Palo Alto Networks Shares Fall After Cutting Its Revenue Forecast for the Year

By Jace Dela Cruz

Feb 21, 2024 12:29 AM EST

Palo Alto Networks experienced a significant decline of 19% in its shares during extended trading on Tuesday.

According to CNBC, the cybersecurity company's shares plunged after it reported surpassing expectations on both revenue and earnings for its second quarter of fiscal 2024 but revising down its full-year guidance for revenue and billings.

(Photo : Neilson Barnard/Getty Images for New York Times)
NEW YORK, NY - NOVEMBER 03: President & CEO of The New York Times Company Mark Thompson (L) participates in a panel discussion with CTO of Palo Alto Networks Nir Zuk at the New York Times 2015 DealBook Conference at the Whitney Museum of American Art on November 3, 2015 in New York City.

Palo Alto Networks Revises its Full-Year Guidance

In its latest financial report, Palo Alto Networks revealed an adjusted earnings per share of $1.46, outperforming the $1.30 per share expected by LSEG, formerly Refinitiv. Additionally, the company reported revenue of $1.98 billion, slightly exceeding the anticipated $1.97 billion.

Net income for the quarter stood at $1.7 billion, translating to $4.89 per share, a notable increase from $84 million, or $0.25 per share, recorded in the fiscal second quarter of 2023.

However, despite the positive financial results, Palo Alto Networks lowered its full-year guidance, which was below analysts' expectations.

The company now projects total billings for the year to be between $10.1 and $10.2 billion, in contrast to the previous guidance of $10.7 to $10.8 billion.

Expectations for full-year revenue were also adjusted to range from $7.95 to $8 billion, down from its earlier guidance of $8.15 to $8.2 billion.

Strategic Shift of Palo Alto Networks

According to CNBC, Palo Alto Networks CEO Nikesh Arora attributed the lowered guidance to a strategic shift aiming to "accelerate growth, our platform migration and consolidation and activating AI leadership."

He added that the firm expected "a difficult customer" as it shifted stance. Palo Alto Networks reportedly provided guidance for the upcoming quarter that failed to meet consensus estimates.

Analysts had expected fiscal third-quarter revenue of $2.04 billion, but the company now forecasts revenue to range between $1.95 billion and $1.98 billion. The revised billings and revenue projections indicate a lower growth trajectory than the previous guidance.

Palo Alto Networks is now anticipating full-year billings growth between 10% and 11%, down from the initial projection of 16% to 17%. Revenue growth expectations were also adjusted from 15% to 16%, compared to the earlier forecast of 18% to 19%.

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