Palo Alto Networks (PANW +7%) is trading higher after reporting robust Q4 (Jul) results. The cybersecurity giant returned to double-digit EPS beats after a rare miss in Q3 (Apr). Revenue increased by 12.1% year-over-year to $2.19 billion, slightly exceeding analyst expectations. Additionally, PANW approved an extra $500 million for share repurchases, raising its remaining authorization to $1 billion.
- PANW provided significant upside guidance for Q1 (Oct) EPS and slight revenue upside at the mid-point. FY25 guidance was also strong, with both EPS and revenue mid-points surpassing analyst expectations. Given PANW's conservative guidance history, this is encouraging.
- Billings grew 10.8% year-over-year to $3.50 billion, exceeding prior guidance of $3.43-3.48 billion. However, PANW will no longer focus on billings due to changes in client payment preferences and the rollout of its platformization strategy, which has made billings more volatile.
- Going forward, PANW will emphasize NGS (Next Generation Security) ARR and RPO. In Q4, NGS ARR grew 43% year-over-year to $4.2 billion, while RPO increased 20% year-over-year to $12.7 billion. Revenue grew across all regions: Americas (11%), EMEA (14%), and JPAC (15%).
- PANW's strategy to combat security threats through platformization is gaining traction. Despite initial concerns, PANW added over 90 new platformizations in Q4, bringing the total to over 1,000 among its 5,000 largest customers. This shift is driving an uplift in ARR as customers move to single and multi-platform solutions.
Investors are clearly impressed with PANW's strong close to FY24, particularly the bullish guidance for Q1 and FY25. The focus on platformization is driving results and boosting ARR, with demand accelerating in the second half of the year. Concerns about this strategic shift are subsiding, and management has been increasingly optimistic in recent earnings calls.
