Palo Alto Networks Steps up AI Security

Security player Palo Alto Networks (NYSE:PANW) recently announced its quarterly results that continued to outpace market expectations. The company has put a pause on its acquisition spree for now and is instead focused on building its AI-focused product portfolio while improving margins.

Palo Alto Network’s Financials

Palo Alto Networks’ third quarter revenues grew 24% to $1.7 billion, ahead of the Street’s estimate by 0.38%. Non GAAP net income was $1.10 per share. The market was looking for net income of $0.92 per share.

By segment, Product revenues grew 10.4% to $388.1 million. Subscription and support revenues grew 28.7% to $1.332 billion.

Among other metrics, billings improved 26% to $2.3 billion.

For the fourth quarter of fiscal 2023, Palo Alto expects revenues of $1.973-$1.967 billion and an EPS of $1.26-$1.30. The market was looking for revenues of $1.95 billion and an EPS of $1.20.

For the year, Palo Alto expects revenues of $6.88-$6.91 billion and an EPS of $4.25-$4.29. The market was looking for revenues of $6.88 billion and an EPS of $4.01.

Palo Alto Network’s Growing Offerings

Recently, Palo Alto announced its cloud Next Generation Firewall (NGFW) for Microsoft Azure customers. Cloud NGFW offers a comprehensive security solution with capabilities like Advanced Threat Prevention, Advanced URL Filtering, WildFire, and DNS Security. The solution has the ability to stop known, unknown, and zero day threats, enabling customers to safely and more quickly migrate applications to Azure. 

Palo Alto is also gearing up its product portfolio to address the growing AI market. Its Autonomous Digital Experience Management (ADEM) already provides Prisma SASE customers end-to-end observability across their network. It recently expanded the offering with the addition of AIOps to help customers automate complex IT functions while increasing productivity and reducing mean time to resolution. By integrating ADEM within Prisma SASE, it has eliminated the need for deployment of additional appliances or agents. The integrated solution will proactively remediate issues through AI-based problem detection and predictive analytics and isolate issues faster. 

It also introduced SD-WAN Innovations to extend Zero Trust capabilities. First, it added a Prisma SD-WAN Command Center that provides AI-powered and segment-wise insights and always-on monitoring for network and apps for proactive problem resolution at the branch level. It also integrated Prisma SD-WAN with IoT security that allows existing Prisma SD-WAN appliances to help secure IoT devices without the need for additional appliances and sensors. Finally, it released an On-Prem Controller for Prisma SD-WAN that helps customers meet their industry-specific security compliance requirements and works with on-premise and cloud controller deployments. 

Palo Alto’s stock is trading at $216.12 with a market capitalization of $66.1 billion. It was trading at a 52-week high of $217.05 earlier this month. The recent market turmoil had sent the stock to a 52-week low of $132.22 in January.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.