Palo Alto Networks stock rallies as outlook hiked once again following earnings beat

Late Tuesday, Palo Alto Networks said it expects adjusted fiscal-third quarter earnings of $1.65 to $1.68 a share on revenue of $1.35 billion to $1.37 billion and billings of $1.59 billion to $1.61 billion, while analysts surveyed by FactSet had forecast $1.63 a share on revenue of $1.35 billion and billings of $1.58 billion.

With that, Palo Alto Networks raised its full-year forecast to adjusted earnings of $7.23 to $7.30 a share, versus a previous forecast of $7.15 to $7.25 a share. Additionally, the company expects higher-than-previously-forecast revenue between $5.43 billion and $5.48 billion, and billings of $6.8 billion to $6.85 billion.

Analysts expect $7.23 a share on revenue of $5.39 billion and billings of $6.72 billion.

Notably, the strength behind those hikes comes from Palo Alto Networks absorbing the many technologies it has acquired over the years.

“This quarter marks the end of all integrations of our acquired businesses over the last few years,” Nikesh Arora, Palo Alto Networks chairman and chief executive, told analyst on a conference call. “All of our products are now seamlessly integrated and can have organic development continuing in them.”

Palo Alto Networks has gone more than a year without announcing a new acquisition, following a four-year M&A spree, having acquired a dozen companies — the largest being attack-surface management company Expanse Inc. and security orchestration, automation and response company Demisto Inc. — for a total cost of about $3.3 billion. In August, the company said it wasn’t looking for any more acquisitions. Arora told analysts on the call late Tuesday that hadn’t changed.

“The reason we were acquisitive in the beginning was there were many areas in cybersecurity which were up-and-coming and going to be important, and we were not in there, and we were behind the eight ball — to pick an analogy — we were late to the party,” Arora said. The CEO said one of the major areas Palo Alto Networks needed to catch up was in cloud security.

“We bought six or seven companies in cloud security: Each of them had been in existence for three to four years,” Arora said. “So those four years of development, we were able to benefit from in a market where we need to be first.”

The company reported a fiscal second-quarter loss of $93.5 million, or 95 cents a share, compared with a loss of $142.3 million, or $1.48 a share, in the year-ago period. Adjusted earnings, which exclude share-based compensation charges and other items, were $1.74 a share, compared with $1.55 a share in the year-ago period.

Revenue rose to $1.32 billion from $1.02 billion in the year-ago quarter. Billings, which reflects future business under contract, rose to $1.61 billion, compared with $1.21 billion a year ago.

Analysts had forecast earnings of $1.65 a share on revenue of $1.28 billion and billings of $1.52 billion. Palo Alto Networks had forecast earnings of $1.63 to $1.66 a share on revenue of $1.27 billion to $1.29 billion and billings of $1.51 billion to $1.53 billion.

Palo Alto Networks shares are up 24% over the past 12 months. In comparison, the ETFMG Prime Cyber Security ETF  HACK, -0.90% is down 11%, the S&P 500 index  SPX, -1.01%  is up 11%, and the tech-heavy Nasdaq Composite Index  COMP, -1.23%  is down 1.1% in that span.

Back in December, Palo Alto Networks joined the Nasdaq 100 Index NDX, -0.99%, which is up 4.9% over the past 12 months.