Palo Alto Networks, Inc. (PANW) reported better-than-expected results for the third quarter of fiscal 2024. The company reported non-GAAP earnings of $1.32 per share for the third quarter, which beat the Zacks Consensus Estimate of $1.25. The bottom line improved 20% from the year-ago quarter’s non-GAAP earnings of $1.10 per share and came above the company’s earlier guidance range of $1.24-$1.26.Palo Alto’s third-quarter revenues of $1.98 billion beat the Zacks Consensus Estimate of $1.97 billion and rose ...

Key PointsPalo Alto Networks stock price dipped on a surge in billings that have no bearing on company health or future growth.Guidance was narrowed to a range bracketing the consensus; guidance expects 10% to 11% revenue growth in Q4. Analysts are raising their targets and leading this market to retest its all-time high. 5 stocks we like better than Palo Alto NetworksPalo Alto Networks' NASDAQ: PANW share price is down more than 5% following its FQ3 release, which provides an attractive buy-the-dip opportu ...

Palo Alto Networks Inc (NASDAQ:PANW) reported a fiscal third-quarter earnings and revenue beat after yesterday's close, but the security slipped after also issuing a weaker-than-expected billings outlook. Shares are down 6.6% at $302.46 at last check, with the brokerage bunch doling out two price-target cuts and two hikes in response to the results.Today's bear gap has the equity swinging to a year-to-date loss, but it still boasts a 31.2% year-over-year lead. Shares yesterday hit their highest level since ...

About this content About Josh Lamb After graduating from the University of Kent in the summer of 2022 with a degree in History, Josh joined Proactive later that year as a journalist in the UK editorial team. Josh has reported on a range of areas whilst at Proactive, including energy companies during a time of global crisis, aviation and airlines as the sector recovers from the pandemic, as well as covering economic, social and governance issues. Read more About the publisher Proactive financial news and ...

Key TakeawaysPalo Alto Networks shares fell nearly 9% in extended trading Monday after the cybersecurity firm issued a lackluster current-quarter and full-year outlook.The company's muted guidance has raised concerns about its recent move to a consolidated cybersecurity platform aimed at driving growth among cautious enterprise customers.Palo Alto Networks shares find a zone of support between $281 and $295 from the 50-day moving average and price action over the past five months. Shares in Palo Alto Networ ...

Financial Data and Key Metrics Changes - The company reported Q3 revenue of $1.98 billion, with product revenue growing by 1% and total service revenue increasing by 20% [35] - Subscription revenue grew by 25%, while support revenue increased by 11% [35] - The company achieved a 15% growth in revenue and a 3% growth in billings, with a 47% growth in next-generation security ARR [11][35] - Operating margin expanded by 200 basis points year-over-year, resulting in a 25% growth in operating income and a 20% increase in EPS to $1.32 [13] Business Line Data and Key Metrics Changes - The company saw a 23% growth in remaining performance obligations (RPO), indicating strong future revenue potential [11] - The next-generation security ARR reached nearly $4 billion, with significant contributions from multiple platforms [15][20] - The company reported a healthy increase in large deal activity, with significant transactions over $1 million, $5 million, and $10 million [24] Market Data and Key Metrics Changes - Revenue growth was observed across all regions: Americas grew by 15%, EMEA by 20%, and JPAC by 8% [35] - The lower growth in JPAC was attributed to reduced product bookings, offset by higher subscription bookings [35] Company Strategy and Development Direction - The company is focusing on platformization as a key strategy to enhance customer engagement and drive growth [19][32] - The partnership with IBM aims to migrate QRadar customers to XSIAM, enhancing the company's market position [25][40] - The company is targeting $15 billion in next-generation security ARR by fiscal year 2030, with a focus on increasing customer engagement and upselling capabilities [20][45] Management's Comments on Operating Environment and Future Outlook - Management highlighted the ongoing threat landscape, with cyberattacks increasing in frequency and sophistication, particularly with the rise of AI [7][8] - The company expects continued robust demand for cybersecurity solutions, driven by zero-trust transformations and cloud migrations [9][10] - Management anticipates that the impact of platformization will persist through fiscal year 2025, with expectations for improved growth thereafter [43] Other Important Information - The company repurchased $500 million worth of shares during Q3, reflecting an opportunistic buyback strategy [37] - The company expects Q4 billings to range from $3.43 billion to $3.48 billion, representing a 9% to 10% increase [44] Q&A Session Summary Question: Duration of platformization efforts - Management indicated that platformization is now a core strategy and will continue for the foreseeable future, transitioning to a normal operational motion over time [48] Question: Update on channel strategy and partnerships - Management clarified that both traditional VARs and GSIs play important roles in the platformization strategy, with partnerships enhancing customer transformation efforts [51] Question: Insights into the pipeline for Q4 - Management expressed confidence in a robust pipeline, driven by opportunities for platform consolidation across customer accounts [57] Question: Update on federal contracts - Management noted that the Thunderdome contract was activated due to urgent security needs, but expectations for its financial impact remain unchanged [60] Question: Clarification on large deal impacts on billing - Management explained that large deals contribute to RPO and may not immediately reflect in billings due to customer payment preferences [62] Question: Path for recovery of billing growth - Management emphasized that implied bookings and RPO are more relevant metrics than billings, which can be influenced by customer payment terms [64]

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial information, including statements, management's discussion, market risk, and controls [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents Palo Alto Networks' unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, with accompanying notes [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a summary of the company's financial position, detailing assets, liabilities, and equity as of April 30, 2024, and July 31, 2023 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | April 30, 2024 | July 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,373.7 | $1,135.3 | | Total current assets | $5,918.8 | $6,048.0 | | Goodwill | $3,372.7 | $2,926.8 | | Deferred tax assets | $2,291.9 | $23.1 | | **Total assets** | **$17,930.8** | **$14,501.1** | | **Liabilities & Equity** | | | | Deferred revenue (Current) | $5,014.9 | $4,674.6 | | Total current liabilities | $7,084.8 | $7,737.5 | | Long-term deferred revenue | $5,152.7 | $4,621.8 | | **Total liabilities** | **$13,463.0** | **$12,752.7** | | Retained earnings (deficit) | $992.5 | $(1,227.4) | | **Total stockholders' equity** | **$4,467.8** | **$1,748.4** | - Total assets increased significantly to **$17.9 billion** from **$14.5 billion**, primarily driven by a substantial increase in deferred tax assets and goodwill[6](index=6&type=chunk) - Total stockholders' equity more than doubled, moving from **$1.7 billion** to **$4.5 billion**, largely due to a shift from an accumulated deficit to retained earnings[6](index=6&type=chunk) [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including revenue, gross profit, operating income, and net income for the three and nine-month periods ended April 30, 2024 Statement of Operations Summary (in millions, except per share data) | Metric | Q3 FY2024 | Q3 FY2023 | YTD FY2024 | YTD FY2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,984.8 | $1,720.9 | $5,838.0 | $4,939.4 | | Gross Profit | $1,471.2 | $1,246.1 | $4,352.5 | $3,536.5 | | Operating Income | $176.7 | $78.7 | $445.5 | $133.8 | | Net Income | $278.8 | $107.8 | $2,219.9 | $212.0 | | Diluted EPS | $0.79 | $0.31 | $6.27 | $0.63 | - Total revenue for Q3 FY2024 grew **15.3%** year-over-year to **$1.98 billion**, driven by a **19.6%** increase in subscription and support revenue[8](index=8&type=chunk)[110](index=110&type=chunk) - Net income for the quarter more than doubled to **$278.8 million** from **$107.8 million** in the prior year period, significantly boosted by a tax benefit[8](index=8&type=chunk)[110](index=110&type=chunk) - For the nine months ended April 30, 2024, net income surged to **$2.22 billion**, compared to **$212.0 million** in the prior year period[8](index=8&type=chunk) - This was primarily due to a significant benefit from income taxes of **$1.55 billion**, related to the release of a valuation allowance[8](index=8&type=chunk)[98](index=98&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended April 30, 2024 Cash Flow Summary for the Nine Months Ended April 30 (in millions) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,744.9 | $2,363.4 | | Net cash used in investing activities | $(1,341.4) | $(2,396.4) | | Net cash used in financing activities | $(1,163.8) | $(91.5) | | Net increase (decrease) in cash | $239.7 | $(124.5) | - Cash from operations increased to **$2.74 billion** for the nine months ended April 30, 2024, up from **$2.36 billion** in the prior year, reflecting business growth[18](index=18&type=chunk) - Cash used in financing activities increased significantly to **$1.16 billion**, mainly due to repayments of convertible senior notes (**$834.1 million**) and common stock repurchases (**$566.7 million**)[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies, financial statement line items, and material events affecting the company's financial position and performance - Remaining Performance Obligations (RPO) stood at **$11.3 billion** as of April 30, 2024, with approximately **$5.4 billion** expected to be recognized as revenue over the next 12 months[32](index=32&type=chunk) - In December 2023, the company completed two acquisitions: Dig Security Solutions for **$255.4 million** and Talon Cyber Security for **$458.6 million**, adding a total of **$445.9 million** in goodwill[49](index=49&type=chunk)[53](index=53&type=chunk)[59](index=59&type=chunk) - During the nine months ended April 30, 2024, holders converted **$834.1 million** of the 2025 Convertible Senior Notes, which were repaid in cash[67](index=67&type=chunk) - The company also net settled all 2023 Warrants by issuing **9.0 million** shares of common stock[74](index=74&type=chunk) - The company accrued **$180.5 million** related to a jury verdict in the Centripetal Networks patent infringement lawsuit, which is included in general and administrative expenses for the nine months ended April 30, 2024[81](index=81&type=chunk) - A valuation allowance release resulted in a net tax benefit of **$1.6 billion** for the nine months ended April 30, 2024, as the company concluded it is more likely than not that its U.S. federal, certain U.S. state, and U.K. deferred tax assets will be realizable[98](index=98&type=chunk) - Subsequent to the quarter end, on May 15, 2024, the company entered into a definitive agreement to acquire certain QRadar assets from IBM for **$500.0 million** in cash, plus potential contingent payments[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for Q3 FY2024, highlighting **15.3%** revenue growth to **$2.0 billion** driven by subscription and support, and analyzes trends in revenue, costs, margins, operating expenses, liquidity, and capital resources [Overview](index=26&type=section&id=Overview) This section provides an overview of the company's business model, key product areas, and highlights the overall financial performance for the quarter - The company's business focuses on four key areas: Network Security (ML-Powered Firewalls, SASE), Cloud Security (Prisma Cloud), Security Operations (Cortex portfolio), and Threat Intelligence (Unit 42)[110](index=110&type=chunk) - For Q3 FY2024, total revenue was **$2.0 billion**, a **15.3%** year-over-year increase, reflecting increased adoption of the company's product, subscription, and support portfolio[110](index=110&type=chunk) [Key Financial Metrics](index=28&type=section&id=Key%20Financial%20Metrics) This section presents a summary of key financial performance indicators, including revenue, billings, operating margin, and cash flow metrics Key Financial Metrics (in millions) | Metric | Q3 FY2024 | Q3 FY2023 | YTD FY2024 | YTD FY2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,984.8 | $1,720.9 | $5,838.0 | $4,939.4 | | Billings | $2,334.0 | $2,256.2 | $6,705.7 | $6,034.3 | | Operating Margin | 8.9% | 4.6% | 7.6% | 2.7% | | Cash flow from operations | N/A | N/A | $2,744.9 | $2,363.4 | | Free cash flow (non-GAAP) | N/A | N/A | $2,635.5 | $2,254.3 | - Billings, defined as total revenue plus the change in total deferred revenue, grew **3.4%** year-over-year for Q3 FY2024 to **$2.33 billion**[116](index=116&type=chunk)[117](index=117&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenue breakdown, gross margins, and operating expenses for the reported periods Revenue Breakdown (in millions) | Revenue Type | Q3 FY2024 | Q3 FY2023 | YoY Growth | | :--- | :--- | :--- | :--- | | Product | $391.0 | $388.1 | 0.7% | | Subscription and support | $1,593.8 | $1,332.8 | 19.6% | | **Total Revenue** | **$1,984.8** | **$1,720.9** | **15.3%** | Gross Margin Analysis | Margin Type | Q3 FY2024 | Q3 FY2023 | | :--- | :--- | :--- | | Product Gross Margin | 80.1% | 75.9% | | Subscription and support Gross Margin | 72.7% | 71.4% | | **Total Gross Margin** | **74.1%** | **72.4%** | - Product gross margin increased due to lower product costs and increased software revenue[140](index=140&type=chunk) - For the nine-month period, the increase was also driven by an easing of supply chain challenges[140](index=140&type=chunk) - General and administrative expenses for the nine months ended April 30, 2024, increased by **62.2%** YoY to **$540.2 million**, primarily due to a litigation accrual of **$180.5 million** related to a patent infringement lawsuit[149](index=149&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position, investment portfolio, debt obligations, and share repurchase activities, confirming sufficient resources for future needs - As of April 30, 2024, the company had **$6.4 billion** in total cash, cash equivalents, and investments, up from **$5.4 billion** at July 31, 2023[157](index=157&type=chunk) - During Q3 FY2024, holders converted **$661.8 million** of the 2025 Notes, which were repaid in cash[159](index=159&type=chunk)[67](index=67&type=chunk) - As of April 30, 2024, **$1.2 billion** of the 2025 Notes remained outstanding and were classified as a current liability[159](index=159&type=chunk)[67](index=67&type=chunk) - As of April 30, 2024, **$500.0 million** remained available for future share repurchases under the current authorization, which expires on December 31, 2024[160](index=160&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is interest rate risk related to its investment portfolio, with a hypothetical 100 basis point increase in interest rates resulting in a **$73.8 million** decline in fair market value - The company's main market risk is interest rate risk[171](index=171&type=chunk) - A sensitivity analysis as of April 30, 2024, showed that a **100 basis point** increase in interest rates would cause a **$73.8 million** decline in the fair market value of its investment portfolio[171](index=171&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of April 30, 2024, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that as of April 30, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level[172](index=172&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[174](index=174&type=chunk) PART II - OTHER INFORMATION This section includes details on legal proceedings, risk factors, equity sales, and other disclosures [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10 for legal proceedings, highlighting an ongoing patent infringement case with Centripetal Networks, Inc., where a jury verdict of **$151.5 million** plus interest resulted in an **$180.5 million** accrual - The company is involved in a lawsuit with Centripetal Networks, Inc[81](index=81&type=chunk)[178](index=178&type=chunk) - On January 31, 2024, a jury found non-willful infringement and awarded a lump sum of **$151.5 million**[81](index=81&type=chunk)[178](index=178&type=chunk) - The company has accrued **$180.5 million** for the verdict and estimated interest[81](index=81&type=chunk)[178](index=178&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks including adverse economic conditions, intense competition, reliance on channel partners, potential security incidents, product defects, supply chain dependencies, and complexities of international operations and data privacy regulations - Key risks include adverse economic conditions, intense competition from large companies and specialized vendors, reliance on channel partners for substantially all revenue, and potential supply chain disruptions for key hardware components from limited sources[180](index=180&type=chunk)[182](index=182&type=chunk)[193](index=193&type=chunk)[218](index=218&type=chunk) - The company highlights risks related to the development and deployment of AI, which may result in reputational harm, legal liability, and increased costs[198](index=198&type=chunk) - A network or data security incident could allow unauthorized access, harm reputation, and create significant liability[202](index=202&type=chunk) - The company notes that as a well-known security provider, it may be an attractive target for such attacks[202](index=202&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter, the company issued **4.6 million** unregistered shares for 2025 Notes conversion and repurchased **1.7 million** shares for approximately **$500.0 million** under its share repurchase program - During Q3 FY2024, the company issued **4.6 million** shares of unregistered common stock to holders of the 2025 Notes for the conversion value in excess of the principal amount[244](index=244&type=chunk) Share Repurchase Summary (Q3 FY2024) | Month | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | February 2024 | 0.4 | $284.26 | | March 2024 | 1.3 | $297.28 | | April 2024 | — | $277.71 | | **Total** | **1.7** | **$293.81** | [Other Information](index=63&type=section&id=Item%205.%20Other%20Information) This section discloses the adoption of Rule 10b5-1 trading plans by key executives, including CEO Nikesh Arora, President William "BJ" Jenkins, and CTO Nir Zuk, during Q3 FY2024 Executive Rule 10b5-1 Trading Plans Adopted in Q3 FY2024 | Name | Title | Date Adopted | Total Shares to be Sold | | :--- | :--- | :--- | :--- | | Nikesh Arora | Chief Executive Officer | March 27, 2024 | 2,444,760 | | William "BJ" Jenkins | President | March 26, 2024 | 8,054 | | Nir Zuk | EVP, Chief Technology Officer | April 1, 2024 | 432,000 | [Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data formatted in Inline XBRL [Signatures](index=65&type=section&id=Signatures) This section contains the official signatures of the company's Chief Financial Officer and Chief Accounting Officer, certifying the Form 10-Q filing - The Form 10-Q was signed on May 20, 2024, by Dipak Golechha, Chief Financial Officer, and Josh Paul, Chief Accounting Officer[253](index=253&type=chunk)

Key TakeawaysPalo Alto Networks reported fiscal third-quarter results that came in better than analysts had anticipated.The cybersecurity company issued guidance that was roughly in line with expectations.Palo Alto shares fell more than 8% in extended trading following the release of the quarterly earnings report. Palo Alto Networks (PANW) reported quarterly earnings that beat analysts' expectations and provided revenue guidance that matched estimates. The company's shares fell more than 8% in extended trad ...

Palo Alto Networks (PANW) reported $1.98 billion in revenue for the quarter ended April 2024, representing a year-over-year increase of 15.3%. EPS of $1.32 for the same period compares to $1.10 a year ago.The reported revenue represents a surprise of +0.91% over the Zacks Consensus Estimate of $1.97 billion. With the consensus EPS estimate being $1.25, the EPS surprise was +5.60%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to dete ...

Palo Alto Networks (PANW) came out with quarterly earnings of $1.32 per share, beating the Zacks Consensus Estimate of $1.25 per share. This compares to earnings of $1.10 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 5.60%. A quarter ago, it was expected that this security software maker would post earnings of $1.30 per share when it actually produced earnings of $1.46, delivering a surprise of 12.31%.Over the last four quar ...