Palo Alto Networks CEO Nikesh Arora told CNBC's Jim Cramer on Monday that companies need integrated, modernized cybersecurity systems in order to protect themselves from "bad actors" who are getting faster at gaining access to sensitive information.
Arora said the problem isn't that companies lack cybersecurity vendors. Rather, their security infrastructure may consist of a complicated assortment of vendors, some of which are outdated.
"Listen, you need to have a two-, three-year road map to try and modernize all of that. Put that in some sort of an AI stack, so you can actually do this in more real time. Because, the bad actors are moving faster," he said. It used to take days to hack into systems, Arora added, but now it can occur within a matter of hours.
"It's important for us to make sure we're ready to deflect the stuff in hours, not in days," Arora continued. "And that requires sort of a modernization. It doesn't necessarily mean you have to spend more money. It just means you have to spend it smartly."
The Securities and Exchange Commission released new guidelines late last month that require companies to report a "material" security breach within four days from when the breach is confirmed. Notable companies like copper miner Freeport-McMoRan, cosmetics maker Estee Lauder and consumer products manufacturer Clorox were recently hit with cybersecurity breaches.
"You really don't want to be exposed, telling the SEC that you have been breached, you haven't fixed it yet," Arora said. "So, one of the things which all of us will have to make sure, is that customers can fix these things much faster."
Palo Alto Networks' stock surged nearly 15% on Monday, likely driven by a Friday after-hours earnings report that showed the company's revenue increased 26% compared with the year-earlier quarter. Revenue came in at $1.95 billion, slightly below $1.96 billion consensus estimates, according to Refinitiv. The company reported adjusted quarterly earnings per share of $1.44, beating the Refinitiv consensus of $1.28 per share.
Sign up now for the CNBC Investing Club to follow Jim Cramer's every move in the market.
Disclaimer The CNBC Investing Club Charitable Trust holds shares of Palo Alto Networks and Estee Lauder.
Palo Alto Networks Inc. today reported its fiscal fourth-quarter profit before certain costs such as stock compensation jumped 90% from a year ago, to $482.5 million, or $1.44 a share. Net profit hit $227.7 million, or 64 cents a share. Revenue rose 26%, to $2 billion.
The outlook was positive as well. For its fiscal first quarter, the company expects adjusted earnings of $1.15 to $1.17 a share, up 40% at the midpoint, on a 16% to 18% rise in revenue, to as much as $1.85 billion. For the full year, the revenue forecast is a tick higher, between 18% and 19%, with adjusted earnings up 19% to 22%.
Investors liked the results. Palo Alto’s shares were rising more than 8% in after-hours trading, following a 1% uptick in regular trading. Shares had fallen about 16% since Aug. 2, when the company announced it would release earnings on a Friday, usually a day for bad news.
But as Chief Executive Nikesh Arora apologetically explained on the call, which was kicked off with a remix of Rebecca Black’s 2011 earworm “Friday,” he wanted to leave time to talk one-on-one with analysts over the weekend before a planned company sales meeting that starts Sunday. Anyway, shares were up more than 80% in the year to the start of the month.
“The report is better than feared,” Ivana Delevska, founder and chief investment officer of investment adviser Spear Invest, told SiliconANGLE. “Guidance is light, but given the timing of the report many investors were expecting something much worse like an accounting restatement, or management change.”
Arora touted the “changing environment” that drove more customers toward “platformization,” meaning customers that buy multiple product lines. To that end, Arora said the company was surprised by the strength of its extended security intelligence and automation management, or XSIAM, product, with bookings of more than $200 million in its first year.
XSIAM, in its Cortex line, combines endpoint detection and response or EDR, security orchestration automation and response or SOAR, attack surface management or ASM, and security information and event management or SIEM technologies into a single solution. Many other companies offer these separately, which can be a pain point for customers that often must juggle many different cybersecurity products from different companies.
Despite the positive results, it’s no easy sledding these days, given high interest rates that are tamping down spending. “There is more scrutiny” on deals, Arora said. “There are some that get stretched or get canceled.”
During a 90-minute presentation, Arora dug into the evolution of what he says is a $213 billion cybersecurity market. There are new segments such as SASE, cloud security and internet of things security that contribute $29 billion, transforming segments such as endpoint and XDR as well as SIEM and network security at a collective $72 billion, steady segments such as identity, app security, data and email security at a total of $31 billion, and $81 billion in services.
“We were told customers don’t want platforms, they wanted best-of-breed solutions,” Arora noted. Instead, he said, Palo Alto is aiming to do both, through what the company calls a “build and buy” strategy, to become the largest pure-play cybersecurity provider. Cisco Systems Inc. and Microsoft Corp. are larger in security, but of course cyber is just part of their businesses.
The upshot of all this is that Palo Alto looks to continue as a consolidator in this industry, along with a few others such as CrowdStrike Holdings Inc., Check Point Software Inc. and Cisco Systems Inc. The industry does seem to be splitting between larger companies continuing to grow and roll up smaller companies and others struggling to maintain traction either because of aging technology or because IT departments are diverting more spending toward AI. Just in the past week or so, Rapid7 and Secureworks laid off workers. And Arora noted that there are 3,000 cyber startups out there –a clearly unsustainable situation.
Going forward, Arora sees a need for, and shift to, more real-time and autonomous security. “We will see a standard platform for security,” he vowed. “That’s the only way we’re going to get to the future we need for real-time and AI-based security.”
Palo Alto Networks (PANW) stock rose more than 14% early Monday after the company's fourth quarter results topped Wall Street expectations, despite fears the company was planning to bury bad news with a Friday night earnings report.
"Our choice of Friday has definitely made us the course du jour these past two weeks and has made for some very interesting reading of all the analyst notes," Palo Alto CEO Nikesh Arora told analysts during a conference call on Friday.
"We apologize to people who are inconvenienced, but as we had mentioned in our press release, we wanted to give ample time to analysts to have one-on-one calls with us over the weekend, and we have a sales conference that kicks off on Sunday.
"So again, we apologize for the unique Friday afternoon earnings call, but clearly, we've enjoyed the attention."
In early August, Palo Alto made a rare shift to announce earnings after the bell on a Friday, a move not seen by an S&P 500 company since Nike (NKE) in 2020. The stock had slumped nearly 20% on fears that bad news was coming from the company due to the adjusted earnings announcement date.
Palo Alto delivered fourth quarter revenue of $1.44 billion, above the $1.28 billion analysts had expected while the cybersecurity company projected full-year billings in a range of $10.9 billion-$11 billion. The Street had been expecting $10.77 billion.
These upbeat results may also bolster sentiment around the AI narrative heading into Nvidia's (NVDA) earnings, which are expected on Wednesday after the bell.
In a note titled "Flying over the firewall of worry" — a nod to timing-related concerns around the company's results — Jefferies analyst Joseph Gallo maintained a Buy rating and $285 price target on the stock.
"Results/Guide were much better than feared & PANW remains our fav platform benefitting from cyber consolidation & AI," Gallo wrote.
Several Wall Street analysts had worried bad news may be coming from a Friday announcement.
And the concerns could've been warranted.
As Wall Street Horizon's vice president of research Christine Short highlighted in Yahoo Finance's Chartbook, a late earnings announcement "typically signals negative news on the horizon."
Wedbush Securities managing director Dan Ives called the move "one of the biggest PR disasters and black eyes we have seen in decades of covering tech."
After the results and call came and went without disappointing news, analysts celebrated the beats and the company's artificial intelligence promise.
Meanwhile, UBS analyst Roger Boyd noted the Friday earnings date had his team fearing results could come in similar to fellow cybersecurity player Fortinet (FTNT), which is down nearly 30% since reporting disappointing results on August 3.
UBS cited industry partners who said Palo Alto had been "chasing deals" to the end the quarter in a fashion similar to Fortinet.
"While this is admittedly a small sample size, and you have to be careful not to extrapolate that comment or Fortinet's underwhelming results too much, we still think it's noteworthy, especially when you consider the unconventional timing of the earnings release on a summer Friday," Boyd wrote in an earnings preview on August 10.
Josh Schafer is a reporter for Yahoo Finance.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
(RTTNews) - Shares of cybersecurity company Palo Alto Networks, Inc. (PANW) are rising more than 14% Monday morning after reporting improved fourth-quarter earnings, better than the consensus estimates. The company's full-year outlook also came in above analysts' view.
Net income for the fourth quarter was $227.7 million, or $0.64 per share significantly higher than $3.3 million, or $0.01 per share in the same quarter a year ago.
Excluding one-time items, earnings were $482.5 million, or $1.44 per share, that beat the average estimate of analysts polled by Thomson-Reuters of $0.93 per share.
Revenue for the quarter grew 26% year over year to $2.0 billion.
For the full year, the company expects revenue in the range of $8.15 billion - $8.20 billion. Adjusted income per share for the year is expected in the range of $5.27 - $5.40.
Analysts expect the company to report earnings of $4.27 per share on revenue of $6.9 billion for the year.
PANW is at $240.34 currently. It has traded in the range of $132.22 - $258.88 in the last 52 weeks.
(Reuters) - Palo Alto Networks forecast annual billings above market estimates on Friday, in a sign that more businesses were turning to its integrated cybersecurity offerings to combat rising digital threats.
Shares of the company jumped more than 8% in extended trading, lifting rivals Zscaler and Fortinet by 3.5% and 1.5%, respectively.
Rising cyber crime, privacy concerns and high-profile hacks have in the past year fueled demand for cybersecurity products as businesses and governments grow their digital presence.
The biggest winners of that have been the companies that serve as a one-stop shop for cybersecurity solutions, helping clients be more efficient and Strengthen risk management.
Palo Alto projected full-year billings to be between $10.9 billion and $11.0 billion, compared with the Visible Alpha consensus estimate of $10.80 billion.
"We finished off the year with strong execution and the changing environment drove more customers towards platformization," said Chief Executive Nikesh Arora.
Global average weekly cyber attacks rose 8% increase in the second quarter of 2023, according to Check Point Research, with the average number of attacks per organization per week hitting a two-year high.
Shares of Santa Clara, California-based Palo Alto have declined around 17% since it set Friday as its earnings date earlier this month — a move some analysts termed as "head scratching".
Its fourth-quarter revenue grew about 26% to $1.95 billion, roughly in line with analysts' expectations, according to Refinitiv data.
The company's adjusted profit per share was $1.44 for the quarter ended July 31, beating the estimate of $1.28.
Palo Alto expects annual adjusted profit per share to be between $5.27 and $5.40, compared with analysts' expectations of $4.98.
Rival Check Point Software Technologies also reported a higher-than-expected quarterly profit in late-July as it benefited from higher demand for cybersecurity tools.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Shilpi Majumdar)