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Palo Alto (PANW) Q1 Earnings Beat, Billings Miss Guidance
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Palo Alto Networks (PANW - Free Report) reported better-than-expected results for the first quarter of fiscal 2024. However, shares of PANW declined 5.3% during Wednesday’s extended trading session as first-quarter billings came lower than the company’s forecast.
Though billings increased 15.8% to $2.02 billion in the first quarter, it fell short of the company’s projection of $2.05-$2.08 billion. Our estimates for billings were pegged at $2.07 billion.
The company reported non-GAAP earnings of $1.38 per share for the first quarter, beating the Zacks Consensus Estimate of $1.16. The bottom line improved 66.3% from the year-ago quarter’s non-GAAP earnings of 83 cents per share.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto’s first-quarter revenues of $1.88 billion beat the Zacks Consensus Estimate of $1.84 billion and grew 20% from the year-ago reported figure. The top line was primarily driven by the normalization of supply chain and growth across Products, Services and Subscription segments. Additionally, increased adoption of Palo Alto’s Next-Generation Security platforms, driven by the hybrid work culture and the heightened need for stronger security, also aided the first-quarter results.
The company’s strong quarterly performance reflects its sustained focus on product innovation, a shift in its business model to subscription-based services, building sales capability, platform integration and continued investments in the go-to-market strategy.
Quarterly Details
Product revenues increased 3.4% year over year to $341.1 million and contributed to 18.2% of the total revenues. The company’s Subscription and Support revenues, which accounted for 81.8% of the total revenues, improved 24.6% to $1.54 billion. Our estimates for Product and Subscription and Support revenues were pegged at $372.7 million and $1.45 billion, respectively.
Deferred revenues at the end of the fiscal first quarter were $4.73 billion. Palo Alto’s remaining performance obligation climbed to $10.4 billion, reflecting a year-over-year increase of 26%. Our estimates for deferred revenues and remaining performance obligation were pegged at $9.5 billion each.
Palo Alto’s next-generation security annualized recurring revenues were $3.23 billion in the reported quarter compared with $2.95 billion in the previous quarter and $2.11 billion in the year-ago quarter. Our estimate for first-quarter next-generation security annualized recurring revenues was pegged at $3.09 billion.
Non-GAAP gross profits increased 26.2% to $1.47 billion. The non-GAAP gross margin expanded 370 basis points (bps) to 78%, primarily driven by a higher software mix, normalization in the supply-chain environment and some efficiencies in customer support.
The non-GAAP operating income rose 64% to $529 million. Meanwhile, the non-GAAP operating margin expanded 760 bps to 28.2% compared with the previous quarter.
Balance Sheet & Cash Flow
Palo Alto exited the fiscal first quarter with cash, cash equivalents and short-term investments of $3.89 billion, up from $2.39 billion at the end of the previous quarter. As of Oct 31, 2023, the company had long-term operating lease liabilities of $275.8 million.
PANW generated an operating cash flow of $1.53 billion and a non-GAAP adjusted free cash flow of $1.49 billion in the fiscal first quarter. The non-GAAP adjusted free cash flow margin for the first quarter came in at 79.3%.
Second Quarter and Fiscal 2024 Guidance
Palo Alto initiated guidance for the second quarter and updated the outlook for the full fiscal 2024. For the second quarter of fiscal 2024, PANW projects revenues between $1.955 billion and $1.985 billion, suggesting year-over-year growth of 18-20%. Total billings are anticipated between $2.335 billion and $2.385 billion, indicating an increase of 15-18% from the year-ago quarter. Non-GAAP earnings are projected in the range of $1.29-$1.31 per share.
For fiscal 2024, the company continues to project revenues between $8.15 billion and $8.20 billion, suggesting year-over-year growth of 18-19%.
Total billings of PANW are now estimated in the range of $10.7-$10.8 billion for fiscal 2024, down from the previous range of $10.9-$11 billion. The updated billings guidance reflects a year-over-year increase of 16-17% instead of 18-20% projected earlier.
Palo Alto raised its non-GAAP earnings forecast to $5.40-$5.53 per share from $5.27-$5.40 per share anticipated previously. The company also raised its non-GAAP operating margin guidance for fiscal 2024 to 26-26.5% from 25-25.5% projected earlier. The guidance range for non-GAAP adjusted free cash flow margin has been kept unchanged at 37-38%.
Zacks Rank and Stocks to Consider
Currently, PANW carries a Zacks Rank #3 (Hold). Shares of PANW have gained 70.9% year to date.
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Palo Alto (PANW) Q1 Earnings Beat, Billings Miss Guidance
Palo Alto Networks (PANW - Free Report) reported better-than-expected results for the first quarter of fiscal 2024. However, shares of PANW declined 5.3% during Wednesday’s extended trading session as first-quarter billings came lower than the company’s forecast.
Though billings increased 15.8% to $2.02 billion in the first quarter, it fell short of the company’s projection of $2.05-$2.08 billion. Our estimates for billings were pegged at $2.07 billion.
The company reported non-GAAP earnings of $1.38 per share for the first quarter, beating the Zacks Consensus Estimate of $1.16. The bottom line improved 66.3% from the year-ago quarter’s non-GAAP earnings of 83 cents per share.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote
Palo Alto’s first-quarter revenues of $1.88 billion beat the Zacks Consensus Estimate of $1.84 billion and grew 20% from the year-ago reported figure. The top line was primarily driven by the normalization of supply chain and growth across Products, Services and Subscription segments. Additionally, increased adoption of Palo Alto’s Next-Generation Security platforms, driven by the hybrid work culture and the heightened need for stronger security, also aided the first-quarter results.
The company’s strong quarterly performance reflects its sustained focus on product innovation, a shift in its business model to subscription-based services, building sales capability, platform integration and continued investments in the go-to-market strategy.
Quarterly Details
Product revenues increased 3.4% year over year to $341.1 million and contributed to 18.2% of the total revenues. The company’s Subscription and Support revenues, which accounted for 81.8% of the total revenues, improved 24.6% to $1.54 billion. Our estimates for Product and Subscription and Support revenues were pegged at $372.7 million and $1.45 billion, respectively.
Deferred revenues at the end of the fiscal first quarter were $4.73 billion. Palo Alto’s remaining performance obligation climbed to $10.4 billion, reflecting a year-over-year increase of 26%. Our estimates for deferred revenues and remaining performance obligation were pegged at $9.5 billion each.
Palo Alto’s next-generation security annualized recurring revenues were $3.23 billion in the reported quarter compared with $2.95 billion in the previous quarter and $2.11 billion in the year-ago quarter. Our estimate for first-quarter next-generation security annualized recurring revenues was pegged at $3.09 billion.
Non-GAAP gross profits increased 26.2% to $1.47 billion. The non-GAAP gross margin expanded 370 basis points (bps) to 78%, primarily driven by a higher software mix, normalization in the supply-chain environment and some efficiencies in customer support.
The non-GAAP operating income rose 64% to $529 million. Meanwhile, the non-GAAP operating margin expanded 760 bps to 28.2% compared with the previous quarter.
Balance Sheet & Cash Flow
Palo Alto exited the fiscal first quarter with cash, cash equivalents and short-term investments of $3.89 billion, up from $2.39 billion at the end of the previous quarter. As of Oct 31, 2023, the company had long-term operating lease liabilities of $275.8 million.
PANW generated an operating cash flow of $1.53 billion and a non-GAAP adjusted free cash flow of $1.49 billion in the fiscal first quarter. The non-GAAP adjusted free cash flow margin for the first quarter came in at 79.3%.
Second Quarter and Fiscal 2024 Guidance
Palo Alto initiated guidance for the second quarter and updated the outlook for the full fiscal 2024. For the second quarter of fiscal 2024, PANW projects revenues between $1.955 billion and $1.985 billion, suggesting year-over-year growth of 18-20%. Total billings are anticipated between $2.335 billion and $2.385 billion, indicating an increase of 15-18% from the year-ago quarter. Non-GAAP earnings are projected in the range of $1.29-$1.31 per share.
For fiscal 2024, the company continues to project revenues between $8.15 billion and $8.20 billion, suggesting year-over-year growth of 18-19%.
Total billings of PANW are now estimated in the range of $10.7-$10.8 billion for fiscal 2024, down from the previous range of $10.9-$11 billion. The updated billings guidance reflects a year-over-year increase of 16-17% instead of 18-20% projected earlier.
Palo Alto raised its non-GAAP earnings forecast to $5.40-$5.53 per share from $5.27-$5.40 per share anticipated previously. The company also raised its non-GAAP operating margin guidance for fiscal 2024 to 26-26.5% from 25-25.5% projected earlier. The guidance range for non-GAAP adjusted free cash flow margin has been kept unchanged at 37-38%.
Zacks Rank and Stocks to Consider
Currently, PANW carries a Zacks Rank #3 (Hold). Shares of PANW have gained 70.9% year to date.
Some better-ranked stocks from the broader technology sector are NVIDIA (NVDA - Free Report) , NetEase (NTES - Free Report) and Dropbox (HPE - Free Report) , each flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVDA’s third-quarter fiscal 2024 earnings has been revised by 2 cents northward to $3.34 per share in the past 60 days. For fiscal 2024, earnings estimates have increased by 3 cents to $10.85 in the past seven days.
NVIDIA's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same on one occasion, the average surprise being 9.8%. Shares of NVDA have rallied 233% year to date.
The Zacks Consensus Estimate for NetEase's third-quarter 2023 earnings has been revised upward by 9 cents to $1.65 per share in the past 30 days. For fiscal 2023, earnings estimates have increased by 42 cents to $6.96 per share in the past 30 days.
NTES' earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same on one occasion, the average surprise being 24.54%. Shares of NTES have gained 58.4% year to date.
The Zacks Consensus Estimate for Dropbox's fourth-quarter 2023 earnings has remained unchanged for the past 90 days at 48 cents per share. For fiscal 2023, earnings estimates have been revised 7 cents upward to $1.96 per share in the past 30 days.
DBX’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 13.14%. Shares of DBX have climbed 23.1% year to date.