What More Can Palo Alto Acquire?

Last week, Santa Clara-based Palo Alto Networks (NYSE: PANW) announced its second-quarter results that surpassed market expectations and sent the stock soaring to a record high. Its stock climbed 11% in reaction to the result. The company has been growing steadily not only through innovative product releases, but also by following an aggressive acquisition strategy. Since 2018, it has spent over a billion dollars in acquisition of other complementary players. And, with a cash and equivalents balance of over $1.1 billion, those acquisitions are expected to continue.

Palo Alto Network’s Financials

Second quarter revenues grew 30% over the year to $711.2 million, ahead of the market’s forecast of $683 million. Adjusted earnings of $1.51 per share grew 44% over the year and surpassed the Street’s forecast of $1.22.

By segment, Product revenues grew 33% to $271.6 million. Subscription and Support revenues grew 29% to $439.6 million with SaaS-based Subscription revenues rising 36% to $249.7 million and Support revenues increasing 21% to $189.9 million. Billings grew 27% to $852.5 million.

For the current quarter, Palo Alto Networks expects revenues of $697-$707 million and EPS of $1.23-$1.25. The market was looking for revenues of $696.7 million with an EPS of $1.25 for the quarter. The company did not provide an outlook for the year.

Palo Alto’s Product Innovation

Earlier in the quarter, Palo Alto announced the release of the industry’s only open, and integrated, AI-based security platform – the Cortex. Cortex allows security teams to accelerate the analysis of data sets to find threats and deliver responses quickly. It operates on Cortex Data Lake which allows customers to securely and privately store and analyze large amounts of data. The release includes Cortex XDR that provides detection, investigation and response capabilities across network, endpoint and cloud data. It uncovers threats using behavioral analytics, and accelerates investigations and prevention through automation. It also released Traps 6.0, an endpoint protection and response system that includes a behavioral threat protection engine. Traps 6.0 can identify a sequence of events that could lead to malicious activity on a real time basis. Through its integration with Cortex Data Lake and Cortex XDR, Traps identifies and prevents damage across the entire digital infrastructure.

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