Palo Alto Networks shares plunge after company cuts full-year billings, revenue guidance

Shares of cybersecurity company Palo Alto Networks plunged 19% in extended trading Tuesday, after the company reported a beat on the top and bottom lines but lowered its full-year guidance for revenue and billings.

Here’s how the company did compared to estimates by LSEG, formerly known as Refinitiv:

• Earnings per share: $1.46 adjusted vs. $1.30 expected
• Revenue: $1.98 billion vs. $1.97 billion expected

Net income was $1.7 billion for the quarter, or $4.89 per share, compared to $84 million, or $0.25 share, for the fiscal second quarter of 2023.

The company is now guiding to full-year total billings between $10.1 billion and $10.2 billion, compared with its previous guidance of between $10.7 billion and $10.8 billion. Palo Alto Networks also expects full-year revenue to range between $7.95 billion and $8 billion, compared with its prior guidance of between $8.15 billion and $8.2 billion.

In a conference call with analysts, CEO Nikesh Arora said the lowered guidance was due to a “shift” in strategy, “wanting to accelerate growth, our platform migration and consolidation and activating AI leadership,” adding that the company expected “a difficult customer” as the company shifted stance.

Guidance for the upcoming quarter also fell short of consensus estimates. Analysts surveyed by LSEG expected the company to guide to fiscal third-quarter revenue of $2.04 billion, but Palo Alto Networks now expects revenue to range between $1.95 billion and $1.98 billion.

The new billings guidance represents full-year growth of between 10% and 11% versus previous guidance showing 16% to 17% billings growth. Similarly, Palo Alto Networks now expects full-year revenue growth between 15% and 16%, down from initial guidance showing 18% to 19% growth.

The lowered estimates come even as the artificial intelligence frenzy sweeps up cybersecurity stocks and the broader technology sector. Arora said the company would look to activate its “AI leadership strategy” in the earnings release.