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Palo Alto Networks (PANW - Free Report) reported strong third-quarter fiscal 2022 results, wherein both earnings and revenues not only surpassed the respective Zacks Consensus Estimates, but also improved year over year.
The company reported non-GAAP earnings of $1.79 per share, beating the Zacks Consensus Estimate of $1.67. The bottom line improved 29.7% from the year-ago quarter’s non-GAAP earnings of $1.38 per share.
Palo Alto’s fiscal third-quarter revenues of $1.39 billion surpassed the Zacks Consensus Estimate of $1.36 billion. The top line grew 29% from the year-earlier reported figure.
The top line was aided by several deal wins and increased adoption of Palo Alto’s Next-Generation Security (“NGS”) platforms due to hybrid work culture and the heightened need for stronger security.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto’s strong quarterly performance reflects its sustained focus on product innovation, a shift in its business model to subscription-based services, platform integration and continued investments in the go-to-market strategy.
Quarterly Details
Product revenues increased 22% year over year to $351.5 million and contributed 25.3% of total revenues. The company’s subscription and support revenues, which accounted for 74.7% of total revenues, improved 31.9% to $1035.2 million.
Billings jumped 40% to $1.80 billion. Deferred revenues at the end of the fiscal third quarter were $3.15 billion. Palo Alto’s remaining performance obligation climbed to $6.9 billion, reflecting a year-over-year surge of 40%.
Palo Alto’s NGS annualized recurring revenues (ARR) were $1.61 billion in the reported quarter compared with $973 million in the year-ago quarter and $1.43 billion in the previous quarter.
The company’s non-GAAP gross profit increased 26.1% to $1.01 billion. However, non-GAAP gross margin contracted 170 basis points (bps) to 72.9%, primarily due to heightened costs associated with supply chain issues.
Non-GAAP operating income rose 38.7% to $252.9 million while non-GAAP operating margin expanded 120 bps to 18.2%.
Balance Sheet & Cash Flow
Palo Alto exited fiscal third quarter with cash, cash equivalents and short-term investments of $3.87 billion compared with $3.34 billion at the end of the previous quarter. The company’s balance sheet does not carry any long-term debt.
PANW generated an operating cash flow of $389.5 million and a non-GAAP adjusted free cash flow of $351.2 million during the second quarter. Non-GAAP adjusted free cash flow margin came in at 25.3%.
Guidance
Buoyed by a strong fiscal third-quarter performance, Palo Alto has raised its fiscal 2022 guidance.
The company now anticipates fiscal 2022 revenues of $5.481-$5.501 billion, suggesting growth of around 29% from the fiscal 2021 level. Earlier, it had projected revenues between $5.425 billion and $5.475 billion, which indicated year-over-year growth of 27-29%.
Total billings are now estimated to be $7.106-$7.136 billion for fiscal 2022, indicating year-over-year increase of 30-31%. Earlier, the company had estimated billings in the range of $6.80-$6.85 billion, implying a 25-26% increase from the year-ago quarter.
Palo Alto raised its non-GAAP earnings guidance range from $7.23-$7.30 per share to $7.43-$7.46 per share.
However, non-GAAP adjusted free cash flow margin is still expected in the range of 32-33%.
For the fourth quarter of fiscal 2022, Palo Alto projects revenues between $1.53 billion and $1.55 billion, suggesting year-over-year growth to be 25-27%.
Total billings are anticipated between $2.32 billion and $2.35 billion, indicating an increase of 24-26% from the year-ago quarter. Non-GAAP earnings are projected to be $2.26-$2.29 per share.
Zacks Rank & Key Picks
Palo Alto currently carries a Zacks Rank #4 (Sell). Shares of PANW have gained 27.4% in the past year.
The Zacks Consensus Estimate for Avnet's fourth-quarter fiscal 2022 earnings has been revised 55 cents northward to $1.96 per share over the past 30 days. For 2022, earnings estimates have moved 20.5% north to $6.83 per share in the past 30 days.
Avnet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 21.2%. Shares of AVT have gained 4.5% in the past year.
The Zacks Consensus Estimate for Axcelis' second-quarter 2022 earnings has been revised 3 cents upward to 99 cents per share over the past 30 days. For 2022, ACLS' earnings estimates have moved 41 cents north to $4.40 per share in the past 30 days.
Axcelis' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 23.5%. Shares of ACLS have jumped 42.5% in the past year.
The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised 4 cents upward to $2.18 per share over the past 60 days. For fiscal 2022, earnings estimates have moved 11 cents north to $8.43 per share in the past 60 days.
Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have climbed 0.9% in the past year.
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Palo Alto's (PANW) Q3 Earnings & Revenues Beat Estimates
Palo Alto Networks (PANW - Free Report) reported strong third-quarter fiscal 2022 results, wherein both earnings and revenues not only surpassed the respective Zacks Consensus Estimates, but also improved year over year.
The company reported non-GAAP earnings of $1.79 per share, beating the Zacks Consensus Estimate of $1.67. The bottom line improved 29.7% from the year-ago quarter’s non-GAAP earnings of $1.38 per share.
Palo Alto’s fiscal third-quarter revenues of $1.39 billion surpassed the Zacks Consensus Estimate of $1.36 billion. The top line grew 29% from the year-earlier reported figure.
The top line was aided by several deal wins and increased adoption of Palo Alto’s Next-Generation Security (“NGS”) platforms due to hybrid work culture and the heightened need for stronger security.
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 strong quarterly performance reflects its sustained focus on product innovation, a shift in its business model to subscription-based services, platform integration and continued investments in the go-to-market strategy.
Quarterly Details
Product revenues increased 22% year over year to $351.5 million and contributed 25.3% of total revenues. The company’s subscription and support revenues, which accounted for 74.7% of total revenues, improved 31.9% to $1035.2 million.
Billings jumped 40% to $1.80 billion. Deferred revenues at the end of the fiscal third quarter were $3.15 billion. Palo Alto’s remaining performance obligation climbed to $6.9 billion, reflecting a year-over-year surge of 40%.
Palo Alto’s NGS annualized recurring revenues (ARR) were $1.61 billion in the reported quarter compared with $973 million in the year-ago quarter and $1.43 billion in the previous quarter.
The company’s non-GAAP gross profit increased 26.1% to $1.01 billion. However, non-GAAP gross margin contracted 170 basis points (bps) to 72.9%, primarily due to heightened costs associated with supply chain issues.
Non-GAAP operating income rose 38.7% to $252.9 million while non-GAAP operating margin expanded 120 bps to 18.2%.
Balance Sheet & Cash Flow
Palo Alto exited fiscal third quarter with cash, cash equivalents and short-term investments of $3.87 billion compared with $3.34 billion at the end of the previous quarter. The company’s balance sheet does not carry any long-term debt.
PANW generated an operating cash flow of $389.5 million and a non-GAAP adjusted free cash flow of $351.2 million during the second quarter. Non-GAAP adjusted free cash flow margin came in at 25.3%.
Guidance
Buoyed by a strong fiscal third-quarter performance, Palo Alto has raised its fiscal 2022 guidance.
The company now anticipates fiscal 2022 revenues of $5.481-$5.501 billion, suggesting growth of around 29% from the fiscal 2021 level. Earlier, it had projected revenues between $5.425 billion and $5.475 billion, which indicated year-over-year growth of 27-29%.
Total billings are now estimated to be $7.106-$7.136 billion for fiscal 2022, indicating year-over-year increase of 30-31%. Earlier, the company had estimated billings in the range of $6.80-$6.85 billion, implying a 25-26% increase from the year-ago quarter.
Palo Alto raised its non-GAAP earnings guidance range from $7.23-$7.30 per share to $7.43-$7.46 per share.
However, non-GAAP adjusted free cash flow margin is still expected in the range of 32-33%.
For the fourth quarter of fiscal 2022, Palo Alto projects revenues between $1.53 billion and $1.55 billion, suggesting year-over-year growth to be 25-27%.
Total billings are anticipated between $2.32 billion and $2.35 billion, indicating an increase of 24-26% from the year-ago quarter. Non-GAAP earnings are projected to be $2.26-$2.29 per share.
Zacks Rank & Key Picks
Palo Alto currently carries a Zacks Rank #4 (Sell). Shares of PANW have gained 27.4% in the past year.
Some top-ranked stocks from the broader Computer and Technology sector are Avnet (AVT - Free Report) , Axcelis Technologies (ACLS - Free Report) and Analog Devices (ADI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Avnet's fourth-quarter fiscal 2022 earnings has been revised 55 cents northward to $1.96 per share over the past 30 days. For 2022, earnings estimates have moved 20.5% north to $6.83 per share in the past 30 days.
Avnet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 21.2%. Shares of AVT have gained 4.5% in the past year.
The Zacks Consensus Estimate for Axcelis' second-quarter 2022 earnings has been revised 3 cents upward to 99 cents per share over the past 30 days. For 2022, ACLS' earnings estimates have moved 41 cents north to $4.40 per share in the past 30 days.
Axcelis' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 23.5%. Shares of ACLS have jumped 42.5% in the past year.
The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised 4 cents upward to $2.18 per share over the past 60 days. For fiscal 2022, earnings estimates have moved 11 cents north to $8.43 per share in the past 60 days.
Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have climbed 0.9% in the past year.