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.”

Photo: SiliconANGLE

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