A month has passed by for the reason that final earnings report for Palo Alto Networks (PANW). Shares have misplaced about 4.8% in that timeframe, underperforming the S&P 500.
Will the current detrimental development proceed main as much as its subsequent earnings launch, or is Palo Alto due for a breakout? Earlier than we dive into how buyers and analysts have reacted as of late, let’s take a fast have a look at the newest earnings report to be able to get a greater deal with on the necessary drivers.
Palo Alto Q1 Earnings and Revenues Surpass Estimates
Palo Alto Networks delivered first-quarter fiscal 2025 non-GAAP earnings of $1.56 per share, which surpassed the Zacks Consensus Estimate by 5.4%. The determine improved 13% 12 months over 12 months, exceeding administration’s steering of $1.47-$1.49.
Palo Alto’s earnings beat the Zacks Consensus Estimate in every of the trailing 4 quarters, with a median shock of seven.6%.
PANW’s first-quarter fiscal 2025 revenues of $2.14 billion beat the Zacks Consensus Estimate by 0.93% and got here marginally larger than administration’s steering of $2.10-$2.13 billion.
The highest line rose 14% 12 months over 12 months, pushed by a formidable efficiency throughout its segments. Moreover, the rising adoption of PANW’s Subsequent-Technology Safety platforms, pushed by the hybrid work tradition and a strong want for stronger safety, additionally boosted first-quarter fiscal 2025 outcomes.
Fiscal Q1 Efficiency
PANW’s robust top-line efficiency may be attributed to the immense year-over-year rise in its Subscription & Assist revenues backed by a modest enhance in its Product revenues.
Product revenues elevated 3.7% 12 months over 12 months to $353.8 million and contributed to 16.5% of the entire revenues. The corporate’s Subscription and Assist revenues, which accounted for 83.5% of the entire revenues, improved 16% to $1.79 billion.
Deferred revenues on the finish of the fiscal first quarter have been $5.51 billion. Palo Alto’s remaining efficiency obligation climbed to $12.6 billion, reflecting a year-over-year enhance of 20%.
Palo Alto’s next-generation safety annualized recurring revenues have been $4.5 billion within the reported quarter, which grew 40% 12 months over 12 months and 6.6% from the earlier quarter.
Non-GAAP gross income elevated 12.8% to $1.653 billion. The non-GAAP gross margin contracted 70 foundation factors (bps) to 77.3%. The non-GAAP working earnings rose 16.4% to $544.9 million. In the meantime, the non-GAAP working margin expanded 60 bps to twenty-eight.8% in contrast with the year-ago quarter.
Stability Sheet & Money Stream
Palo Alto had money and money equivalents and short-term investments of $3.4 billion as of Oct. 31, 2024, in contrast with $2.56 billion as of July 31, 2024.
PANW generated an working money move of $1.51 billion and a non-GAAP adjusted free money move of $1.47 billion within the first quarter fiscal of 2025.
FY25 and Second-Quarter Steerage
For fiscal 2025, Palo Alto expects revenues between $9.12 billion and $9.17 billion, up from the sooner projected vary of $9.10-$9.15 billion. Remaining Efficiency Obligation remains to be projected within the vary of $15.2-$15.3 billion. Subsequent-Gen Safety ARR is estimated within the band of $5.52-$5.57 billion, up from the earlier forecast of $5.42-$4.47 billion.
PANW’s fiscal 2025 non-GAAP working margin remains to be projected within the vary of 27.5-28%. Its adjusted free money move margin remains to be estimated within the vary of 37-38%. The corporate expects non-GAAP earnings per share within the vary of $6.26-$6.39, up from the earlier steering of $6.18-$6.31.
For the second quarter of fiscal 2025, PANW tasks revenues between $2.22 billion and $2.25 billion, which suggests year-over-year progress of 12-14%. Remaining Efficiency Obligations are anticipated between $12.9 billion and $13 billion. Subsequent-Gen Safety ARR is predicted within the band of $4.70-$4.75 billion.
How Have Estimates Been Shifting Since Then?
Prior to now month, buyers have witnessed an upward development in estimates revision.
VGM Scores
At present, Palo Alto has a robust Development Rating of A, although it’s lagging loads on the Momentum Rating entrance with an F. Following the very same course, the inventory was allotted a grade of F on the worth facet, placing it within the fifth quintile for this funding technique.
Total, the inventory has an combination VGM Rating of D. In case you aren’t centered on one technique, this rating is the one you have to be all in favour of.
Outlook
Estimates have been broadly trending upward for the inventory, and the magnitude of those revisions signifies a downward shift. Notably, Palo Alto has a Zacks Rank #3 (Maintain). We count on an in-line return from the inventory within the subsequent few months.
Efficiency of an Business Participant
Palo Alto is a part of the Zacks Web – Software program business. Over the previous month, Datadog (DDOG), a inventory from the identical business, has gained 2.1%. The corporate reported its outcomes for the quarter ended September 2024 greater than a month in the past.
Datadog reported revenues of $690.02 million within the final reported quarter, representing a year-over-year change of +26%. EPS of $0.46 for a similar interval compares with $0.45 a 12 months in the past.
Datadog is predicted to publish earnings of $0.43 per share for the present quarter, representing a year-over-year change of -2.3%. During the last 30 days, the Zacks Consensus Estimate has modified +4.2%.
Datadog has a Zacks Rank #2 (Purchase) based mostly on the general path and magnitude of estimate revisions. Moreover, the inventory has a VGM Rating of C.
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