Cybersecurity firm Palo Alto Networks reported fiscal first-quarter earnings and revenue that topped Wall Street targets amid slowing growth in its core network firewall market. But billings guidance for PANW stock in the current January quarter and fiscal 2024 fell short of estimates.
The company released fiscal Q1 earnings after the market close on Wednesday. On the stock market today, Palo Alto stock fell 5.4% to close at 242.30.
For the quarter ended Oct. 31, Palo Alto earnings rose 66% to $1.38 a share on an adjusted basis. Further, revenue for PANW stock rose 20% to $1.9 billion, including acquisitions.
Analysts expected earnings of $1.16 a share on sales of $1.84 billion.
PANW Stock: Billings Growth Misses
Billings climbed 16% to $2.025 billion, missing estimates for 18% growth.
"Palo Alto delivered a disappointing quarter with billings growth of 16% that was $45 million below consensus expectations while revenue and pro forma EPS outperformed," said William Blair analyst Jonathan Ho in a report.
He added: "The company attributed the shortfall to customer preferences for shorter duration deals and only 65% of customers paying up front. While Palo Alto has offered attractive financing to reduce some of these impacts, the company opted to accept shorter-term deals in lieu of unfavorable economic deals."
For the current quarter ending in January, Palo Alto forecast revenue of $1.97 billion at the midpoint of guidance, only meeting expectations. The company predicted billings, a sales growth metric, of $2.36 billion, below estimates of$2.41 billion.
For full-year fiscal 2024, Palo Alto lowered its billings outlook to $10.75 billion at the midpoint of guidance from $10.95 billion. Analysts had modeled billings of $10.96 billion.
Network Firewall Appliance Sales Slowing
In fiscal 2024, Palo Alto revenue growth is expected to slow to around 19%, vs. 25% in the previous fiscal year. Management has told analysts that companies are taking longer to approve computer security purchases.
In addition, sales for firewall network appliances have slowed. Firewall appliances protect computer networks by blocking online intrusions and monitoring web-based apps. However, Palo Alto has built a broad cloud-based security platform through acquisitions. Cloud software revenue is becoming a larger part of overall sales.
Heading into the Palo Alto earnings report, the cybersecurity stock had advanced 85% in 2023.
PANW stock holds a perfect Composite Rating of 99, according to IBD Stock Checkup.
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