Core Viewpoint - Palo Alto Networks' stock price declined after the Q3 results and guidance update, which met expectations, indicating that expected news does not drive higher share prices but can support an uptrend if positive [1] Group 1: Financial Performance - Palo Alto Networks achieved a 15% growth in Q3 compared to the previous year, marking the fourth consecutive quarter of acceleration [3] - The company's Next Gen Annual Recurring Revenue (ARR) grew by 34%, surpassing $5 billion for the first time, while remaining performance obligations increased by nearly 20% [4] - Adjusted net income rose by 20%, and adjusted earnings increased by 21% to $0.80, exceeding consensus expectations [5] Group 2: Guidance and Market Sentiment - The revenue forecast aligns with consensus, projecting nearly 15% growth for the next quarter, although adjusted EPS forecasts are at the low end of expectations [6] - Analysts' revisions post-Q3 update are mixed, but the overall sentiment remains bullish, with a majority increasing their price targets [8] - The trimmed average of revisions is $210, indicating a potential new all-time high and a gain of over 15% [9] Group 3: Stock Forecast and Market Position - The 12-month stock price forecast averages $206.59, suggesting a 12.30% upside based on 45 analyst ratings [7] - The stock is currently at a critical support level, with potential to advance quickly to the $195 to $200 range [10] - At the end of FQ3, the company reported a 10% increase in assets, reduced liabilities, virtually no long-term debt, and a 40% increase in shareholder equity [11]

Core Insights - Palo Alto Networks (PANW) reported third-quarter fiscal 2025 non-GAAP earnings of 80 cents per share, exceeding the Zacks Consensus Estimate by 3.9% and reflecting a year-over-year improvement of 21.2% [1] - The company's revenues for the third quarter reached $2.29 billion, surpassing the Zacks Consensus Estimate by 0.57% and increasing from $1.98 billion in the same quarter last year [1][2] Financial Performance - Product revenues increased by 15.8% year over year to $452.7 million, making up 19.8% of total revenues, while Subscription and Support revenues grew by 15.2% to $1.84 billion, representing 80.2% of total revenues [3] - Non-GAAP gross profit rose to $1.74 billion, a 13% increase year over year, with a non-GAAP gross margin of 76.0%, down 60 basis points [5] - Non-GAAP operating income increased by 23.5% to $627.1 million, with an operating margin of 27.4%, up 180 basis points compared to the previous year [5] Deferred Revenues and Future Guidance - Deferred revenues at the end of the fiscal second quarter were $5.76 billion, and Remaining Performance Obligation increased to $13.5 billion, up 19% year over year [4] - For fiscal 2025, PANW raised its revenue guidance to between $9.17 billion and $9.19 billion, compared to the previous range of $9.14 billion to $9.19 billion [6] - The company projects non-GAAP earnings per share for fiscal 2025 in the range of $3.26 to $3.28, with an expected operating margin of 28.2% to 28.5% [7] Fourth Quarter Projections - For the fourth quarter of fiscal 2025, PANW anticipates revenues between $2.49 billion and $2.51 billion, indicating year-over-year growth of 14-15% [8] - Non-GAAP earnings are projected to be in the range of 87 to 89 cents per share, reflecting a year-over-year improvement of 17.14% [9]

Core Insights - Palo Alto Networks Inc (NASDAQ:PANW) shares are down 6.2% to $182.52 following the fiscal third-quarter results, where profits exceeded estimates, revenue met expectations, but gross margin fell more than anticipated [1] - The company has forecasted a strong current quarter and raised its full-year guidance [1] Analyst Reactions - Four analysts have reduced their price targets, with Northland Capital lowering it to $177 from $210, while Wells Fargo increased its target to $235 from $225 and maintained an "overweight" rating [2] - The stock has experienced significant volatility, trading between a high of $208.39 on February 19 and a low of $144.15 on April 7, currently at its lowest level since late April [2] Market Activity - The stock's 14-day relative strength index (RSI) is at 70.9, indicating it is in "overbought" territory, suggesting a potential short-term drop [3] - There has been a notable increase in options trading, with 72,000 calls and 48,000 puts traded, which is ten times the typical volume, with the weekly 5/23 180-strike put being the most popular [3]

Group 1 - Michael Wiggins De Oliveira is an inflection investor, focusing on buying undervalued companies at pivotal moments when their profitability is expected to improve significantly over the next year [1] - The investment strategy emphasizes technology and the Great Energy Transition, including uranium, with a concentrated portfolio of approximately 15 to 20 stocks and an average holding period of 18 months [1] - Michael has over 10 years of experience analyzing companies in tech and energy sectors, and has built a following of over 40,000 on Seeking Alpha [2] Group 2 - The Investing Group Deep Value Returns, led by Michael, offers insights through a concentrated portfolio of value stocks, timely updates on stock picks, and a weekly webinar for live advice [3] - The group provides "hand-holding" support for both new and experienced investors, fostering an active and kind community accessible via chat [3]

Financial Performance - Total revenue for Q3 fiscal 2025 was $2.3 billion, a year-over-year growth of 15.3% compared to $2.0 billion in Q3 fiscal 2024[113] - Product revenue reached $452.7 million, accounting for 19.8% of total revenue, with a year-over-year growth of 15.8%[114] - Subscription and support revenue grew to $1.8 billion, representing 80.2% of total revenue, with a year-over-year growth of 15.2%[114] - Total revenue for the three months ended April 30, 2025, was $2,289.0 million, representing a year-over-year increase of 15.3%[124] - Subscription and support revenue for the three months ended April 30, 2025, was $1,836.3 million, a 15.2% increase from $1,593.8 million in the same period last year[130] - Product revenue for the three months ended April 30, 2025, was $452.7 million, reflecting a 15.8% increase from $391.0 million in the prior year[128] - Net income for the three months ended April 30, 2025, was $262.1 million, which is 11.5% of total revenue[125] - Total gross profit for the three months ended April 30, 2025, was $1,669.7 million, with a gross margin of 72.9% compared to 74.1% in the same period in 2024[139] Expenses and Margins - Gross margin for the three months ended April 30, 2025, was 72.9%, down from 74.1% in the same period last year[124] - Operating income for the three months ended April 30, 2025, was $218.8 million, with an operating margin of 9.6%[124] - Total operating expenses for the three months ended April 30, 2025, were $1,450.9 million, representing 63.3% of total revenue[125] - Research and development expenses for the three months ended April 30, 2025, were $494.5 million, an increase of $37.3 million or 8.2% compared to the same period in 2024[143] - Sales and marketing expenses for the three months ended April 30, 2025, were $718.7 million, a decrease of $73.8 million or 10.3% compared to the same period in 2024[145] - General and administrative expenses for the three months ended April 30, 2025, were $118.6 million, a decrease of $45.3 million or 38.2% compared to the same period in 2024[147] Cash Flow and Investments - Free cash flow (non-GAAP) for the nine months ended April 30, 2025, was $2,535.3 million, compared to $2,635.5 million in the prior year[122] - Cash flow provided by operating activities for the nine months ended April 30, 2025, was $2,695.2 million, slightly down from $2,744.9 million in the previous year[122] - Cash provided by operating activities was $2.7 billion for the nine months ended April 30, 2025, a slight decrease of $49.7 million compared to the same period in 2024[167] - Cash used in investing activities increased by $100.8 million to $1.4 billion for the nine months ended April 30, 2025, primarily due to higher purchases of investments[169] - Cash used in financing activities decreased by $759.0 million to $404.8 million for the nine months ended April 30, 2025, mainly due to reduced cash used for share repurchases[171] - Total cash, cash equivalents, and investments reached $8.5 billion as of April 30, 2025, up from $6.8 billion as of July 31, 2024[154] Strategic Initiatives - In April 2025, the company introduced new offerings such as Prisma AIRS and Cortex XSIAM 3.0, and announced the acquisition of Protect AI, expected to close by Q1 fiscal 2026[115] - The company focuses on a platformization strategy to simplify security architectures and consolidate various products and services[108] - The AI-driven Cortex platform enhances security operations with unified data and automation, providing real-time prevention and automated remediation[110] - The company emphasizes the importance of innovation and timely development of new features to meet end-customer needs and improve competitive positioning[115] Market and Economic Conditions - The company continues to monitor macroeconomic conditions, including inflation and geopolitical tensions, which may impact business performance[117] - The company maintains a two-tiered indirect fulfillment model for sales, working closely with channel partners[113] - Revenue from the Americas increased by $169.6 million or 12.5% for the three months ended April 30, 2025, contributing the highest increase in revenue due to its larger scale[131] Accounting and Financial Estimates - The company has made significant estimates and assumptions regarding goodwill and intangible assets in business combinations, impacting future amortization expenses[174] - A hypothetical 100 basis point increase in interest rates would result in a $124.7 million decline in the fair market value of the investment portfolio[178] - The company maintains a diversified portfolio of cash, cash equivalents, and investment-grade securities to minimize interest rate risk[178] - There have been no significant changes to critical accounting estimates since the last report, except for updates related to the acquisition of certain IBM QRadar assets[173] - The company evaluates its estimates and assumptions on an ongoing basis, acknowledging that actual results could differ materially due to economic uncertainties[172] - Contingent consideration obligations in business combinations are subject to revaluation at the end of each reporting period, which may materially impact future fair values[175] - The company aims to preserve principal, provide liquidity, and maximize income without significantly increasing risk in its investment activities[178] - Recent accounting pronouncements have been reviewed, with expectations of their impact on results of operations and financial condition noted[176] - The company assesses its exposures to market risk, with no material changes reported since the last annual report[177] - Critical estimates in valuing intangible assets include expected future cash flows, discount rates, and profit margins[174]

Core Insights - Palo Alto Networks (PANW) reported revenue of $2.29 billion for the quarter ended April 2025, reflecting a year-over-year increase of 15.3% [1] - Earnings per share (EPS) for the quarter was $0.80, up from $0.66 in the same quarter last year, with an EPS surprise of +3.90% compared to the consensus estimate of $0.77 [1] Financial Performance Metrics - Remaining Performance Obligation (RPO) stood at $13.5 billion, slightly below the average estimate of $13.54 billion from six analysts [4] - Product revenue reached $452.70 million, exceeding the estimated $420.05 million, marking a 15.8% increase year-over-year [4] - Subscription and support revenue totaled $1.84 billion, slightly below the estimated $1.85 billion, with a year-over-year increase of 15.2% [4] - Subscription support revenue was $601.90 million, surpassing the estimate of $599.36 million, reflecting a 9.8% year-over-year growth [4] - Subscription revenue was $1.23 billion, below the estimate of $1.25 billion, but still showing an 18.1% increase compared to the previous year [4] - Non-GAAP product gross profit was $355.10 million, exceeding the average estimate of $329.84 million [4] - Non-GAAP subscription and support gross profit was $1.39 billion, slightly below the average estimate of $1.43 billion [4] - GAAP subscription and support gross profit was $1.32 billion, compared to the average estimate of $1.37 billion [4] - GAAP product gross profit was $352 million, exceeding the estimate of $330.75 million [4] Stock Performance - Palo Alto's shares have returned +21.4% over the past month, outperforming the Zacks S&P 500 composite's +13.1% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Insights - Palo Alto Networks (PANW) reported quarterly earnings of $0.80 per share, exceeding the Zacks Consensus Estimate of $0.77 per share, and up from $0.66 per share a year ago, representing an earnings surprise of 3.90% [1] - The company achieved revenues of $2.29 billion for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 0.57%, and an increase from $1.98 billion year-over-year [2] - The stock has gained approximately 6.8% since the beginning of the year, outperforming the S&P 500's gain of 1.4% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.86 on revenues of $2.49 billion, and for the current fiscal year, it is $3.22 on revenues of $9.16 billion [7] - The estimate revisions trend for Palo Alto has been unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Security industry, to which Palo Alto belongs, is currently ranked in the top 35% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - Total revenue for Q3 was $2,290,000,000, representing a 15% year-over-year growth, at the high end of the guided range [36] - Product revenue grew by 16%, while total services revenue increased by 15% [36] - Next Generation Security ARR surpassed $5,000,000,000, ending the quarter at $5,090,000,000, a growth of 34% year-over-year [39] - Adjusted free cash flow generated in Q3 was $578,000,000 [44] - Total gross margin was 76%, with product gross margin at 78.4% [42] Business Line Data and Key Metrics Changes - Subscription revenue within total services grew by 18%, while support revenue rose by 10% [36] - Software firewall ARR grew approximately 20% year-over-year, driven by public cloud deployments [26] - SASE ARR grew 36% year-over-year, with 40% of SASE customers being net new to the company [28] - AI ARR reached approximately $400,000,000 in Q3, up over 2.5 times year-over-year [39] Market Data and Key Metrics Changes - The Americas region grew by 12%, EMEA by 20%, and JPEG by 23% [37] - The average duration of new contracts remained at approximately three years, with a slight decrease year-over-year [37] Company Strategy and Development Direction - The company is focused on a platformization strategy, which is resonating with customers and resulting in larger deals [6][8] - The urgency to adopt AI is becoming a strategic imperative for customers, leading to increased investments in technology transformation [10][12] - The company aims to reach a target of $15,000,000,000 in ARR by FY30 [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted free cash flow margin targets over the next few years [9] - The geopolitical environment has caused some uncertainty, but the company has executed well despite challenges [84] - There is strong momentum heading into the fiscal year-end, with expectations for a robust Q4 pipeline [33] Other Important Information - The company announced its intention to acquire Protect.ai for $700,000,000 to enhance its AI security capabilities [45] - The transition to a contract manufacturing facility in Texas is expected to benefit from scale and innovation [42] Q&A Session Questions and Answers Question: How are customers thinking about the upgrade from QRadar on-premise? - Management highlighted a strong partnership with IBM to facilitate the transition from on-premise SOC to cloud-delivered SOC, indicating a significant ARR opportunity [50][51] Question: Can you unpack the details behind the product revenue growth? - Management noted that product revenue growth is driven by both hardware and software, with a notable inflection in the software firewall business due to increased AI adoption [62][66] Question: What does the AI imperative mean for Palo Alto Networks? - Management indicated that securing AI implementations is becoming a priority, leading to faster adoption of cloud firewalls and a shift from hardware to software [76][77] Question: How is the company navigating geopolitical volatility? - Management acknowledged that April was an anomalous month but expressed pride in the team's execution during a challenging quarter [84][85] Question: How does the company plan to evolve its AI product portfolio? - Management emphasized the importance of runtime security in AI and the acquisition of Protect.ai to enhance capabilities in this area [89][95]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $2,290,000,000, representing a 15% year-over-year growth, at the high end of the guided range [34] - Product revenue grew by 16%, while total services revenue increased by 15% [34] - Next Generation Security ARR surpassed $5,000,000,000, ending the quarter at $5,090,000,000, a growth of 34% year-over-year [37] - Adjusted free cash flow generated in Q3 was $578,000,000 [42] Business Line Data and Key Metrics Changes - Subscription revenue within total services grew by 18%, and support revenue rose by 10% [34] - Software firewall ARR grew approximately 20% year-over-year, driven by public cloud deployments [25] - SASE ARR grew 36% year-over-year, with 40% of SASE customers being net new to Palo Alto Networks in Q3 [26] Market Data and Key Metrics Changes - The Americas grew by 12%, EMEA by 20%, and JPEG by 23% [35] - The average duration of new contracts remained at approximately three years, with a slight decrease year-over-year [35] Company Strategy and Development Direction - The company is focused on a platformization strategy, which is resonating with customers and resulting in larger deals [5] - There is a strong emphasis on AI integration, with the urgency for customers to adopt AI becoming a strategic imperative [8] - The company aims to reach a $15,000,000,000 ARR target for FY30 [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted free cash flow margin targets over the next few years [7] - The geopolitical environment has caused some uncertainty, but the company has executed well despite challenges [82] - There is optimism about strong momentum heading into Q4, driven by continued transformation and a robust pipeline [32] Other Important Information - The company announced its intention to acquire Protect.ai for $700,000,000 to enhance its AI security capabilities [43] - The company is transitioning to a contract manufacturing facility in Texas to benefit from scale and mitigate tariffs [40] Q&A Session Summary Question: How are customers thinking about upgrading from QRadar on-premise? - Management highlighted the significant ARR uplift from transitioning customers from on-premise SOC to cloud-delivered SOC, emphasizing the potential for large deals [49][50] Question: Can you unpack the details behind product revenue growth? - Management noted that product revenue growth is driven by both hardware and software, with a notable inflection in the software firewall business due to increased AI adoption [60][66] Question: What does the AI opportunity mean for Palo Alto Networks? - Management indicated that securing AI implementations is becoming a priority for customers, leading to faster adoption of cloud firewalls and a shift from hardware to software [72][76] Question: How is the company navigating geopolitical volatility? - Management acknowledged that April was an anomalous month due to geopolitical tensions but expressed pride in the team's execution during that period [82] Question: How does the company plan to evolve its AI product portfolio? - Management discussed the importance of runtime security in AI and the acquisition of Protect.ai to enhance capabilities in this area [88][94]

Palo Alto Networks signage displays on the screen at the Nasdaq Market in New York City, U.S., March 25, 2025.Palo Alto Networks reported better-than-expected earnings and revenue for the latest quarter but its gross margin was below estimates. The stock dropped 4% in extended trading on Tuesday.Here's how the company did, compared to analysts' consensus estimates from LSEG:Earnings per share: 80 cents, adjusted vs. 77 cents expectedRevenue: $2.29 billion vs. $2.28 billion expectedSales in the company's fis ...