Cloud Stocks: Palo Alto Networks Continues To Acquire

The increase in work-from-home requirements of organizations has led to a surge in demand for cyber security services. Palo Alto Networks (NYSE:PANW) is witnessing the results of this growth as was evident in its recent result announcement.

Palo Alto Network’s Financials

Palo Alto Network’s third quarter revenues grew 20% to $869.4 million, significantly ahead of the Street’s estimate of $829 million. GAAP net loss was $74.8 million or $0.77 per share compared with a loss of $20.2 million or $0.21 per share a year ago. On an adjusted basis, net income was $1.17 per share compared to analyst estimate of $0.94 per share.

By segment, Product revenues were relatively flat at $280.9 million compared with $278.4 million a year ago. Subscription and support revenues grew 31% to $588.5 million.

Among other metrics, billings improved 24% to $1 billion and Deferred revenues grew 28% to $3.4 billion.

For the fourth quarter, Palo Alto expects revenues of $915-$925 million with an EPS of $1.37-$1.40. It expects to end the year with revenues of $3.373-$3.383 billion and EPS of $4.78-$4.81. The market was looking for revenues of $916.8 million with EPS of $1.31 for the quarter and revenues of $3.33 billion with EPS of $4.44 for the year.

Palo Alto Network’s Acquisition

Amidst the crisis, Palo Alto announced the acquisition of cloud-delivered software-defined wide area network (SD-WAN) provider CloudGenix for an estimated $420 million. CloudGenix is known for its cloud-managed networking product that competes with Cisco, Fortinet, and VMware. Its product helps customers stay safe by defining policies that enforce compliance with company security protocols across distributed locations. Its platform is particularly useful for organizations who have a lot of branch offices and provide a distributed workforce. The current lockdown conditions have accelerated the demand for this product globally as more employees are working from home.

Palo Alto plans to leverage the acquisition to accelerate the use of its Prisma Access security offering by remote business branches and retail stores. The combined offering will help accelerate the shift of organizations to Secure Access Service Edge (SASE) offerings.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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