Palo Alto shares plummet on disappointing sales and billings forecast

Palo Alto Networks' fourth-quarter billings forecast disappointed investors on Monday, a sign of tight corporate spending on cybersecurity solutions, sending its shares down more than 8% in aftermarket trading.

Businesses are spending cautiously on cybersecurity offerings, as they grapple with sticky inflation in an uncertain economy, hitting firms such as Palo Alto Networks.

Palo Alto Networks.

Clients are also wary of relying on any one particular cybersecurity firm due to high-profile security incidents, prompting them to invest in multiple vendors to cut dependency and avoid migrations.

Palo Alto provided a disappointing sales and billings forecast, "creating concerns about a cybersecurity growth deceleration," said Michael Ashley Schulman, chief investment officer at Running Point Capital.

The company expects fourth-quarter billings to be between $3.43 billion and $3.48 billion, the mid-point of which was largely in line with analysts' estimate of $3.45 billion.

Palo Alto now expects annual billings in a range of $10.13 billion to $10.18 billion, compared with prior range of $10.10 billion to $10.20 billion

"Minor full-year FY24 guidance revisions failed to indicate a meaningful upswing in momentum, and the downstream benefit of increasing platform buy-in from large customers remains to be seen. This was echoed by lackluster guidance for the Q4 FY24 period," Third Bridge analyst Jordan Berger said.

Earlier this month, rival Fortinet forecast second-quarter billings below analysts' estimates.

Palo Alto's billings for the third quarter came in at $2.33 billion, compared with analysts' average estimate of $2.34 billion, according to LSEG data.

Revenue for the third quarter ended April 20 grew about 15% to $1.98 billion, edging past analysts' estimate of $1.97 billion.

In the reported quarter, its adjusted profit per share came in at $1.32, beating estimates of $1.25 per share.