Latest news with #platformization
Yahoo
2 days ago
- Business
- Yahoo
Palo Alto Networks (PANW) Gets Rating Upgrade on Platformization Momentum
Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the On August 12, Piper Sandler analyst Rob Owens upgraded the stock from Neutral to 'Overweight' with a price target of $225.00 (from $200.00). According to the firm, Palo Alto's early 'platformization' success should reaccelerate bookings growth and prove to be durable as Xsiam traction grows. The company's free cash flow leverage should be more consistent moving forward with annual payments. Meanwhile, the Cyberark (CYBR) acquisition adds a high-quality asset to company's portfolio. Piper sees a favorable share setup from here. A team of actuaries and engineers at a computer looking at the data and finding the best reinsurance solution for a client. 'We are upgrading shares to Overweight with a $225 PT. Our more favorable view is predicated on 1) early platformization success that has helped reaccelerate bookings and should prove durable as XSIAM traction grows (noting channel feedback surrounding platformization has inflected to begin CY'25), 2) more consistent FCF leverage moving forward with annual payments / PAN-FS turning to a tailwind after posing pressure over last two years, 3) the acquisition of CYBR, which simultaneously adds a very high quality asset to PANW's portfolio while filling its largest gap. Altogether, this should help PANW achieve a low-teens CAGR and improved FCF margins, creating a favorable setup from here.' Palo Alto Networks, Inc. (NASDAQ:PANW) is a leader in AI-powered cybersecurity. While we acknowledge the potential of PANW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure: None.
Yahoo
24-05-2025
- Business
- Yahoo
Palo Alto Networks Stock Drops Despite Strong Guidance -- Is This a Buying Opportunity?
Palo Alto stock fell despite the company reporting solid fiscal Q3 results. The company's platformization continues to progress, helping drive results. However, the stock is not cheap, even after the recent stock sell-off. 10 stocks we like better than Palo Alto Networks › Share prices of Palo Alto Networks (NASDAQ: PANW) slipped earlier this week after the company reported its fiscal Q3 earnings results. While the results were strong and topped analyst expectations, the company failed to raise the top end of its full-year fiscal 2025 guidance for the first time this year, and a few metrics only met its guidance. The stock is now up just 1.8% in 2025 and up almost 19% over the past year, as of this writing. Let's take a closer look at the cybersecurity company's results and guidance to see if this could be a good opportunity to buy the stock on the dip. The big story surrounding Palo Alto over the past 15 months has been the company's decision to shift directions and begin what it called a "platformization" strategy. With its customers seeing diminishing returns on their cybersecurity spending when they added new point solutions, the company decided to stop selling new point solutions and instead embark on a plan to begin moving its customers onto one of its three cybersecurity platforms. However, to do this, it decided to give away some of its solutions for free while its customers had contracts in place for similar services with other vendors. It said this was the equivalent of giving away free product capabilities to customers for six months, and that it would negatively impact its billings and revenue growth over the next 12 to 18 months. Palo Alto's platformization strategy continued to gain traction in fiscal Q3, with the company delivering "over 19 net new platformization deals." Over 19 seems to indicate 20, which is a nice round number, but nobody on the company's earnings call decided to ask management what over 19 actually meant. It ended the quarter with 1,250 platformizations within its top 5,000 customers. That's an increase from the 1,150 platforms it mentioned in fiscal Q1, showing its continued progress of transitioning existing customers over to one of its platforms. Note that the company's three platforms are its network security platform Strata, threat detection and response solution Cortex, and its cloud security solution Prisma Cloud. Strata is its most widely adopted platform and the one that is typically the starting point for customers. Cortex and Prisma, meanwhile, are more upsells. Its goal is to have between 2,500 and 3,500 platformization customers by fiscal year 2030. That would get it to around an annual recurring revenue run-rate of $15 billion. Overall, Palo Alto's fiscal Q3 revenue rose 15% year over year to $2.29 billion, which was at the high end of the company's forecast for revenue of between $2.26 billion and $2.29 billion. Service revenue increased by 15%, with subscription revenue climbing 18% and support revenue rising 10%. Product revenue grew by 16%. Its biggest revenue driver was once again next-generation security, and the company said it saw an inflection point in the quarter. Next-generation security annual recurring revenue (ARR) jumped 34% to $5.1 billion, led by a 200% surge in XSIAM ARR in the quarter. Palo Alto called XSIAM its "data to market engine." It's an AI-powered security platform that helps organizations detect, investigate, and automatically respond to cyberthreats faster and more efficiently than traditional legacy tools like SIEM. SASE (secure access service edge), meanwhile, climbed 36%. SASE is a cloud-based cybersecurity solution that lets businesses securely connect users to apps and data from anywhere, combining networking and security into one service. It said that 40% of new SASE customers in the quarter were new to Palo Alto and that its overall SASE customer count grew by 22% to 6,000. Remaining performance obligations (RPO), which is the revenue a company expects to generate from existing contracts, grew 19% to $13.5 billion, which was at the low end of its prior forecast. Current RPO rose 16% to $6.2 billion. Adjusted earnings per share (EPS) jumped 21% to $0.80, which was ahead of its guidance of $0.76 to $0.77. Looking ahead, Palo Alto forecasts fiscal third-quarter revenue to rise by 14% to 15%, to between $2.49 billion and $2.251 billion. It projects next-generation security ARR of between $5.52 billion and $5.57 billion, representing year-over-year growth of between 31% and 32%. RPO growth is expected to be between 19% and 20%, taking it to between $15.2 billion and $15.3 billion. It forecast adjusted EPS of between $0.87 and $0.89. For the full year, the company bumped up the low end of its revenue guidance while raising its adjusted EPS guidance once again. Its forecast now calls for revenue of $9.17 billion to $9.19 billion and adjusted EPS of $3.26 to $3.28. Below is a table of the company's guidance revisions. FY2025 guidance Original After Q1 After Q2 After Q3 Revenue $9.10 billionto $9.15 billion $9.11 billionto $9.17 billion $9.14 billionto $9.19 billion $9.17 billionto $9.19 billion Revenue growth 13% to 14% 14% 14% 14% Adjusted EPS $3.09 to $3.16 $3.13 to $3.20 $3.18 to $3.24 $3.26 to $3.28 EPS growth 9% to 11% 10% to 13% 12% to 14% 15% to 16% Data source: Palo Alto Networks. Palo Alto's platformization strategy continues to progress nicely, as it adds both new customers and continues to transition existing customers to one of its main platforms, generally Strata. In addition, it is seeing strong momentum with both its Cortex and Prisma platforms as well. It said the number of customers on multiple platformizations grew nearly 70%, with Cortex customers tripling year over year. That said, it was understandable why the stock sold off. Investors have come to expect Palo Alto to beat its results and raise its guidance. However, there were a few areas where it only met its forecast, and it only raised the low end of its full-year revenue forecast. With the stock trading at a forward price-to-sales ratio (P/S) of 11.4 times fiscal 2026 estimates, investors have high expectations, and just meeting expectations can lead to the stock selling off when it reports earnings. Its valuation is a bit rich in my view, given its current growth, although we'll see if growth picks up next fiscal year. After all, the company expected its platformization strategy to negatively impact its billings and revenue growth over the next 12 to 18 months, and it will be reaching 18 months soon. That said, the long-term story for Palo Alto remains intact, and the company should be a solid long-term investment. Before you buy stock in Palo Alto Networks, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Palo Alto Networks wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $640,662!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $814,127!* Now, it's worth noting Stock Advisor's total average return is 963% — a market-crushing outperformance compared to 168% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy. Palo Alto Networks Stock Drops Despite Strong Guidance -- Is This a Buying Opportunity? was originally published by The Motley Fool Sign in to access your portfolio
Globe and Mail
24-05-2025
- Business
- Globe and Mail
Palo Alto Networks Stock Drops Despite Strong Guidance -- Is This a Buying Opportunity?
Share prices of Palo Alto Networks (NASDAQ: PANW) slipped earlier this week after the company reported its fiscal Q3 earnings results. While the results were strong and topped analyst expectations, the company failed to raise the top end of its full-year fiscal 2025 guidance for the first time this year, and a few metrics only met its guidance. The stock is now up just 1.8% in 2025 and up almost 19% over the past year, as of this writing. Let's take a closer look at the cybersecurity company's results and guidance to see if this could be a good opportunity to buy the stock on the dip. Platformization strategy continues to progress The big story surrounding Palo Alto over the past 15 months has been the company's decision to shift directions and begin what it called a "platformization" strategy. With its customers seeing diminishing returns on their cybersecurity spending when they added new point solutions, the company decided to stop selling new point solutions and instead embark on a plan to begin moving its customers onto one of its three cybersecurity platforms. However, to do this, it decided to give away some of its solutions for free while its customers had contracts in place for similar services with other vendors. It said this was the equivalent of giving away free product capabilities to customers for six months, and that it would negatively impact its billings and revenue growth over the next 12 to 18 months. Palo Alto's platformization strategy continued to gain traction in fiscal Q3, with the company delivering "over 19 net new platformization deals." Over 19 seems to indicate 20, which is a nice round number, but nobody on the company's earnings call decided to ask management what over 19 actually meant. It ended the quarter with 1,250 platformizations within its top 5,000 customers. That's an increase from the 1,150 platforms it mentioned in fiscal Q1, showing its continued progress of transitioning existing customers over to one of its platforms. Note that the company's three platforms are its network security platform Strata, threat detection and response solution Cortex, and its cloud security solution Prisma Cloud. Strata is its most widely adopted platform and the one that is typically the starting point for customers. Cortex and Prisma, meanwhile, are more upsells. Its goal is to have between 2,500 and 3,500 platformization customers by fiscal year 2030. That would get it to around an annual recurring revenue run-rate of $15 billion. Overall, Palo Alto's fiscal Q3 revenue rose 15% year over year to $2.29 billion, which was at the high end of the company's forecast for revenue of between $2.26 billion and $2.29 billion. Service revenue increased by 15%, with subscription revenue climbing 18% and support revenue rising 10%. Product revenue grew by 16%. Its biggest revenue driver was once again next-generation security, and the company said it saw an inflection point in the quarter. Next-generation security annual recurring revenue (ARR) jumped 34% to $5.1 billion, led by a 200% surge in XSIAM ARR in the quarter. Palo Alto called XSIAM its "data to market engine." It's an AI-powered security platform that helps organizations detect, investigate, and automatically respond to cyberthreats faster and more efficiently than traditional legacy tools like SIEM. SASE (secure access service edge), meanwhile, climbed 36%. SASE is a cloud-based cybersecurity solution that lets businesses securely connect users to apps and data from anywhere, combining networking and security into one service. It said that 40% of new SASE customers in the quarter were new to Palo Alto and that its overall SASE customer count grew by 22% to 6,000. Remaining performance obligations (RPO), which is the revenue a company expects to generate from existing contracts, grew 19% to $13.5 billion, which was at the low end of its prior forecast. Current RPO rose 16% to $6.2 billion. Adjusted earnings per share (EPS) jumped 21% to $0.80, which was ahead of its guidance of $0.76 to $0.77. Looking ahead, Palo Alto forecasts fiscal third-quarter revenue to rise by 14% to 15%, to between $2.49 billion and $2.251 billion. It projects next-generation security ARR of between $5.52 billion and $5.57 billion, representing year-over-year growth of between 31% and 32%. RPO growth is expected to be between 19% and 20%, taking it to between $15.2 billion and $15.3 billion. It forecast adjusted EPS of between $0.87 and $0.89. For the full year, the company bumped up the low end of its revenue guidance while raising its adjusted EPS guidance once again. Its forecast now calls for revenue of $9.17 billion to $9.19 billion and adjusted EPS of $3.26 to $3.28. Below is a table of the company's guidance revisions. Data source: Palo Alto Networks. Should you buy Palo Alto stock on the dip? Palo Alto's platformization strategy continues to progress nicely, as it adds both new customers and continues to transition existing customers to one of its main platforms, generally Strata. In addition, it is seeing strong momentum with both its Cortex and Prisma platforms as well. It said the number of customers on multiple platformizations grew nearly 70%, with Cortex customers tripling year over year. That said, it was understandable why the stock sold off. Investors have come to expect Palo Alto to beat its results and raise its guidance. However, there were a few areas where it only met its forecast, and it only raised the low end of its full-year revenue forecast. With the stock trading at a forward price-to-sales ratio (P/S) of 11.4 times fiscal 2026 estimates, investors have high expectations, and just meeting expectations can lead to the stock selling off when it reports earnings. Its valuation is a bit rich in my view, given its current growth, although we'll see if growth picks up next fiscal year. After all, the company expected its platformization strategy to negatively impact its billings and revenue growth over the next 12 to 18 months, and it will be reaching 18 months soon. That said, the long-term story for Palo Alto remains intact, and the company should be a solid long-term investment. Should you invest $1,000 in Palo Alto Networks right now? Before you buy stock in Palo Alto Networks, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palo Alto Networks wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $640,662!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $814,127!* Now, it's worth noting Stock Advisor 's total average return is963% — a market-crushing outperformance compared to168%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
Forbes
21-05-2025
- Business
- Forbes
Palo Alto's Platform Strategy Is Working, But It Has A Cost
Palo Alto Networks made a big decision in early 2024 to move to a 'platformization" strategy of more aggressively bundling and discounting products in its portfolio to drive wider adoption. That strategy has largely worked, driving solid growth across the portfolio and larger deal sizes, but as today's earning results show, that's coming at a cost. Palo Alto has spent North of $3 billion in acquisitions over the past five years accumulating point products that it can tie into a broader platform. In early 2024 it announced a sales push into platform, which meant more bundling and discounting for adopting multiple products. The slide below show's how Palo Alto's feverish acquisition binge has outpaced rival Cisco's. Palo Alto has spent billions on at least 21 SASE and cybersecurity startups to build its portfolio, ... More outpacing rival Cisco. There's a catch, though. Platformization may just be a code word for discounting, as Palo Alto's 2025 fiscal Q3 results show. Despite progress in long-term initiatives to sell a more integrated platform as well as its successful Cortex XSIAM AI-driven security product, Palo Alto shares fell today on rising operating expenses and lower-than-expected margins announced last night. The higher cost of platform reared its head in the numbers: Operating expenses grew roughly 12% year-over-year. Product gross margin was 78.4% in the quarter, but total gross margin was 76%, short of analysts' estimates of 77.2%. The higher expenses are result of higher sales and marketing costs driven by the company's aggressive platform strategy. As a result, net income fell to $262.1 million, or 37 cents per share, from $278.8 million, or 39 cents per share, a year ago. Margins were the likely cause behind the stock's sharp drop today. Shares fell nearly 6% ($10.85) to $183 in early trading. The stock remains about 12% below its 52-week high of $208. Despite lower margins, the growth is still there. Palo Alto reported fiscal Q3 revenue of $2.29 billion, representing 15% year-over-year (yoy) growth and coming in at the high range of previous guidance. Product revenue grew 16%, total services revenue grew 15%, an subscriptions grew 18%. The company reported earnings per share (EPS) of 80 cents, adjusted vs. 77 cents expected. Palo Alto CEO Nikesh Arora of course focused on the positive. He talked about the strong growth in Cortex, larger deal sizes, as well as strength in the platform and subscription sales. The company also reported solid growth in annual recurring revenue (ARR). Software firewall ARR grew approximately 20% yoy, with public cloud deployments continuing to be the primary driver. Arora said the company recently crossed an important milestone of $5 billion in next-generation security ARR, up 34% year-over-year. Indeed, Palo continues seems to be doing all the right things in the product department. Its recently released as Cortex XSIAM 3.0 is the hottest product the company's portfolio and has driven up average deal size. "AI is accelerating cloud adoption, and we believe this trend will expand the long-term need for software firewalls that scaled modern workloads," said Arora on the corporate conference call. 'We believe we've reached an inflection point in our next-generation security story, as a growing majority of our incremental growth this year is derived from our AI-powered XSIAM, SASE, and software firewalls,' Cortex XSIAM combines proactive breach prevention with reactive incident response, driven by AI technology. By combining vulnerability management and email security, Palo is looking to keep pace with rivals such as CrowdStrike, which is one of the leaders in cloud-based threat intelligence using AI. Palo Alto's Cortex recently hit $1 billion in sales in the previous quarter, becoming the company's fastest product to reach that number. The company points to a total addressable market approaching $40 billion in categories spanning vulnerability management, email security, and security operations. Arora spent much of the call touting the success of Cortex along with several big customer wins. This includes a "leading global consulting firm" signing a transaction worth over $90 million in the quarter. "This customer platformized on Cortex for XSIAM, replacing a legacy incumbent SIEM provider," said Arora. Arora pointed to other deals, including "A leading financial services company" with a $46 million deal and a U.S. financial services firm for $33 million. Arora says the company now has approximately 270 customers in XSIAM, and the average ARR per customer is over $1 million. "XSIAM is not only our fastest-growing product ever, it is now more impactful to our overall growth rate," said Arora. 'I believe that from a strategic perspective, XSIAM has the potential of being the game changer for both the industry and Palo Alto Networks.' Like most industry research and analyst firms, Futuriom provides paid research and marketing services to technology companies. These services include subscription research, custom research, and report sponsorships. In the past twelve months, Futuriom has not had a paid relationship with Palo Alto Networks.
