Palo Alto Networks reported better-than-expected earnings during the company’s fiscal first quarter as customers continued to consolidate their security spending.
Fiscal first-quarter revenue rose 25% to $1.6 billion for the quarter ending October 31, compared with year-ago revenue of $1.2 billion.
Palo Alto Networks Chair and CEO Nikesh Arora said customers are moving forward with their cybersecurity needs, despite the challenges of interest rate hikes and wider economic concerns.
“While cybersecurity is somewhat resilient, we do see some marginal signs of impact,” Arora told analysts during the company’s quarterly conference call. “Cybersecurity deals are getting more scrutiny, suggesting deeper and longer reviews of transformational projects.”
The company is experiencing few outright deal cancellations, however some organizations are sizing down deals or breaking them up into phases.
Deal cycles are getting longer as more discussions are taking place around payment terms and discounts. The financial impact changes around different industry segments, for example technology, consumer packaged goods and some parts of retail are feeling more of an impact, compared with utilities, oil and gas, defense and public sector verticals.
Palo Alto Networks said it still expects a low double digit growth rate for product revenue as the supply chain eases.
The company entered a definitive agreement to buy Cider Security for $195 million in cash, a firm that specializes in application security and software supply chain security. The deal is expected to close during the fiscal second quarter.
Palo Alto reported non-GAAP earnings of $266.4 million, or 83 cents per diluted share, during the quarter, compared with $170.3 million, or 55 cents per diluted share, during the year-ago quarter.
Net income was $20 million, or 6 cents a share, compared with a net loss of $103.6 million, or 35 cents a share during the year-ago quarter.
The company expects fiscal second quarter revenue of between $1.63 billion and $1.66 billion, representing year-over-year growth of 24% to 26%. Non-GAAP earnings are expected to range from 76 cents per share to 78 cents per share.
Fiscal 2023 revenue is expected to range from $6.85 billion to $6.91 billion. Non-GAAP earnings for the fiscal year are expected to range from $3.37 per share to $3.44 per share.