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Palo Alto Networks (PANW) reported another strong print today, highlighted by yet another beat and raise quarter. Specifically, Q4/2022 (quarter end-July) revenues of $1.55B beat consensus estimates calling for $1.543B while adjusted EPS of $2.39 topped internal estimates between $2.26-$2.29 and consensus expectations calling for $2.28. These results come on back of the previous quarter’s blowout financials when on May 22nd we highlighted our high conviction (link here). That said, the Q4 revenues represented an increase of 27% y/y and reached the upper end of the previously announced guidance range. More specifically, the Product segment posted revenues of $408.1M, representing y/y growth of 20% while billings grew by a whopping 44% y/y to reach $2.69B (the highest point achieved in four years and topping consensus calling for $2.33B). Though gross margins (impacted during the quarter by increased shipping and logistics costs) of 73.2% were slightly below consensus estimates looking for 73.8%, operating margins amounted to 20.8%, topping consensus estimates looking for 20.4%.
In terms of guidance, Q1/2023 revenues are seen between $1.535B-$1.555B representing a y/y increase of 23%-25% while total quarterly billings are now seen between $1.68B-$1.70B representing a y/y increase of 22%-23%. For fiscal FY/2023, initial estimates were announced ahead of consensus expectations: total revenues are seen between $6.85B-$6.90B while total billings are expected between $8.95B-$9.05B. Internally, the BOD authorized and additional $915M for share repurchases thus increasing the remaining authorization for future share repurchases to $1.00B, expiring by December 31, 2023. Additionally, the BOD also approved a 3:1 stock split for September 14.
Versus a basket of defensive tech peers, note that PANW is up +2.0% YTD while all peers are down - Cisco Systems (CSCO) is down -23.2%, Juniper Networks (JNPR) is down -17.8%, Crowdstrike Holdings (CRWD) is down -6.3%, Ciena Corporation (CIEN) is down -29.5% and Arista Networks (ANET) is down -12.7%. Note that YTD the S&P is down -13.2%. Rebased performance since 2020 can be seen below:
Building upon its three-platform strategy, Palo Alto Networks is clearly solidifying its dominant position following its shift to cloud. The currently near 60,000 enterprise firewall customers will provide a solid platform for cross selling additional product offerings and services. Management specifically highlighted 1,240 active customers spending $1.0M+ per year compared to 986 active customers last year. Despite an uncertain macro backdrop, tailwinds such as cyber security and enterprise spend are poised to provide tailwinds for the years ahead. We believe that the company is poised to dominate the cybersecurity landscape for years to come.