Breaking Wall Street Doubts! "AI+ Network Security" Becomes a Revenue Generator, Boosting Palo Alto's Performance Beyond Expectations

According to Dolphin Research, the stock price of Palo Alto Networks Inc (PANW.US), a US cybersecurity company, surged more than 11% after the US stock market closed on Friday. The company's outlook for the total order size for the next fiscal year exceeded Wall Street's expectations, alleviating concerns in the market about the slowdown in demand for cybersecurity that could impact the company and the entire industry. The company expects the total contract order size for fiscal year 2024 to be between $10.9 billion and $11 billion, while analysts' average expectation is $10.8 billion. However, the company's outlook for total revenue in fiscal year 2024 is lower than analysts' expectations. The company expects the total revenue range for fiscal year 2024 to be between $8.15 billion and $8.2 billion, below analysts' expectation of $8.38 billion.

In addition, the company's fourth-quarter revenue and outlook for the next quarter are lower than the average analyst expectations. The financial report data shows that for the fourth quarter of fiscal year 2023 ending on July 31, Palo Alto's quarterly total revenue was $1.95 billion, a year-on-year increase of 26%, slightly lower than the average analyst expectation of $1.96 billion. On a non-GAAP basis, Palo Alto's earnings per share for the fourth quarter were $1.44, exceeding analysts' expectations by 15 cents and higher than the 80 cents in the same period last year. For the first quarter ending in October, Palo Alto expects total revenue to be between $1.82 billion and $1.85 billion, with a growth rate of 16% to 18%, lower than analysts' expectation of $1.93 billion.

The relatively positive performance outlook provided by Palo Alto can be considered the biggest highlight in the cybersecurity industry. The performance reports of peer companies such as Fortinet Inc. (FTNT.US) and Check Point Software Technologies (CHKP.US) have shown that the growth rate of the entire industry is slowing down due to the general decline in technology spending and the instability of economic growth.

Public information shows that Palo Alto Networks is a US cybersecurity company headquartered in Santa Clara, California. The company focuses on providing cybersecurity solutions to protect enterprises and organizations from network attacks, malware, data breaches, and other network threats. Currently, Palo Alto, which is committed to integrating AI technology into the field of cybersecurity, is one of the biggest winners in this year's global AI investment frenzy, with a growth rate of over 50% year-to-date, far exceeding the growth of the Nasdaq 100 index.

Breaking Wall Street Doubts with Performance!

In a statement, Palo Alto CEO Nikesh Arora expressed that the company's strategy is resonating with an increasing number of customers, driving continued integration. He also noted that the company is very pleased with the reception of its AI-based security platform among its customer base.

Unlike the company's usual timing, the latest earnings report was released after Friday's closing, which sparked speculation about the company's actual performance being less optimistic. Due to the "pure fear" spreading among investors, the company's stock price has dropped by about 20% since the announcement of the earnings report release.

Wall Street investment firm Wedbush even called this move a "disastrous timing choice," stating that it is the biggest PR disaster they have seen in the tech industry in decades. Wedbush previously expected Palo Alto Networks' revenue and earnings per share for the fourth quarter of fiscal year 2023 to be slightly below market expectations, but the actual performance completely shattered the doubts of the firm.

At the beginning of the earnings conference call, CEO Arora apologized for the "special attention" caused by the company's decision to hold the performance meeting later on Friday afternoon, stating that it was to allow sufficient time for one-on-one conversations with analysts before the sales meeting on Sunday.

Arora believes that the cybersecurity industry needs to shift more towards solutions that can stop attacks in real-time, rather than taking 4 to 6 days as it currently does.

"This is unacceptable, it has to be down to the minute." Arora pointed out one reason for accelerating network solutions: the SEC has introduced a new regulation requiring public companies to disclose significant network breaches within 4 days.

The CEO emphasized that artificial intelligence technology can help provide this real-time autonomous solution but further investment is needed. He added that AI has some "dark sides" and the industry needs to address this issue to prevent abuse. He also stressed that Palo Alto is striving to "double down" - ensuring precise AI technology is deployed in every product.