Palo Alto Networks (PANW) is trading sharply higher today (+8%) after reporting earnings last night. In case you're not familiar, PANW is seen by many as the sort of the gold standard for cybersecurity. PANW sees itself as the market disruptor.
Its platform allows its enterprise customers to secure their businesses by safely enabling applications running on their networks and by preventing breaches that stem from targeted cyberattacks. Its platform uses an innovative traffic classification engine that identifies network traffic by application, user, and content and provides consistent security across the network, endpoint, and cloud.
Its platform enables customers to maintain the visibility and control needed to protect their valued data and critical control systems while pursuing technology initiatives, like cloud and mobility, that grow their business. PANW believes its platform offers superior performance compared to legacy approaches by simplifying their security operations and infrastructure and eliminating the need for multiple, stand-alone security appliances and software products.
PANW's Next-Generation Security Platform consists of three major elements: its Next-Generation Firewall, its Advanced Endpoint Protection, and its Threat Intelligence Cloud. PANW combines proprietary hardware and software architecture, PAN-OS operating system, Traps, and Threat Intelligence Cloud to provide a comprehensive security platform. Its firewall integrates application visibility and control and is comprised of three identification technologies: App-ID, User-ID, and Content-ID. These allow customers to enable the secure use of applications while managing the inherent risks of doing so.
Its end-customers are predominantly medium to large enterprises, service providers, and government entities. Its customers operate in a variety of industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecom. Typical deployment scenarios include the enterprise perimeter, the enterprise data center, and the distributed enterprise perimeter. Its deployments typically involve at least one pair of PANW products along with one or more of subscriptions, depending on size, security needs and requirements, and network complexity.
PANW primarily sells its products through channel partners and resellers. But it also sells its VM-Series virtual firewalls directly to end-customers through Amazon's AWS Marketplace and Microsoft's Azure Marketplace under a usage-based licensing model.
Turning to the Q1 (Oct) earnings report, non-GAAP EPS rose 35% YoY to $0.74, well above prior guidance of $0.67-0.69. Revenue rose 27.0% year/year to $505.5 mln, which also was a good bit above prior guidance of $482-492 mln. In terms of guidance for Q2 (Jan), PANW sees non-GAAP EPS of $0.78-0.80 and revenue of $518-528 mln. This guidance is better than market expectations.
PANW added more than 2,500 new customers in OctQ, bringing the total number of customers it serves to more than 45,000. The company says it continues to drive disruptive evolutions in a large and growing market by delivering highly automated and orchestrated security capabilities that increase prevention rates and simplify consumption models. In addition, the company named Kathy Bonanno as CFO. She has held senior finance positions at Palo Alto Networks since 2014.
In sum, this was another impressive quarter for PANW. The company has now reported six EPS beats in a row and the last three have been quite sizable beats. The stock got hammered on a weak earnings report/guidance in late February but each of the next three earnings reports have resulted in gap-ups. It seems that investors are quite pleased with the OctQ results.