Cybersecurity company Palo Alto Networks (PANW 172.88, +3.38 +2.0%) made better than two-year highs this morning in reaction to the company’s strong Q2 report and guidance.
PANW’s strong Q2 print was headlined with a marked beat on the bottom line with earnings of $0.97 per share. Revenues came in equally as impressive, owing to PANW’s solid product line and content refresh, with growth of about 28% to $542.4 million.
On taxes, PANW highlighted that it had a GAAP one-time tax benefit of $6.2 million associated with the U.S. Tax Cuts and Jobs Act, which resulted in a benefit to Q2 GAAP earnings per diluted share of $0.07. On a non-GAAP basis, PANW’s effective tax rate was reduced from 31% to 22% due to the reduction of the U.S. federal corporate income tax rate under the Tax Cuts and Jobs Act. This change in tax rate resulted in a benefit to Q2 non-GAAP net income and non-GAAP earnings per diluted share of $10.6 million and $0.11, respectively.
Breaking it down a bit, PANW’s subscription and support revenues were up about 34% to $340.2 million as management believes the prior sales execution issues are behind the company. Not to be outdone, Product revenues were up about 20% to $202.2 million in the quarter.
Billings grew about 20% in the period to about $674.6 million as deferred revenues were up 33% compared to last year to about $2.0 billion.
Looking ahead, PANW guided Q3 ahead of expectations while also raising its FY18 outlook. In Q3, the company sees better than expected earnings of $0.94-0.96 per share with revenues between $538-548 million with total billings in the range of $665 to $680 million.
For FY18, the company now sees EPS of $3.84-3.91 (compared to prior $3.35-3.41) on revenues of $2.190-2.220 billion (compared to prior $2.145-2.185 billion). Total billings are now expected in the range of $2.715-2.770 billion (from prior $2.650-2.710 billion).
All told, the better than expected Q2 report and strong guidance move shares decently higher into the afternoon. The need for more comprehensive cybersecurity has become apparent in recent years (think Equifax), aiding strong spending in the cybersecurity environment. PANW is reaping the benefits with the stock adding to its nearly 15.5% YTD advance it carried into the print.