Palo Alto Networks, a leading security software company, saw its stock surge in late trading on Friday following an exceptional end-of-the-week earnings report that surpassed Wall Street expectations. This rare Friday release, coupled with an equally unusual two-hour analysts’ meeting scheduled for the same afternoon to disclose long-term guidance and updates, signaled a bold move in the company’s strategic approach.

For the fiscal fourth quarter ending July 31, Palo Alto Networks reported a revenue of $2 billion, marking a 26% increase from the previous year and surpassing the Street’s consensus forecast of $1.958 billion. However, the company’s billings, a term used in the industry to describe business booked but not yet delivered, were at the lower end of the projected range, standing at $3.16 billion, an 18% increase. This intriguing mix of results points towards a complex financial landscape for the company.

Palo Alto Networks Stocks Soar Following Strong Earnings Report

After a rare end-of-week earnings report that surpassed Wall Street’s expectations, Palo Alto Networks’ shares experienced a significant rise in late trading on Friday. The cybersecurity company also held an unusual two-hour analyst meeting on the same day to discuss long-term guidance and other updates.

Surpassing Street Estimates

For the fiscal fourth quarter ending on July 31, Palo Alto Networks reported revenues of $2 billion, marking a 26% increase from the previous year and beating the expected figure of $1.958 billion. Additionally, the company’s billings for the quarter reached $3.16 billion, an 18% increase, albeit at the lower end of the company’s guidance range. The term "billings" refers to business that has been booked but not yet delivered.

The company’s non-GAAP profits were $1.44 per share, which was 15 cents ahead of the consensus estimate of $1.29, and a significant increase from 80 cents a year earlier. Under generally accepted accounting principles, the company’s earnings were 64 cents a share, up from just one cent a year prior.

Full Fiscal Year Performance

Over the full fiscal year, Palo Alto Networks reported a revenue of $6.9 billion, up 25%, with adjusted profits of $4.44 a share. Full-year billings amounted to $9.2 billion, marking a 23% increase. Additionally, remaining performance obligations grew 30%, reaching $10.6 billion.

CFO Dipak Golechha noted in a statement that the company’s "top-line strength showed through" in the remaining performance obligations. However, he admitted that "billings this quarter didn’t fully capture that strength." The company also highlighted that its operating margins increased more than 5 percentage points over the full year as it continued to prioritize profitability.

Looking Ahead

For the fiscal first quarter ending in October, Palo Alto Networks expects revenues to range between $1.82 billion and $1.85 billion, representing a 16% to 18% increase. However, this is below the consensus estimate of $1.93 billion. On the bright side, the company predicts adjusted profits of between $1.15 and $1.17 a share, above the consensus estimate of $1.11 a share. Billings for the quarter are expected to range from $2.05 billion to $2.08 billion, marking an increase of 17% to 19%.

For the fiscal year ending in July 2024, the company projects revenues of $8.15 billion to $8.20 billion, slightly below the Street consensus forecast of $8.38 billion. Nevertheless, the company anticipates adjusted profits of $5.27 to $5.40 a share, comfortably above the Street estimate of $4.98 a share. Billings are projected to grow between 19% and 20%, falling between $10.9 billion to $11 billion.

Market Response

After the announcement of the earnings report and the analyst call, Palo Alto Networks shares had fallen by about 18% previously. However, in late trading on Friday, the stock was up 8.8%, selling at $228.15.

Takeaways

Palo Alto Networks’ latest earnings report demonstrates the resilience and growth potential of the cybersecurity market. Despite the unusual timing of the release, the company’s strong performance across various financial metrics highlights its robust business model. Looking ahead, while revenue projections may be slightly conservative, the anticipated growth in adjusted profits and billings underscores the firm’s optimism about its future performance.