Palo Alto Networks, Inc. (PANW) on Q3 2021 Results - Earnings Call Transcript

Operator: Good afternoon and thank you for joining us for today’s conference call to discuss Palo Alto Networks' Fiscal Third Quarter 2021 Financial Results. I am Walter Pritchard, Senior Vice President of Investor Relations and Corporate Development. This call is being broadcast live over the web and can be accessed on the Investors section of our website at investors.paloaltonetworks.com. With me on today’s call are Nikesh Arora, our Chairman and Chief Executive Officer; Dipak Golechha, our Chief Financial Officer; and Lee Klarich, our Chief Product Officer. Nikesh Arora: Thank you, Walter. Good afternoon and thank you for joining us today for our earnings call. Let me begin with the current cybersecurity landscape. After the December SolarStorm attack, we saw an acceleration in attacks throughout our third quarter and after the quarter closed. These range from software supply chain attacks like SolarWinds and Codecov to ransomware attacks like Colonial Pipeline. Ransomware especially has been in the spotlight recently and data from our own Unit 42 shows that the average ransom paid in 2020 tripled from 2019 and in 2021 it's more than doubled again. The highest demand we’ve seen is $50 million, up from $30 million in 2020, with organized groups with near nation state discipline perpetrating coordinated attacks. The targets are not only corporations where healthcare and pharma is a focus with the pandemic, but also government organizations and shared infrastructure. The reason for this vulnerability is deep seated. Organizations run their operations on technology that is decades old, sometimes predating the internet. They continually bolt on new technologies to automate facilities, and make them compatible with the modern internet, but those platforms are inherently insecure. At the same time, cyber defenses are fragmented, making it very challenging to block sophisticated attacks and lengthening meantime to discovery and repair. Lastly, more and more businesses and consumers are coming online without a baseline of productive protection. In such a scenario, it is imperative that customers focus on securing their most critical assets, while also focusing on reducing the fragmentation and leveraging new technologies like artificial intelligence, machine learning and using those approaches. With that backdrop, let's focus on our results. Overall, we saw continued strong demand environment and our own continued execution drove Q3 billings revenue and EPS side of guidance. We saw billings growth accelerated 27% in Q3 ahead of our 24% revenue growth forecast with growing ratable revenue contribution. I want to highlight one dynamic regarding our billings to help you better understand the drivers. During COVID, some customers were asking for annual billing plans to meet their needs. We noted to you that we saw success with larger, more strategic transactions in Q3. Along with these deals, we saw an uptick in annual billings plans. Normalizing for this, our billings would have grown greater than 28%, nearly two points higher than we reported, which is the highest billing growth we have seen in the third quarter since Q3 of fiscal year 2018. Dipak Golechha: Thanks, Nikesh. I'm excited and humbled to be part of this world-class leadership team. I look forward to driving total shareholder return. As Nikesh indicated, we have a strong third quarter as we continue to deliver winning innovation, while simultaneously adding new customers of pace. The strength gives us confidence to raise guidance for the year. We delivered billings of $1.3 billion, up 27% year-over-year, with strong growth across the Board and ahead of our guidance of 20% to 22% growth. We’ve continued to see some customers ask for billing plans. Many involving larger transactions as we become a more strategic partner to our customers. We’ve also use our Palo Alto Networks financial services financing capability here. The dollar-weighted contract duration for new subscriptions and support billings in the quarter were consistent year-over-year and remained at approximately three years. We added approximately 2,400 new customers in the quarter. Total deferred revenue at the end of Q3 was $4.4 billion, an increase a 30% year-over-year. Remaining performance obligation or RPO was $4.9 billion, an increase of 38% year-over-year. We continue to see these metrics is becoming more meaningful, as we drive growth from our ratable business. Our revenue of $1.07 billion grew 24% year-over-year ahead of our guidance of 21% to 22% growth driven by via billings and broad business strengths and amidst an increase in our audible subscription revenue. We remain focus on driving this high quality revenue with all new product offerings being pure or substantially all subscription in nature. Looking at growth by geography, the Americas grew 24%, EMEA grew 23% and APAC grew 25% showing broad executional excellence across the world. Q3 product revenue of $289 million increased 3% compared to prior year. Q3 subscription revenue of $474 million increased 34%. Support revenue of $311 million, increased 33%. In total, subscription and support revenue of $785 million increased 33% and accounted for 73% of total revenue. Our Q3 non-GAAP gross margin was 74.6%, which is down 60 basis points compared to last year, driven by product mix, which are less mature. Q3 non-GAAP operating margin was 17%, an increase of 60 basis points year-over-year. There are several factors driving our operating margins. We have revenue upside, lower travel and event expenses, due to COVID and some shift in spending out of Q3. At the same time, we continue to aggressively invest the growth largely in the areas of sale capacity and R&D investments. With health conditions improving and geographies of many of our facilities, including our Santa Clara, headquarters. We're seeing more employees look to return to the office. We expect this trend will continue to gain steam in Q4, reversing some of the savings we've seen in the last few quarters in our OpEx. Non-GAAP net income for the third quarter increased 22% to $140 million, or $1.38 per diluted share. Our non-GAAP effective tax rate for Q3 was 22%, the EPS expansion was driven by revenue growth and operating expense leverage with an undertone of strong investments of growths. On a GAAP basis for this quarter, net loss increased $140 million, or $1.50 per basic and diluted share. We ended the third quarter with 9,715 employees, including 39 from the Bridgecrew, at the close of acquisition. Turning to the balance sheet and cash flow statement, we finished April with cash, cash equivalents and investments of $3.8 billion. Q3 cash flow from operations $278 million, increased by 64% year-over-year. Free cash flow was $251 million, up to 100% at a margin of 23.4%. Our DSO was 60 days, a decrease from three days from the prior year period and flat from second quarter. Our Firewall as a Platform, or FWaaP, had another strong quarter, as we continue to grow faster than the market. FWaaP billings grew 26% in Q3, and we continue our transition from hardware and software and SaaS form factors as Nikesh highlighted. Our next generation security or NGS continues to expand, and now represents 27% of our total billings of $346 million, growing at 70% year-over-year. In the third quarter, we added $133 million in new NGS, ARR, reaching $973 million. The acquisition of Bridgecrew, added an immaterial amount to this number, and we remain confident in our plan to achieving $1.15 billion in NGS, ARR exiting fiscal year 2021. Turning now to guidance and modeling points. For the fourth quarter of 2021, we expect billings to be in the range of $1.695 billion to $1.715 billion, an increase of 22% to 23% year-over-year. We expect revenues to be in the range of $1.165 billion to $1.175 billion, an increase of 23% to 24% year-over-year. We expect non-GAAP ups to be in the range of $142 to $144, using 101 to 103 million shares. Additionally, I'd like to provide some modeling points. We expect our Q4 non-GAAP effective tax rate to remain at 22% and our CapEx in Q4 to be approximately $30 million to $35 million. As Nikesh indicated, we're seeing broad drivers across our business in Q3, driven by foundation of innovation and strong sales execution along with trends we see in our pipeline and the long trail demand tailwinds that remain strong, we're raising our fiscal year 2021 guidance. We expect billings to be in the range of $5.28 billion to $5.3 billion, an increase of 23% year-over-year. We continue to expect next generation security, ARR, to be approximately $1.15 billion, an increase of 77% year over year. We expect revenue to be in the range of $4.2 billion to $4.21 billion, an increase of 23% -- 24% year over year. We expect product revenue growth of 1% to 2% year over year. We expect operating margins to improve by 50%, 50 basis points year over year. We expect non-GAAP EPS to be in the range of $597, $599, using $99 to $101 million shares. We expect regarding free cash flow for the full year, we expect an adjusted free cash flow margin of approximately 30%. Now let's review our fiscal year projections for NetSec and ClaiSec. Overall, we are confirming our ClaiSec projections, while raising NetSec billings by 300 basis points and revenue by 100 basis points, given the strong performance of SASE, VM-Series and subscription business overall within that NetSec. Moving on to adjusted free cash flow. We expect Network Security will deliver a free cash flow margin of 42% in fiscal year ’21, up from 38% in fiscal year ’20. We continue to expect Cloud and AI free cash flow margin of minus 43% in fiscal year ’21 an improvement from negative 59% in fiscal year 20. While we are focused on growth investments in Cloud and AI, overtime we expect Cloud and AI to -- to achieve growth, operating and free capital margins in line with industry benchmarks as we gain scale, our customer base matures and we become more efficient. In Q3 we repurchase $350 million in our own stock at an average price of $322. As of April 30, 2021, we have $652 million remaining available for repurchases. This is part of a broader capital allocation strategy focused on balancing priorities and maximizing total shareholder return. We start with fueling organic investments and managing priorities across innovation and go to market to set the foundation for sustainable growth the Palo Alto Networks. Second, we deploy capital for targeted acquisitions which accelerate this growth opportunity. We rigorously evaluate targets, focused on acquiring leading technology, retaining key members of the team and following through with integrating these acquisitions into our businesses. Finally, we work to optimize our capital structure using the options available to us in this dynamic market that includes deploying debts, using stock for M&A consideration and also buying back their own stock when we see it representing the good value. With that, let's move on to the Q&A portion of the call. Walter over to you. Operator: Thanks. . Our first question comes from Brian Essex from Goldman Sachs with Fatima Boolani from UBS on deck. Brian Essex: Hey. Hi, thank you. Good afternoon and thank you for taking the question. Maybe for unit cash, we've seen a lot of solid outperformance relative expectations on a network security side. And nice performance this quarter with respect to Cloud and AI ARR growth. Wanted to get a better understanding, given that the outperformance has been on the network security side, how confident are you in your ability to hit that $1.150 billion guide for the full year? How do we think about, you know, how that business is performed relative to your expectations so far this year? Nikesh Arora: Brian, remember, two or three years ago when we set out targets for next generation security business, we didn't have the muscle networks to figure out how we can get out of the firewall business and have that sales force go out and actually go sell Cloud and AI. The good news is over the last two and a half years we're building muscle, we're learning how the market operates. It's kind of interesting, every one of these markets operate slightly differently. If you look at NGS, it's a combination of SASE, Prisma Cloud and Cortex. Now SASE's characteristic are a lot of the free trials we gave a few quarters ago and this whole push to work from home is forcing customers to think hard about their security stack and it's no longer, you can access half the apps, half the time, you need to be access -- able to access everything from wherever you are. So we're seeing network transformations and that's what's driving the success on SASE and some of the huge wins you had on Prisma access. As I mentioned one of the deals, which we closed and shipped on the first of this month is our largest SASE deal ever, which gave us $7 million of NGS ARR, so you can see approximately the quantum of that deal. So we're seeing a lot of traction on the access front and the SASE front, so that's good. Cortex is an interesting space, because we compete there with people like CrowdStrike and SentinelOne and the others. We're great on the product front as we've showed you the Forrester Wave and the MITRE results. We're trying to create more muscle around being able to do those deals. Those deals are typically, you got to -- because it's a competitive market, you got to do a whole bunch of deals there, and they all range in the $1 million to $5 million range with the higher end and the smaller below that. So you don't get lumpy deals as you have to do a lot more deals, so that's what we're doing on the Cortex front. Last, but not the least, on the cloud front, we got 2,250 customers, but there the deals end up being large deals that are slightly lumpy, and they have very high variability in duration and consumption. So some deals have moved in the cloud, how to buy credit to the next three years, how many credits do I need. They suddenly find their deployment is slower because they haven't deployed fully on GCP or AWS or Azure. Others, you'll say, they've been customers last three years. They're upping because they moved all their workloads to the cloud and their workload ramp is increased. So, all three of them have slightly different characteristics. That's why we end up in a portfolio situation. You saw this quarter we added about $133 million in net new NGS ARR, I just told you about seven more, because I felt you guys are extremely curious in NGS and I don't want you guys to go out thinking we're not confident on 1150. So right now we all feel that we'll get to 1150 on NGS ARR, and it's going to end up being a portfolio call in terms of some things extremely doing extremely well something doing normal. Brian Essex: Got it. Got it. Thank you for that. And then maybe a follow-up with Dipak. Appreciate the commentary on the improving operating efficiency or potential to improve the operating efficiency of cloud and AI. And I think that's one of the things that investors kind of struggle with when I think we've all looked at this business on the sum of the parts basis and the performance of each on its own, in the challenge with cloud AI that its burning cash at the rate that it is, what do you think about the term -- the timeline for improving profitability and cash flow generation from that business, because I think that might be a trigger for investors to maybe look at that business on a standalone basis and assign it a little bit more value? Dipak Golechha: Yeah. So, maybe if I answered in two different ways. I mean, we look at what other companies have done as they've kind of like grown through there -- they've scaled over time. And we often benchmark ourselves versus where were they at this time and are there things that we can do to be able to get there. But at the same time, we're not shy from like making the right investments, if we see the opportunity there. So that's why I don't want to really box ourselves into a timeframe. It really is a question of what opportunities are out there at the time, so we have a base plan that's constantly improving, but we're also reflecting on the fact that this is a dynamic market, and sometimes you need to lean in, if it makes sense for the long-term. Nikesh Arora: Yeah. If I can add to that. Brian Essex: Great. Thanks. Oh, go ahead. Nikesh Arora: Yeah. There are two parts one, as Dipak, highlighted. We continue to work hard towards getting gross margin efficiency on those products because the product development is in our control, and Lee who's sitting to my right, he and his team work hard at trying to make sure that we optimize the gross margin part. The rest of it honestly is the question of how much do we want to invest in sales capacity to be able to drive those? Don't forget, in each of those areas, we are dealing with extremely competitive situation. In the case of XDR we deal with dedicated salespeople from CrowdStrike, they outflank us 8:1 on the number of salespeople. So we have to look hard at how much investment we want to make on the sales side. We do get leverage with the Palo Alto sales people, eventually end up with hand to hand combat. On the Prisma Cloud side, I'd say we were doing fine and we are doing fine. But suddenly the equity of the venture markets have gone and provided phenomenal valuations and dumped a lot of cash in some very early stage companies who are not dangling large paychecks to our sales people got the most qualified cloud security sales. And so, that's why I think Dipak is right in saying that, we're going to watch the market carefully. But again, we just told you another number. $250 million in ARR in cloud security, VMs and public cloud security. That's a number which is -- outflanks our next competitor by probably 25 times. Brian Essex: Super helpful color. Thank you. Operator: Great, Thanks. So just a reminder, let's limit to one question. So next up is Fatima Boolani and on deck is Keith Weiss from Morgan Stanley. Fatima Boolani: Thanks Walter. Nikesh, maybe I'll start with you very quickly. You talked through a lot of the areas of strength from a product pillar perspective. But in terms of just zooming back, can you stock rank for us what specific product areas in the NGS portfolio really were the drivers of billings acceleration in the quarter? And then I have a quick follow up for Dipak, please. Nikesh Arora: Yeah. As I highlighted, SASE is strong. Dipak highlighted the subscriptions are strong. We're pleased with the way Cortex is evolving and cloud ends up being lumpy. So some quarters we’ll get some very large deals, and then make up the billing. Some quarters they push. But across the board, the portfolio is performing in line with our expectations or slightly ahead, as we said, we hit 973 or 980, depending on how you count it. Fatima Boolani: Very good. Dipak, nice to meet you. Operator: Well, we’re just going to go to -- let's just go one question. Let's -- we're going to move on next to Keith Weiss with Sterling Auty from JPMorgan on deck. Keith Weiss: Excellent, thank you guys; Very nice quarter and thanks for taking the question. I think, you guys are doing a very good job of illustrating the -- there's a difference between firewall appliances and more generally firewalling capabilities. And you're seeing that firewall is a platform growth, sustained really well, actually accelerating in recent quarters. And I think that's probably one of the key areas that investors are most cautious on, is the durability of growth and firewalling. Can you talk to us a little bit about where you're seeing that strength from? Do you believe it to be durable over the next couple of years, and is there anything that we should be watching out for in terms of tough compares or any one-time items from a year ago period that might upset that that growth trend that you've been seeing in firewall as a platform? Nikesh Arora: Well, I’ll gave -- I’ll make two comments, Keith. One is, is there are situations where the customers are looking for, like you say, firewalling capability. We can walk in and say we can solve this problem with software or we can go deploy tons of hardware to solve the same problem. So take a large retailer, then go deploy 1,200 firewalls in each of their stores; if they choose to go down the hardware route, which is more costly to deploy, harder to maintain, harder to upgrade over time; or we can go in and say, let's do that with Prisma SASE, which is a software dependent solution, which has lower cost of ownership, easier deployment, easier to solve. So you're seeing us create some degree of substitution in our customer base. So if you compare us like-to-like with some of the leading hardware firewall businesses, which don't have that strength in that software capability, they cannot deal that substitution capability, which we think is better for the long term, because we just point to the ARPU. So look, we can grow ARPU at 38%. That just means we have future revenue coming down the pike on the FwaaP front, which is going to be harder to hunt and kill on a quarterly basis, if you were hardware only business. So I actually think there's more resilience in our network security business than most hardware develop -- dependent businesses. The second piece, I would say, in that context is what was proxy based architectures is now full firewall in the cloud. We’re seeing that in space and Prisma SASE, people are stepping back and saying, okay, let me understand this, how do I get my trading system to be accessible from an employee's home, you can do that with proxy based architecture. We talked about that and we're seeing that really bear out in the success we're seeing in Prisma SASE. My fellow colleagues Walter and Dipak will not let me throw out more stats in that area, but I'll just say I'm extremely delighted with the progress we've made in SASE from where we came. 2.5 years ago, there used to be a product called GPCS, and we would shudder, like you said the onetime items. There was one deal when I came to Palo Alto, we sweated the entire year to see how we left that in the following quarter. Now we do six of those in the quarter. And we've got tons and tons lined up in our pipe going forward. So SASE is strong, which should give us continued strength. I think the network transformation is in a very, very early stage. If you think about it, if you see AWS, GCP, Azure clipping $40 billion, $50 billion of billing in a quarter, all those customers are going to stand up and realize wait I'm relying on MPLS based architectures to go back to my data center, now I don't need to go there, I need to go to a public cloud. And to do that, you got to go SASE. Right now, we firmly believe we have the best SASE solution in the market. We firmly believe that we have the most deployed customers out there at scale. Operator: Great, Thanks. Next question from Sterling Auty and Saket Kalia from Barclays on deck. Sterling Auty: Hi. Thanks. It's fun to see Walter on the other side trying to keep us to one question after all these years. I want to follow up on Keith’s question as well on FWaaP. Help us understand what are the metrics that we should look at in terms of and you gave a little bit of this last quarter, but when look at your install base of the on-premise appliances, as some of that starts to transition to FWaaP, is that happening? And if it does, how is the dollar-for-dollar comparison? In other words, do your customers still end up spending more, does they are still expanding under FWaaP versus their traditional clients? Is it smaller or the same? Nikesh Arora: I'm going to bring in my colleague Lee Klarich, who spends a lot of his time making sure that these transitions work, and we see these transitions happen, Lee. Lee Klarich: Yes. Thank you, Nikesh. Good question, and actually last quarter we provided some insight into this, if you remember. There's effectively two transitions that we see play out. One transition has to do with movement of applications from data centers to the cloud, where the form factor often is changing from a hardware form factor to software form factors, VM series etcetera. The other transition is from -- based on how the employees and users are moving increasingly obviously, moving off the network and soon moving to more of a hybrid state where, in that case, it often is moving from hardware to hardware plus cloud-delivered SASE architectures. And so as you think about those, the net effect of all of it is positive for us in terms of the overall spend from customers. There's some puts and takes, hardware going to VM-Series and the cloud is relatively similar, hardware going through SASE is actually typically an uptick in overall spend because it's not just like-for-like, it's actually SASE includes network as a service. And a lot of the networking components, global network reach etcetera and so the overall spend envelope becomes larger as more of the capabilities actually get integrated into the service that we're delivering to customers. So overall, positive and we've been now tracking this and have history of this for a few years to be able to actually see how that plays out. Sterling Auty: Great, thank you. Operator: Great, thanks. Next question from Saket Kalia from Barclays, and then Matt Hedberg from RBC next. Saket Kalia: Okay, great. Thanks for taking my question here. Nikesh, maybe for you. Can you hear me okay, Walter? Operator: Yeah. Saket Kalia: Okay, cool. Nikesh, that was helpful commentary on the equity structure around ClaiSec. I guess the question is what were some of the things that went into your decision to explore that last quarter, and then maybe reconsider it this quarter, and is it a matter of timing given the volatility in the market or would you say that the probability of exploring that down the road is still relatively low. Nikesh Arora: I think Saket as we went through the mechanics of creating all the paper work required to file this. The debate began to happen with some of our shareholders, as look, the true value creations and they actually can take this and separate it, because you'll still have a stub or some sort of tracking stock. And the challenge with separating it, as you saw, 70% of our customers are buying multiple platforms. 40% of our customers are buying all three platforms. We're getting into conversations with CIO, and somebody goes to a breach or ransomware when they want to go, wall-to-wall and say, listen, come protect me, protect my cloud, protect my sock, protect my network transformation. And then we’re suddenly saying, look, we have all this vantage point from where we are, where we can go pitch all three platforms and go on the lock the customer with security and we're creating this artificial separation amongst ourselves, we're not going to be leveraged that. So that definitely went through the decision. I think the question which I can keep practicing. So just asked around to Deepak about the funding of ClaiSec vis-à-vis NetSec, I think, we'd still have to make that a self-standing profitable entity in its own due course. And I think it's too early to go think about separating that into distinct businesses, because we're getting phenomenal leverage from our firewall sales teams, who are sort of one and a half decades trying to build the relationships and get them better than our customers did. Saket Kalia: Very helpful. Thanks. Operator: Great, thanks. Great. Thanks. Next question from Matt Hedberg from RBC, and then we've got Tal Liani from BofA next. Matt Hedberg: Thanks Walter. Hey, Nikesh, I wanted to talk about, all these recent breaches you alluded to President Biden, talking about the importance of zero trust. I guess, how do you think about that impacting your federal business later this year. And then also, as these breaches continue to accelerate in a post-COVID world, do you think you're going to be in a better position to consolidate security spending, there's always that debate on best of breed versus consolidation. Is this just accelerate your demand environment even more so? Nikesh Arora: Matt, what interesting is, let's start with the second part first. Like, clearly, whatever approach was used to buy security hasn't worked, right? And we've traditionally been in a best of breed approach. You got the companies, they have 35, 25, 40 vendors, and this act of stitching all those solutions together is left on the shoulders of the customer. You coupled that are the two biggest technological transitions that have ever happened in the history of computing. One is the shift to the public cloud, but you have to fundamentally change your IT architecture. And the second is network automation that you're going through, driven by the cloud. So, CIOs are dealing with those two technology transitions and at the same time, having to take a hard look at security and bolstered up. And I think there, if you look at historically, I don’t think there has been many security companies who have been able to give you best of breed solutions across multiple capabilities. So our firewalls, nine times, top right, magic quadrant of our own capability, whether it's sassy or hardware firewalls, VMs fit in the category, so they can get the best firewalling capabilities across three different architectures, XDR measures the top right and Forrester Wave. We're the only cloud security native security company with Prisma cloud. We are top right in SD LAN and we're top right next sort of there was a corner. So we actually have the ability to give you a stitched set of products across five leadership positions, which is not available today in the cybersecurity industry. So, we're able to make the both the best of breed, and stitch platform argument right now, and is resonating because customers who are going through these agonizing times are stepping back and saying, wait, I need to look at it from a different approach. And I can go -- how can I go with a partner, where I can hold accountable for my entire security footprint. Operator: Great. Thanks, Matt. Next up is Tal Liani with Keith Bachman from BMO on deck. Tal Liani: Hey, I have an accounting issue -- accounting question. Great results, ARR, were better than expected, at least some people expected some issues there, but I looked at your filing and you change the definition of ARR a little bit this quarter, you edit the language. When I compare the language of this quarter versus last quarter, you edit the language that this quarter it includes certain cloud delivered security services to ARR, would you mind to quantify this addition was it material to the numbers this quarter? Thanks. Dipak Golechha: I'll take that question. It's really not material to be overall, we added a couple of cloud delivered technology solutions like IOT in one example, when you have all of them that they're relatively de minimus in nature. Tal Liani: Got it. Thank you. Nikesh Arora: The early launches of our products and we want to make sure they fit in the right bucket. Nikesh Arora: We can sell IoT against Cortex. Cortex data lakes and they sit in both places in our firewall business and in our cloud AI business. Tal Liani: Great. Thank you. Operator: Next up is Keith Bachman and then Gray Powell from BTIG. Keith Bachman: All right, thank you very much. Nikesh I want to ask you to flesh out Cortex, a bit more in terms of run rate and expectations feedback we've been getting from the channels is Cortex certainly is doing better and I was wondering if you could talk about win rates, where you're winning. Some of the reasons why? Is there any metrics you can give us on growth associated with the Cortex brand, whether it's revenues or billings? Nikesh Arora: Well, I can't give you a metric we haven't given, but I'll tell you, Cortex comprises three products; one is XDR, which we compete with as you see with CrowdStrike and SentinelOne. I think the challenge we have there is our product as you can see, has technically been now ranked better than CrowdStrike and at par with SentinelOne and others. The challenge we see is we don't have as much coverage as CrowdStrike, so they're in more deals and we are, and that's a virtue of the fact that they have eight times more dedicated sales people chasing the XDR category and we don't. Where we do end up against them, we pretty much don't lose technical PLCs, obviously because of the, you've seen the technical comparison market, then it becomes a price war, and we don't bend over on the price war. So, we see reasonably good win rates against them where we are present. I think our challenges were not present in as many deals as we'd like to be present and because they've got us -- they've been at it for seven years, we've been at it for two and a half. So, that's kind of like the XDR solution. XSOAR, it used to be Phantom and demister, for the most part we don't see much competition in the XSOAR category. We think pretty much where the customer believes they have a need, they will go with XSOAR, so we're not we don't feel challenged in that market, but it's a moderate deal size, it's not the deal size of cloud which can get to eight figures. It's a deal size just smaller than that, but we do see less competitive activity in the XSOAR category. And last but not the least access management is a newer category where people are beginning to understand that the hackers can look at the entire vulnerability footprint from the outside, so you're better off having a clear view. For example, any customer that goes into a Breach Report ransomware actually wants to understand that the entire footprint and the vulnerability associated with it. So we end up having an engagement expense, whenever that happens. What is going on is that with the formation of Unit 42, we're getting more and more involved in more incidents out there, and that's allowing them to drag and drop XDR and Expanse in those early days, but we have merged the forensic capabilities for example of Crypsis, which used to be a product called Hadron that has been embraced into XDR, that will go live very shortly, where our cars were where our incident responders can go deploy XDR and provide all the forensic capabilities that they do when a breach happened. So early days we are seeing more traction on Cortex, I think we announced that we have 2,400 customers. The only -- the real upside and opportunity for us is to go ahead and execute at scale over there to get into more and more deals, because the product is there. Two years ago – 12 months ago we didn't have the product. Keith Bachman: Right. Okay. Terrific. Thank you. Operator: 0Thanks, Keith. Next up is Gray Powell from BTIG. And on deck is Adam Tindle from Raymond James. Gray Powell: Hey, great. Can you hear me okay? All right. Thanks for taking the question. So yeah, maybe back on Prisma Access, what's been the reception with Prisma Access 2.0 so far? And do you see that product update with proxy capabilities getting Palo Alto into more traditional secure web gateway replacement deals or potentially improving the pace of new logo ads on the product set? Nikesh Arora: Yes. Look, we're really excited about the 2.0 launch a few months ago, great reception from customers, really excited about everything that was in the launch. Remember, this is where we introduce cloud management. So cloud native experience, onboard – easy onboarding activation. This is also where we launched the first ever Autonomous Digital Experience Management add-on module. So this allows our customers to monitor the actual end user experience that they're seeing through the service to the applications are accessing in addition to the proxy capabilities and cloud-based technology, et cetera. So it was a big release, very well received. The adoption, almost all of the Prisma Access customers have now been upgraded to 2.0 and very smooth upgrade process, we're seeing great adoption to cloud management, close to 100 customers are now using that in just the first couple months of availability. The Autonomous DEM, we're getting great feedback from customers from early adopters and growing the pipeline of that that's an add-on module that we can go and sell back into the Prisma Access customers as well as new customers. And you know the proxy capabilities interesting is, as you know the -- we still believe most customers are going to want the full fledged capabilities of Prisma Access and not just the proxy capabilities, but that capability has achieved what we wanted is remove that as an objection. It's allowed customers who need it, to be able to move to Prisma Access and just remove that as a criteria. And so we're seeing a number of customers that are testing that and using it and happy we added it and made the change. Gray Powell: Okay. Great. Thank you very much. Operator: Thanks, Gray. Next up Adam Tindle from Raymond James and then Michael Turits from KeyBanc. Adam Tindle: Okay. Thanks. Good afternoon. Congrats on the results. I wanted to ask on profitability, whether it's Nikesh or Dipak wants to weigh in. You're seeing deal sizes increase. You're seeing cross platform adoption and those were helpful metrics for us. We typically associate those with very healthy contribution margin. You did talk about 50 basis points of operating margin expansion this year, but I wanted to ask beyond this. Do you think that this is something where you can build on, you're hitting a turning point and we could see sustained margin expansion from here? You’ve talked about a 150 basis points annually, a couple of years ago at an analyst day, wondering the puts and takes to get back to that level of margin expansion? Thanks. Nikesh Arora: I think the honest answer is it's pretty situational, right. I mean, I think every – every customer deal is different and like we're obviously going to lean in, if we have to, you know, in order to do that but I think what really drives us, is making sure that we don't leave any money on the table. I certainly think that as the portfolio grows, as the attack surface area becomes more complicated, hopefully, the leverage moves more within towards our favor over time and that will help us over time. But I think in general, I would stand by, it's always a focus area for us and we believe that with scale will come from margin expansion over time. But at the same time, we just don't want to leave opportunities on the table, if they're there for the taking. Dipak Golechha: Yes. Just adding to that Adam, I read your note, thank you for your enunciation and upgrade. I noticed that you talk about operating margin leverage and as many folks have highlighted in this call, we have two businesses, the Network Security business, where you can see the leverage, 42% free cash flow margins are still growing at 26% of billings and 38% or some number out here, the metric is different. But, so, we see that’s where the leverage is. We use that leverage towards a ClaiSecc businesses. In the history of cybersecurity, nobody's build a 735 million ARR business in 2.5 years. So let's just take stock and pause and – and we didn't buy all of it. We bought some products into it but it has been built by a lot of go-to-market capability. If you benchmark that against the CrowdStrike and the Okta to the world, or the Zscaler to the world, you'll see there's a natural evolution, which doesn't happen in two years. So, do we believe there is operating leverage in future years? Yes we do. It becomes a real question, do I want to go hire another 300 sales people, and beat as many deals as CrowdStrike or do I want to hire 100 salespeople and have a lower growth rate, because I don't believe I have the capability on the product side. Palo Alto Networks has never been in a position like today from a product capability perspective. Our products resonate, we rarely get thrown out because our products don't correct. And given the heightened security awareness in the market, we're seeing more traction because, as you guys know, our products are on the margin slightly more expensive or premium than some of the other players in the market. As the security awareness or heightened you know, desire to have a more secure product goes up, they’re better for us because the customer is more willing to be – willing to be tolerant of a price point associated with Palo Alto Networks. So honestly, I think I'm repeating what Deepak said, is that, we don't want to toddle the growth opportunity for us. When I came to Palo Alto, we were growing at the low 20s. Now we just showed you 27 And you know, maybe 28, 29 if you adjust for the annual plan stuff, and that's acceleration and we'd like to see if we can maintain high growth rates going forward and that requires us to invest and look for leverage in future years, we'll do that as a management team. Operator: Thanks. Next question is from Michael Turits at KeyBanc and after that Patrick Colville at Deutsche Bank. Michael Turits: Yes, thanks. Nikesh, I think one of the – one of the you know investment features here has been that you're the company, most likely to balance, consolidate security, but to make that transition to software and to the cloud, and you're proving that out, but that said, you’ve also has been doing a great job this year on the product/appliance side up to 3% year-to-date versus what you got to do a flat. So I'm just trying to get a sense for the dynamics of that in the next three calendar quarters. Do you – could we get a boost from refresh of what wasn't done last year and is there any constraint to that, if it's going to happen from supply chain components? Nikesh Arora: That’s a great question, Michael. I think the supply chain situation changes weekly. And you can see all those machinations play out in the market. As you can imagine like other players in the market, we have some degree of inventory capability vis-à-vis we are expected demand in the upcoming in the shorter duration and a longer duration, all bets are off in the industry, depending on how they bring up more fabs to go print out the chips and get them to us. So the good news is, as I highlighted we move 40% of our firewalling business software. So, if the industry starts to see supply constraint, we are able to solve the customers problem by giving them capability which is software based and we obviously will still have our baseline availability of hardware. We do have the units available for the recent announcements for hardware launch, which we just did, which we can talk about in a second. But again, I know we've talked about this Michael and we keep going back and forth on this is that, I honestly look at the overall capability of the firewalling capability and as much as I like product. I also like the idea of having more or less and less reliance on hardware because I promise you in a few years from now you're going to tell me, love your business but you still got this hardware hunt and kill requirement every quarter, and then you go punch the ticket and give me hardware. So we're trying to thread the needle with you here, trying to give you a great firewalling goes through to revenue growth side. Keep the cash flow high and still transform our business from hardware to software. But Lee you want to talk about this, firewall? Lee Klarich: Sure. While we're, you know, transition the business there's still a wonderful business out there for hardware and the two new models that we just announced yesterday are pretty exciting really. We introduced a new high end appliance scales up to 150 gig throughput with all security turned on, 75 gig with full SSL decryption; Just amazing product for the large campus data center environments. And then, at a - for the branch environments, smaller enterprise environments, we announced four new appliances in the 400 series that basically 10x the performance of the previous platforms we had. And one thing is -- I think particularly interesting about how we were bringing these new products to market is, we have all of the leading security capabilities that health networks is known for. But we're bringing them out of price points that are incredibly competitive with even the -- some of the lower cost vendors out there. And so, we're same capability. Same great capabilities leading capabilities. But at super competitive price points, change the dynamic in the hardware space, competitive space. Nikesh Arora: I can’t get Lee to say – wanted to say, keep saying leading competitors. Yes, we follow on the great security ex-pricing. You can’t do it. Michael Turits: Okay, fine. Operator: Last question here from Patrick Colville with Deutsche Bank. Go ahead. Patrick Colville: Thank you for squeezing me in. I was actually going to ask about new appliances because I think that's a super interesting, but Lee covered it pretty comprehensively there. The questions we’d been getting from investors over the last hour has been about the definition of change on ARR. Do you mind just quantifying what the certain cloud delivered security services, how much is that in 3Q versus 2Q? Nikesh Arora: Let me get that cracking. When I said that it was deminimus. It's less than $5 million. So just as a kind of like a -- an overall number to be able to work very quickly. Patrick Colville: Great. Very clear. Thank you so much. Operator: Great. And that concludes the Q&A portion of the call. Thank you all for joining and asking the questions. We're – I am going to turn it back over to Nikesh for closing remarks. Nikesh Arora: Hey. I just want to take the opportunity to thank you all for joining our call. I also want to take the opportunity to thank the employees at Palo Alto Networks for all their hard work and dedication to allow us to produce these results. We are here because of what they do. So once again, thank you everyone. And I look forward to seeing you guys in our individual call backs.
PANW Ratings Summary
PANW Quant Ranking
Related Analysis

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.