Palo Alto Networks Inc (NYSE:PANW, ETR:5AP) shares fell on Friday after the provider of enterprise cybersecurity solutions’ earnings outlook for the fiscal third quarter fell short of expectations.
The company expects earnings per share in the range of $0.76 to $0.77 missing estimates of $0.80.
However, revenue is expected to be in the range of $2.26 billion to $2.29 billion, at the midpoint above Street estimates of $2.27 billion.
The company’s weaker-than-expected earnings outlook drew focus away from strong results for the fiscal second quarter, which ended on January 31.
For the quarter, revenue of $2.26 billion was ahead of guidance of $2.22 billion to $2.25 billion and Street estimates of $2.24 billion.
Earnings per share of $0.81 were ahead of estimates of $0.78 and marked an 11% increase from the year-ago quarter.
Remaining Performance Obligation (RPO), a measure of revenue a company has not yet recognized, increased 21% year-over-year to $13 billion, at the high end of the company’s guidance and above estimates of $12.95 billion.
Analysts at Wedbush saw Palo Alto’s latest quarter as a step in the right direction, repeating their ‘Outperform’ rating on the stock and $225 price target.
“We continue to believe the platform approach in cyber security is the right long-term move for Palo Alto and will ultimately emerge from this transition in a stronger market position,” analysts wrote in a note to clients.
They highlighted that platformization conversions continue to accelerate, with Palo Alto seeing a 25% year-over-year increase in $5 plus million accounts and a 52% year-over-year increase in $10 plus million accounts during the quarter.
“While not an inflection point in its platformization strategy, the seeds of growth are falling into place as Palo Alto is in the driver’s seat to gain market and mind share in the cyber security landscape especially with more companies heading down the AI path over the coming years,” they wrote.
Shares traded hands down 5.4% at about $191 in early trade on Friday.