when they do take advantage of it. Philip Winslow: Great, thanks team, keep up the great work. Nikesh Arora: Thanks Philip. Luis Visoso: Thanks. Operator: Our next question comes from Gray Powell from BTIG. Gray Powell: Great. Thanks. Can you hear me okay? Nikesh Arora: Yes. Gray Powell: Cool. So yes, I maybe want to go back to an earlier question on the core Firewall side. How should we think about attached subscription growth on the core Firewall side? Because I think you have four new subscriptions, some of them seem to be getting pretty good traction. You introduced a higher cost premium support to your – but at the same time, product revenue growth is flattening out, which means that the installed base and subscriptions going to attach to is flattening out. So I'm just trying to think like how those two things should net against each other? Nikesh Arora: Well, they shouldn't net against each other because you see the four new subs that we've added, we believe, should be applicable to majority of our customers. And most of our customers don't have them. I mean, the one which has seen some traction, which we talked about last quarter, was our DNS Security sub, which is penetrated over 5% or 6% of our base. So we expect there is still a lot of runway in the new subscriptions to be able to penetrate our base of 70,000-plus Firewall customers. So we don't think that, that should all be on top of the product base that we have out there. And whilst product revenues are flat, our install base continues to rise because this is a one-time sale. Every time we sell, it's to, hopefully, a new set of customers. And over time some of them renew. So I think you are still seeing customer acquisition as is it evident from the 8000 new customers we have between last year and this year. Although they are prime candidates for subscriptions that get attached. In addition to that some of these customers whilst they might be flat from product revenue, they are deploying Prisma SASE or Prisma Access, also deploying VMs where VMs and Prisma Access also allow you to do subscriptions. The subscriptions are not specific only to our hardware business. You can get as of soon DLP with Prisma Access, you can get IoT with Prisma Access. So our subscriptions go past, they apply not only to the 70,000 hardware customers, they apply it to a significant part of our 10,000 software virtual firewall customers or a 1000 Prisma SASE customers. Gray Powell: Got it. That's really helpful. Did you say DNS is already at 5% to 6% penetration about that's only been out like a year? Lee Klarich: About 18 months? Yes, I'd say we said 3000 last quarters, 3000, I think, my math says is approximately… Nikesh Arora: Your math is good. Lee Klarich: My math is good in the morning. Yes. Gray Powell: Alright, thanks. Lee Klarich: Early in the morning. Gray Powell: Thanks. Nikesh Arora: That’s great. Lee Klarich: Just want to make sure, 5% was right. Operator: Next question comes from Andy Nowinski from D.A. Davidson. Andy Nowinski: Great thank you. And congrats on a good start to fiscal 2021. At a high level question, when you look at the thousands of new customers, you added this quarter, I'm curious what percentage started with just your cloud AI products, or do most customers start with the network security products? Just trying to get a better understanding of which one is driving a new logo growth. Thanks. Nikesh Arora: Yes, my CFO will not, let me tell you the number of exact number of new cloud AI customers. But I will tell you there's a significant part of the – both of the Fortune 100 and Global 2000 base, where they have no interest in some of our hardware products, because these are born in the cloud companies, so they are going through cloud transformation. So we are seeing a reasonable number, a significant number of customers, be our first time customers in Prisma Cloud customers who had no interest in buying a firewall because many of them don't have a substantive data center, but they have a cloud presence because that's kind of what they chose to go with. And now with the eight modules, seven modules we provide in Prisma Cloud, they find it interesting to go down that platform route. Many of our customers who are on the defense side or the financial services side where we've not had such a strong presence are getting – we are seeing renewed interest, both in the cloud transformation, as well as the data collection capabilities, Cortex XDR and hopefully expense in the future. So, we're seeing a new set of customers we're able to address with our cloud AI solutions, which we were not able to address with our hardware capabilities. Andy Nowinski: Thanks Nikesh. Nikesh Arora: You are welcome. Operator: This question comes from Saket Kalia from Barclays. Saket Kalia: Okay. Hey, good morning. Can you hear me okay? Nikesh Arora: Yes, Saket. How are you? Saket Kalia: Okay. Excellent. Good. Nikesh how are you? Luis, maybe for you, maybe just shifting gears to profitability for a second. I think the operating margin guide for fiscal 2021 is going up slightly. And I believe that too is consolidating the Expanse cost base. Maybe the first part of the question, my thinking about that right. And then secondly, more strategically, longer term on that cloud and AI business, who do you sort of benchmark yourself against in terms of where that profitability can go long-term? Nikesh Arora: Yes, to your first question, yes, margin is off slightly year-over-year. So yes, we are raising our guidance on margin, so you are right. And you are also right our fiscal year margin is impacted by Expanse, which we basically offset all of that. Right. So we factored that in and we covered the cost and even though – even despite of that we’re going on. And yes, we're benchmarking ourselves against the best you have in the market, right. And we want to get towards those margins as well. And we think it's very reasonable to do that as we gain scale and as we deliver the savings that we talked just a few minutes ago, right. Some of the savings that we are working with Lee’s team, Lee and his team, and some of the savings that we think we can get just as we gain more scale. So that should clearly improve. But that's kind of where we're going. Now think about some of the best-in-class companies out there. And that's where we're benchmarking against to deliver. Luis Visoso: Yes, Saket just to add to that and this is not a reporting question. Part of the reason we wanted to make sure you understand this split and the difference in the two businesses is you want to reinforce that our firewall business is as good as any other firewall business out there in the industry because I got calls about, hey, you are seeing an overall decline in gross margins that because your firewall was under pressure. No it’s not. I think the other part I want to make sure that you see is that it's kind of like maybe we do and we're looking, but it's very hard to build a $735 million business from scratch in 18 months. I want to show you that we're building that business in parallel to continuing to focus on the firewall business. And to an extent, the overall gross margin, operating margin are somewhat not fully in our control as management. And we want to show you the reason that we're investing in the right hand side is because we can drive that ARR growth at very high double digit for a longer period of time. For that we need to continue to invest. And we're just showing in the run we invest. You'll see the – you will see the transparency where we're investing, where we're not investing, where we're leveraging and showing your expansion where we're continuing to invest. We're investing in both, obviously not to the same levels. Prisma SASE is a brand new product category for us in our firewall business. And to be honest, I will tell you this in two years from now when you look back, you'll say, yes you guys did a great job, transforming your business to hardware, to software because there's a high probability the industry starts to slow down on hardware because people realize they are moving faster to network transformation, cloud transformation. And when that happens, you need two years of prep work together. Saket Kalia: Very helpful. Thanks guys. Luis Visoso: Cool. Operator: Our next question comes from Patrick Colville from Deutsche Bank. Patrick Colville: Hey there, thanks again for the new disclosure. It's going to echo to others. I mean, absolutely awesome to see that. So I just want to circle back to Fatima's question about enterprise agreements. So can you just help us understand, I guess at Palo Alto Networks what you define as an enterprise agreement versus just a kind of regular, multiproduct deal. And the reason I asked is because we know in our conversations with resellers we're hearing Palo Alto and enterprise agreement a lot more. So I guess – and I guess the second part of my question is, is there any disclosure you can give us around what proportion of billings are from enterprise agreements? Thank you. Luis Visoso: Thanks Patrick. Thank you for the congratulations. And first of all, I'm looking at Lee just to confirm what I'm going to say, is that we have no enterprise agreements wherever we blend Cloud AI and network security. Lee Klarich: Correct? We don't. Luis Visoso: So first and foremost, any of the cloud and AI stuff does not get bundled with our hardware deals or does not get bundled with software deals. We probably have no enterprise agreements where we blend all of our Prisma SASE and hardware and software firewalls. We don't. So Prisma SASE deals and also independent of that. So most of our enterprise agreements are still firewall plus subscription agreements, whether they are hardware and software and a subscription, they are still the agreements that have continued in Palo Alto Networks for the last 15 years. None of the new stuff is included in enterprise agreements because we don't believe that we have to create cross-product discounting to try and encourage customers to use them. We want our new products to stand on their own, and be sold on their own and be able to – be on a consumption model, which is much more transparent and much easier to manage if they're not part of it, large bundle discount deal. So that's answer number one. Our enterprise deals refer to hardware plus subscription updates. So in that context, any customer who wants to do an enterprise agreement with us is probably an existing hardware customer with subscriptions, where they are going to buy more subscriptions and promise to buy more hardware from us over the next three years. And that's why you do an enterprise agreement, saying hey, I'm going to go from a 100 firewalls to 200 firewalls if I paid you so much money for all your subscriptions in the next three years, can I have a deal where I don't have to keep being every time I buy a new firewall for subscription. So most of our enterprise deals take on the form of if you commit to a large amount of hardware purchase, you can get a bundled price for subscriptions, which you don't have to pay incrementally for. That's the nature of our deals. Hence, our EAs are pretty much dependent on our hardware business. And as I said to a question earlier that most of our EAs are based on renewal deals because nobody walks in front saying, I want to buy the state of thousand firewalls tomorrow sign me up. It's typically I've got 200 more I'm going to get 200 because I'm through a transformation of Palo Alto Networks, can I just hurry up and get a renewal of a larger number if I commit to more hardware because I love your product. Operator: Our next question comes from Matthew Hedberg from RBC. Matthew Hedberg: Hi guys. Thanks for taking my question. And I'll offer my congrats again. Disclosures are really, really helpful. I guess I have a question for Lee. In a post-COVID distributed world, I have to think DLP takes on a new level of importance. Can you talk a little bit more granular about how you guys differ in your approach to cloud DLP versus others? And how much of that is a new business i.e., as a result of distributed work or increased cloud migration, or how much of it is legacy DLP replacement? Lee Klarich: Yes. Thanks for the question, Matthew. When you look at the DLP market, it's been around for a long time. It hasn't changed a whole lot during that time. And it was therefore sort of designed and architected for a very on-prem world. It largely assumes that employees all show up to the office, applications are all in the data center and everything is sort of well contained. As you look at today's world, users are – employees are working from anywhere, applications are increasingly running into cloud and the legacy DLP on-prem architecture does not work as well anymore. And so what we've done is built a DLP service that runs in the cloud and then can connect into all the different enforcement points that are needed, whether that's one of our hardware devices in the data center, prem whether that's Prisma Access, whether that's Prisma Cloud for cloud workload and storage security. And so we can take that single DOP cloud engine and integrate it with all of those enforcement points, really designed for this new way in which networks are deployed, applications are deployed. And so we think that's a very more appropriate architecture and we're getting it's early, but we're getting very positive feedback from our customers and interest in that approach. Matthew Hedberg: Thank you. Operator: Our next question comes from Rob Owens from Piper Sandler. Rob Owens: Good morning. And thank you for taking my question. Given you are the first to report in October quarter on this really early Monday morning, I was curious if you can give us kind of a broader read in terms of what's going on internationally looked like domestic was strong, but rest of the world growth rates ticked down a little bit versus where they were in the back half, or even the quarter from a linearity standpoint, given your dates, billings outstanding, ticked up, I guess, on a year-over-year basis and went a little higher than it was previously. Thanks. Lee Klarich: Well, there's a varied impact around the world, given where people are on this pandemic scale and degree of difficulty in terms of being able to execute in their own environments here, we still see that different parts of Asia are doing better than the others because they're going through their emotions of trying to deal with the pandemic. See similar behavior in Europe, we saw in early part of the quarter was normal in Europe. It's gotten subsequently harder because Europe has started to shut down. So we're seeing different impacts across the Board. But as you know, these deals don't happen in days. These deals happen in months. So there's already always work that's been going on for the last many months for these deals to culminate towards the end of the quarter. So generally speaking, as I said, you know, Europe is okay, it is scattered, the U.S. continues to be strong. I think as I said, we are going to get tested in the, and I don't mean COVID testing the COVID is going to test us. We do get tested pretty much, very often, but COVID is going to test all of us in the next three months, because I think the winter is coming. And we're hoping that all the work that the teams have been able to do in the last few months will bear through the winter. But yes, I think, international continues to be – look, there's two parts to it, one is native strand, the other is investment. So we are continuing to invest internationally because we were not as invested, I would say internationally two, two and a half years ago. We're making investments around the world. We're also investing in making sure our cloud and AI businesses are visible across various customer bases because in many cases, the hardware business, hadn't been able to be of much significance many countries around the world, but we're going back and re-investing in cloud and AI. So I think that counteracts some of the natural weakness based on the pandemic. But we'll see what happens the next few months. Rob Owens: Alright, thank you. Operator: Our next question comes from Gregg Moskowitz from Mizuho Securities. Gregg Moskowitz: Okay. Thank you for taking the question. Nikesh, your next-gen security ARR and billing and growth for me is impressive. Especially now that you're lapping tough comps. What I'm wondering is what are the one or two NGS products that haven't yet contributed much, but that you think is only a matter of time before they move the needle on growth. Nikesh Arora: That was, that was a, quite an impactful way to end the question. But the NGS products, it's kind of interesting as I parse them down, we include Prisma SASE and NGS. We continue to see tremendous amounts of traction in Prisma SASE. Prisma Access continues to go from strength to strength. As I mentioned, we think we four or five, 10 quarters ago, Prisma Access was GPCS, it didn't kind of have enough traction. Now we see tough comps being lapped with great numbers, partly driven by the pandemic response, partly driven by the fact that finally near standing at the top of the roof and claiming the proxy solution that don't fully work. If somebody is hearing him because people want a full-stack firewall and the firewall in the cloud. So a lot of success for Prisma Access front. We think that continues to sustain itself SD-WAN and SASE going forward for the next few years. Prisma Cloud is kind of a different story. It was kind of like, we'll see more benefits in the future because right now we're in expand mode, land mode and we're getting more and more customers, but really we are dependent on the customers’ ability to transform their existing infrastructure to the cloud. So we're getting in there, we're getting our modules in, we're trying to do upsells, get them to use more and more of our product. As they spend more – put more workloads in the cloud Prisma Cloud will see continued ARR growth in the future. On the Cortex XDR front, it's competitive with many XDR vendors out there. Again, we're seeing traction because we have a large install base of traps, which many of that is converting to XDR. We're also seeing new customers where we compete to the likes of Cylance, Crowdstrike and , et cetera. And there, XSOAR, we think is now way larger than any other automation product out there from a security automation perspective. And we think the combination of Expanse, and XDR and XSOAR holds tremendous promise. But I think that's more a next fiscal year thing. This fiscal year I expect Prisma Access, Prisma SASE, I expect the Prisma suite to do really well and XDR to really – XDR to do really well independently. I think we'll see more and Expanse expense plus XDR in the next fiscal year. That gives you a better sense. And of course, VMs continue to do great for us because people are finally realizing you can put a virtual firewall against your third instance and they need one. Operator: Our next question comes from Tal Liani from BofA. Okay. I don't think we have Tal. So I'll move on to our last question and will come from Brent Thill from Jefferies. Brent Thill: Thank you. Nikesh just on the go-to-market this year can you speak to any changes that you're making in the go-to-market motion? Is it anything new this year largely unchanged from last year? Nikesh Arora: Brent, thanks for the question. Look last year, the year before that, when I started, we had a large kicker to get our NGS jump-started and hopefully a billion dollars ARR by the end of this fiscal year, it tells you that we were able to jumpstart it, although that caused some consternation in our product business, as you guys are fully aware of. So we normalized that last year. So we did not create that much of a jump between NGS and a product and things have stabilized. I'll tell you that the one change we've made this year and you should see it in the left side and right inside, be sure you, we have focused our cloud AI team to believe, to build ACV and ARR, right? And our Network Security business is more TCV oriented. So if you were ever to see an impact or shrubs, the way what's going on your billings versus ARR, and that's why we started this disclosure today about showing you the left-hand side is very focused on revenue, operating margin, gross margin and billings, the right-hand side is a very much an ARR business because we believe the huge opportunity we have in front of us should be focused on ACV. And that's why, answering Patrick's question about what do we do with the EAs, I don't want to, bury next-generation regarding revenue products in the EAs because sometimes the EAs you get customers buying a lot of stuff then they choose what they want to use later. I'm focused on making sure every one of our cloud and AI product gets deployed the time to value is very high or short, the time to value short and value is very high. I want to make sure there's consumption increased, I want to make sure there are contracts in place will allow people to spend more as they consume more. So the big shift we made at this time of big or minor shift is we've made sure people focus both on the ARR side and the TCV side, in our business, our sales team. As you can imagine, we didn't have an ARR business. We can report ARR, but we didn't have any ARR focus on our firewall business. I hope that helps answer the question. Brent Thill: Thank you. Operator: That concludes the Q&A portion of our call. Thank you all for your questions. I'm going to turn it back to Nikesh for closing remarks. Nikesh Arora: Well thank you, Karen. And thank you everyone for dialing in. And, I want to normally not what I would do in an earning’s call but I want to applaud the work of Luis and our finance teams. This was a tough, close to get done in 10 days before our user conference. At the same time, based on your feedback, we spent a lot of time with auditors and others to make sure that we were able to show the split because all of you wanted more transparency in our cloud AI business and network security business. I hope you see, by just disclosure, we are building two great businesses at Palo Alto Networks, and we are going to continue to focus on trying to build a share of our value across both these segments and we'll keep looking as to what's the best way to increase more transparency and see if it makes sense on the longer-term to be more regular about these updates. But hopefully you found that disclosure useful. I want to thank you again. I wish your families and you have very safe and happy Thanksgiving next week. We look forward to seeing many of you in our upcoming weeks at our investor conferences. I know I'll be talking to some of you shortly after. I also want to, once again, shout out to our Palo Alto Networks family, our employees, our customers, and our entire ecosystem thank you very much, everybody. And go Palo Alto Networks.
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.
