Palo Alto Networks, Inc. (NASDAQ:PANW) stock slid more than 2% during Wednesday’s premarket session as traders digest a post-earnings setup and an overnight risk-off tone.
Nasdaq futures are down 0.47% while S&P 500 futures have shed 0.20%.
The stock remains in focus as investors assess strong quarterly results and an upbeat growth outlook against questions around free cash flow margins and the timing of next-generation security revenue.
BNP Paribas Highlights Broad Quarterly Strength
BNP Paribas analyst Andrew DeGasperi said Palo Alto delivered fiscal fourth-quarter results above expectations across key metrics.
Revenue reached $3.41 billion, up 34% year over year and above the roughly $3.35 billion consensus. Adjusted diluted EPS of $1.02 topped the 98-cent estimate.
Remaining performance obligations reached $21.20 billion, ahead of the $20.95 billion consensus, while billings of $4.56 billion beat expectations by about 2%.
Next-generation security annual recurring revenue rose 63% year over year to $9.1 billion, exceeding the roughly $8.9 billion estimate. Operating margin of about 30% also came in slightly above the 29% consensus.
Growth Outlook Tops Expectations
DeGasperi highlighted Palo Alto’s projected growth across its businesses. The company expects Network + AI Security to grow at a low-double-digit rate, Cortex, including Chronosphere, by about 30%, and Idira, including CyberArk, by the high teens to 20%.
For the full year, Palo Alto projected revenue of $14.15 billion, above the $13.84 billion consensus, and adjusted diluted EPS of $4.18 versus the $4.11 estimate.
The company expects remaining performance obligations of $25.30 billion, ahead of the $24.74 billion consensus, while next-generation security ARR is projected at $11.13 billion versus the $10.92 billion estimate.
For the first quarter, Palo Alto guided revenue to $3.31 billion and adjusted EPS to 97 cents, both above consensus.
Free Cash Flow Remains A Watchpoint
Despite the strong outlook, DeGasperi flagged free cash flow margins as an area to watch.
He also noted that Palo Alto expects 61% of its next-generation security ARR to be weighted toward the second half of the year, potentially contributing to volatility around near-term expectations.
Analyst Consensus & Recent Actions: The stock carries a Buy rating with an average price forecast of $389.13. Recent analyst moves include:
- BTIG: Buy (Raises Forecast to $404.00) (Sept. 2)
- Scotiabank: Sector Outperform (Raises Forecast to $430.00) (Aug. 31)
- Jefferies: Buy (Raises Forecast to $450.00) (Aug. 28)
Top ETF Exposure
- First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR): 9.43% Weight
- iShares Expanded Tech-Software Sector ETF (BATS:IGV): 9.85% Weight
- Global X Cybersecurity ETF (NASDAQ:BUG): 8.06% Weight
Significance: Because PANW carries such a heavy weight in these funds, significant inflows or outflows will likely force automatic buying or selling of the stock.
Price Action
PANW Stock Price Activity: Palo Alto Networks shares were down 2.23% at $354.01 during premarket trading on Wednesday, according to Benzinga Pro data.
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