Palo Alto Networks shares tumble 16% as company cuts its FY24 billings outlook
Palo Alto Networks, a leading cybersecurity company, recently reported its financial results for the fiscal second quarter of 2024. The company outpaced EPS expectations by 16 cents, but revenues fell in line with expectations. The company guided FY24 revenues below expectations while cutting its billings outlook.
Investors headed for the exit as the performance failed to entice buyers following a 112% run up in the stock over the past year. Shares tumbled from $370 to $315 before stabilizing. The stock is holding the $320 level ahead of its conference call.
The company's total revenue for the quarter grew 19% year-over-year to $1.98 billion, slightly better than the $1.97 billion expected. The company's remaining performance obligation (RPO) grew 22% year-over -year to $10.8 billion.
The company reported Q2 earnings of $1.46 per share, 16 cents better than expectations. The company's non-GAAP operating margin grew 580 basis points year-over-year to 29%, indicating the company's ability to generate strong profitability. This significant increase in net income is primarily attributed to a $1.5 billion net tax benefit from the release of the company's valuation allowance.
Palo Alto Networks provided guidance for the fiscal third quarter and full year of 2024, indicating continued growth and profitability. For the fiscal third quarter, the company expects total billings in the range of $2.30 billion to $2.35 billion, representing year-over-year growth of between 2% and 4%. The company also expects total revenue in the range of $1.95 billion to $1.98 billion, representing year-over-year growth of between 13% and 15%. This forecast fell below the $2.04 billion consensus.
For the full year, the company expects total billings in the range of $10.10 billion to $10.20 billion, representing year-over-year growth of between 10% and 11%. The company also expects total revenue in the range of $7.95 billion to $8.00 billion, representing year-over-year growth of between 15% and 16%, below the consensus of $8.19 billion.
The company's non-GAAP operating margin for the fiscal year is expected to be in the range of 26.5% to 27.0%, indicating the company's ability to maintain strong profitability margins. The company also expects diluted non-GAAP net income per share in the range of $5.45 to $5.55, using 345 million to 347 million shares outstanding.
Additionally, the company expects adjusted free cash flow margin in the range of 38.0% to 39.0%, indicating the company's ability to generate strong cash flows from its operations.
In conclusion, Palo Alto Networks posted in line results that failed to live up to the triple digit rally its shares have witnessed over the past year. The disappointing outlook weighs on shares as well as its peers (CRWD, ZS, FTNT) in after hours trade. The news will garner plenty of attention and keep participants cautious as we await tomorrow"s NVDA numbers.