Palo Alto Networks shares plunge following reduced 2024 forecast
The cyber powerhouse forecast third-quarter billings between $2.30 billion and $2.35 billion, compared with analysts' average estimate of $2.62 billion. Revenue for the quarter that ended on January 31 grew about 19% to $1.98 billion, compared with estimates of $1.97 billion
Cybersecurity giant Palo Alto Networks reported better than expected results for the quarter ending on January 31, 2024, but its reduced outlook for the rest of the year sent its stock tumbling.
The updated annual forecast is for revenues of $7.95-8 billion compared to a previous forecast of $8.15-8.2 billion. The company expects to grow and reach revenues of $1.96 billion in the current quarter, the company's third fiscal quarter.
This is a slight decrease compared to the second fiscal quarter, which ended with revenues of $2 billion and a net profit of $1.7 billion. This is an unusual profit that included a one-time tax benefit of $1.5 billion.
Shares of the Santa Clara, California-based company fell more than 20% in extended trading on Tuesday.
Businesses are navigating in a digital world which is highly susceptible to online threat activity as they ramp up digitizing and migration to cloud. The sluggish spending has hit demand for companies such as Palo Alto.
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Moreover, slowing growth in the firewall business, which helps secure corporate boundaries by inspecting traffic between the networks inside and outside the company, has also struggled for demand.
"We had a significant shortfall in our U.S. federal government business. We expect this trend will continue into our third and fourth quarter," CEO Nikesh Arora said in a post earnings call.
He added that the company should revert back to its original expectations of mid-to-high double-digit billings growth towards the second half of 2025.
Palo Alto forecast third-quarter billings between $2.30 billion and $2.35 billion, compared with analysts' average estimate of $2.62 billion, according to LSEG data.
Revenue for the second quarter that ended on January 31 grew about 19% to $1.98 billion, compared with estimates of $1.97 billion.
Excluding items, the company earned profit of $1.46 per share in the second quarter, beating estimates of $1.30.
The cybersecurity company also cut its annual billings to a range of $10.1 billion to $10.2 billion from its prior expectations of $10.7 billion to $10.8 billion.
