Palo Alto Networks shares slip after third-quarter guidance misses estimates

February 14, 2025 09:53 PM AEDT | By Investing

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Palo Alto Networks shares slip after third-quarter guidance misses estimates

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Investing.com - Shares in Palo Alto Networks (NASDAQ:PANW) slumped in premarket U.S. trading on Friday after the cybersecurity group outlined an income forecast for its current quarter that came up short of Wall Street estimates.

In its fiscal third quarter, the group said it expects to deliver adjusted per-share income of $0.76 to $0.77, below Bloomberg consensus projections of $0.78.

Overall revenue is seen increasing year-on-year between 14% to 15% to between $2.26 billion and $2.29 billion during the period, meeting expectations at the mid-point.

Second-quarter revenue, meanwhile, rose by 14% to $2.26 billion, versus the consensus of $2.24 billion, with CEO Nikesh Arora crediting an ongoing spike in enthusiasm around artificial intelligence for pushing more customers to adopt its technology. For the three months ended January 31, adjusted earnings per share came in at $0.81, compared with expectations of $0.82.

California-based Palo Alto has been boosted by recent cyber crimes and hacks that have led businesses to spend more on security services. It has also pursued a new "platformization" approach that encourages clients to consolidate their cybersecurity tools onto one platform.

Speaking to analysts in a post-earnings call, CFO Dipal Golechha flagged that the group expects to see "fluctuations in seasonality" in its ongoing 2025 fiscal year, driven by the timings of deferred payments from customers, bookings, and cash tax payments. Relative to prior years, a higher amount of free cash flow is due to come in its fiscal fourth quarter, Golechha added.

Analysts at Vital Knowledge noted that Palo Alto tweaked its full-year operating margin outlook lower to 27.5% to 28% from a previous band of 28% to 28.5%, although it left its forecast for revenue unchanged. Its guidance for 2025 next-generation security annual recurring revenue and remaining performance obligations -- both key performance indicators for Palo Alto -- was also maintained.

"This isn’t a perfect/clean report, but the important metrics were fine, and the bull story remains on track once all the dust settles," the Vital Knowledge analysts said.

(Yasin Ebrahim contributed reporting.)

This article first appeared in Investing.com

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