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Palo Alto Networks Still Going Strong

Posted on Friday, Oct 10th 2014

According to a Research and Markets report released earlier this year, the Global Enterprise Network Security market is estimated to grow at a rate of 6.6% annually over the period 2012-2016. The growth in the market is attributed to increasing adoption of network security solutions by small and medium organizations.

Palo Alto’s Offerings
Santa Clara-based Palo Alto Networks is a pioneer within the next generation of network security market. Their product allows organizations to secure their networks while making it accessible to an increasing number of applications. The platform enables organizations to establish controls within the firewall through their proprietary hardware and software architecture while inspecting content for all threats in real-time. It is based on a traffic classification engine that identifies network traffic by application, user, and content and is thus able to provide deeper visibility into traffic and applications at the user level, at all times.

Palo Alto Networks is able to reduce the total cost of ownership for their customers by simplifying the network security infrastructure and eliminating the need for stand-alone security appliances. I spoke with their founder Nir Zuk in 2010 and he estimated that their products helped companies save more than 60%-80% of their network costs.

Last month, they announced the availability of Traps, a unique Advanced Endpoint Protection system that stops cyber attacks on endpoints. Unlike legacy systems that react to a known threat or identify a threat only after the endpoint has been compromised, the Traps system is a proactive model that attacks the endpoint including unknown malware and zero-day exploits.

Palo Alto Network’s Financials
For the recently ended quarter, Palo Alto Networks saw revenues grow 59% over the year to $178.2 million with EPS of $0.11. The market was looking for revenues of $161.3 million and an EPS of $0.11.

By segment, revenues from product grew 52% over the year to $99.7 million. Revenues from services grew 67% to $78.5 million.

They ended the fiscal year 2014 with revenues growing 51% to $598.2 million and a non-GAAP net income of $0.40 per share compared with $0.24 per share reported a year ago.

For the current quarter, Palo Alto Networks expects to reach revenues of $178 million-$182 million and EPS of $0.12. The Street was looking for revenues of $173.6 million and an EPS of $0.12.

Palo Alto Networks has executed extremely well so far, and the market has rewarded them. Their stock is trading at $102.73 with a market capitalization of $8.18 billion. It touched a 52-week high of $106.79 earlier this month. They were venture funded till 2012 with $64.6 million in funding received from Greylock Partners, Sequoia Capital, Globespan Capital Partners, Lehman Brothers, Jafco Ventures, JAIC, and Northgate Capital. In July 2012, they went public on the NYSE when they raised $260.4 million by selling 6.2 million shares at $42 each.

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