:max_bytes(150000):strip_icc()/INV_PaloAltoNetworks_HQ_GettyImages-1604944850-62bc2e300c3449ceb03d96fcc9dbe1ea.jpg "What You Need To Know Ahead of Palo Alto Networks’ Earnings Report Monday")
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Key Takeaways
- Palo Alto Networks is set to release its fiscal third-quarter earnings report after the bell on Monday.
- The cybersecurity company is expected to report that revenue and net income gained from the year-ago period but fell from the second quarter, according to analyst estimates compiled by Visible Alpha.
- Investors are likely to be watching sales after Palo Alto Networks lowered its outlook based on what it described as client “spending fatigue.”
- The company could also provide updates about its “platformization” strategy in its efforts to become a “one-stop shop” for cybersecurity.
Palo Alto Networks (PANW) is set to report earnings for its fiscal third quarter after the bell on Monday, with investors likely watching sales amid concerns about reduced customer spending. The cybersecurity company could also provide updates on its “platformization” strategy in its efforts to become a “one-stop shop” for cybersecurity.
Analysts project Palo Alto Networks’ revenue to be $1.97 billion for the third quarter of 2024, down from the previous quarter but up from $1.72 billion in the same period in 2023, according to estimates compiled by Visible Alpha.
Net income is expected to be $143.3 million, a significant drop from the second quarter but up from $107.8 million in the third quarter of fiscal 2023. Analysts anticipate diluted earnings per share (EPS) of 40 cents, compared with 31 cents in the same period a year earlier.
Fluctuations in Palo Alto Networks’ financials from quarter to quarter are partly caused by seasonality. The company said it expects higher second- and fourth-quarter revenue and lower first- and third-quarter revenue due to several factors including the timing of customers’ spending.
| Analyst Estimates for Q3 FY 2024 | Q2 FY 2024 | Q3 FY 2023 | |
| Revenue | $1.97 billion | $1.98 billion | $1.72 billion |
| Diluted Earnings Per Share | 40 cents | $4.89 | 31 cents |
| Net Income | $143.3 million | $1.75 billion | $107.8 million |
Key Metric: Sales Amid ‘Spending Fatigue’
Palo Alto Networks lowered its outlook when reporting second-quarter earnings, citing “spending fatigue” among customers, raising concerns about headwinds for the cybersecurity industry. The guidance cut in late February sent shares lower, but analysts suggested they remain bullish on the company’s outlook.
Jefferies analysts on Thursday said there is an “attractive” setup for Palo Alto Networks in the third quarter “despite a lot of background noise.” They wrote that they expect Palo Alto Networks’ earnings to beat consensus estimates “given positive checks & achievable setup.”
The analysts did note the “next hurdle” could be guidance for the 2025 fiscal year, but indicated they don’t expect the company to provide this outlook in the third-quarter earnings announcement.
Business Spotlight: Updates on ‘Platformization’ Play
Palo Alto Networks has emphasized its focus on “platformization,” consolidating cybersecurity services on its platform and bundling offerings to become a “one-stop shop” for clients.
As part of its “platformization” strategy, Palo Alto Networks has offered incentives such as discounts and deferred payments to draw clients away from rivals and onto its platform. The company has also made a number of recent acquisitions to expand its offerings, announcing its latest on Wednesday with the purchase of IBM’s QRadar SaaS assets. Jefferies analysts said they viewed the deal as a modest positive “further cementing PANW’s ecosystem lead.”
“While there are clearly challenges and risks to executing on its [platformization] strategy, investors that balk may also be missing out on a significant inflection point in the company’s history,” William Blair analysts wrote in April, adding that “Palo Alto appears to be one step closer to achieving its strategic goal of becoming a single platform-vendor solution for the cybersecurity space.”
The analysts suggested Palo Alto Networks could be “the biggest beneficiary of a platform consolidation play in the space.”
Palo Alto Networks shares have gained about 7.4% since the start of the year, at $316.78 as of Thursday’s close.