Palo Alto Networks’ AI Portfolio Grows

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The?global cyber security market is projected to grow 14% annually from $172.32 billion in 2023 to $424.97 billion in 2030. Cyber security player Palo Alto Networks (NYSE: PANW) recently reported its quarterly earnings that outpaced the market?expectations and?sent its stock climbing 15% in the after-hours trading session.?

Palo Alto Network’s Financials

Its fourth quarter revenues grew 26% to $2 billion, significantly ahead of the Street’s estimate of $1.96 billion. This was the 12th consecutive quarter that the company reported a revenue growth of more than 20%. Net income was $482.51 million or $1.44 per share compared with a net income of $254.1 million or $0.80 per share a year ago. Analyst estimate?was EPS of $1.28.

By segment, Product revenues grew 24.3% to $507.4 million. Subscription and support revenues grew 27.4% to $1.446 billion.

For the fiscal year, revenues grew 25% to $6.9 billion. EPS was $4.44 per share compared with a net loss of $2.52 per share reported a year ago.

Among other metrics, billings improved 18% to $3.2 billion.

For the first quarter of fiscal 2024, Palo Alto expects revenues of $1.82-$1.85 billion and an EPS of $1.15-$1.17. The market was looking for revenues of $1.84 billion and an EPS of $1.16. For the year, Palo Alto expects revenues between $8.15-$8.20 billion and an EPS of $5.27-$5.40. The market was looking for revenues of $8.19 billion and an EPS of $5.33.

Palo Alto Network’s Growth Focus

To continue to drive this growth in the coming quarters, Palo Alto is focusing on two key areas – its platform, and AI capabilities. Palo Alto is working on enhancing its platforms to deliver real-time security outcomes. It will continue to add more integration across form factors to enhance the zero trust capabilities.

It believes that by creating this ‘single pane of glass’ offering, it will be able to offer its users access to instant visibility and response. To further accelerate its detection and response time, it is adding traceability through integration across the app lifecycle. By blocking issues real-time, app developers will be able to fix the issues at source for faster deployment.

It will also enhance its real-time remediation capabilities by integrating data across sources and by using AI. All its security products will either provide data for AI to act upon, or act as enforcement points for the security service.

As part of its AI initiative, Palo Alto is collecting over 4.86 PBs of high-quality data from over 750 million new and unique events every day. The access to this data pool is helping it deliver both Precision and Generative AI. While Precision AI will help it deliver detection and response capabilities to achieve near real-time security, Generative AI will help redefine and simplify how its customers interact with its products.

Palo Alto has been deploying AI capabilities in its tools since 2019. In 2019, eight of its products had some AI capabilities; today more than 35 of its products use AI. It plans to continue to build on this strength to drive growth in the coming years.

Palo Alto’s stock is trading at $236.77 with a market capitalization of $72.35 billion. It was trading at a 52-week high of $258.88 in June. The stock was at a 52-week low of $132.22 in January.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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