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Palo Alto Networks (PANW)
NASDAQ:PANW
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Palo Alto Networks
(NASDAQ:PANW)80Outperform
Positive Factors
Earnings
Palo Alto Networks announced results that exceeded market expectations, with total revenue up 14.3% YoY and non-GAAP net income up 12% YoY, driven by more optimized-than-expected sales and marketing spending.
Platformization Strategy
Management highlighted large deal wins, which validate the platformization strategy and should help drive market share gains and margin expansion over the long term.
Negative Factors
Free Cash Flow (FCF)
PANW reported F2Q FCF below consensus, with a disappointing cash flow in the quarter.
Palo Alto Networks (PANW) vs. S&P 500 (SPY)
Market Cap
$122.08B
Dividend YieldN/A
Average Volume (3M)5.87M
Price to Earnings (P/E)104.1
Beta (1Y)1.28
Revenue Growth13.86%
EPS Growth-46.44%
CountryUS
Employees15,289
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)1.77
Shares Outstanding662,100,000
10 Day Avg. Volume4,832,068
30 Day Avg. Volume5,869,559
Financial Highlights & Ratios
PEG Ratio0.16
Price to Book (P/B)N/A
Price to Sales (P/S)14.24
Price to Cash Flow (P/CF)54.80
P/FCF Ratio54.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$219.14Price Target Upside18.92% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering34
Palo Alto Networks Business Overview & Revenue Model
Company DescriptionCalifornia-based Palo Alto Networks, Inc., founded in 2005, is a global cybersecurity leader. The company provides network security solutions to enterprises, service providers, and government entities.
How the Company Makes MoneyPalo Alto Networks generates revenue primarily through the sale of its cybersecurity products and associated subscription services. The company offers advanced firewall appliances and software, which form a significant portion of its revenue. In addition to hardware sales, the company provides software subscriptions that offer ongoing threat intelligence, malware prevention, and security analytics, supporting a recurring revenue model. Professional services, including consulting, education, and support, also contribute to its earnings. Key partnerships with other technology providers and integrators help expand its market reach and enhance its product offerings, further bolstering its revenue streams.
Palo Alto Networks Financial Statement Overview
Summary
Palo Alto Networks showcases strong revenue growth and robust cash generation. The company maintains low leverage with a solid return on equity, enhancing its financial stability. Minor concerns exist regarding increased liabilities and a dip in net income, but the overall financial trajectory remains positive.Income Statement
Palo Alto Networks has shown strong revenue growth, with a significant increase in Total Revenue from $8.03 billion in 2024 to $8.57 billion in TTM (Trailing-Twelve-Months). The Gross Profit Margin is robust at 73.9%, indicating efficient cost management. The Net Profit Margin is healthy at 14.6%, and both EBIT and EBITDA margins have improved compared to the previous year, reflecting enhanced operational efficiency. However, the decrease in Net Income from 2024 is a concern, which slightly offsets the overall positive performance.85
Very Positive
Balance Sheet
The company maintains a solid financial position with a Debt-to-Equity Ratio of 0.14, indicating low leverage. The Return on Equity (ROE) is a strong 19.7%, showcasing efficient utilization of equity to generate profits. The Equity Ratio stands at 30.4%, reflecting a stable capital structure. While the overall balance sheet is strong, the slight increase in total liabilities requires monitoring to ensure financial stability.80
Positive
Cash Flow
Operating Cash Flow is robust at $3.11 billion, demonstrating strong cash generation capability. The Free Cash Flow to Net Income Ratio is particularly impressive, highlighting effective cash management strategies. The Free Cash Flow Growth Rate is consistent, further reinforcing the company's ability to support growth and investment activities through internally generated funds. The cash flow statement presents a very positive picture, with minimal concerns.88
Very Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 8.57B | 8.03B | 6.89B | 5.50B | 4.26B | 3.41B | Gross Profit |
| 6.33B | 5.97B | 4.98B | 3.78B | 2.98B | 2.41B | EBIT |
| 945.70M | 683.90M | 387.30M | -188.80M | -304.10M | -179.00M | EBITDA |
| 1.52B | 1.28B | 387.30M | 95.60M | -46.60M | 364.80M | Net Income Common Stockholders |
| 1.25B | 2.58B | 439.70M | -267.00M | -498.90M | -267.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.23B | 2.58B | 2.39B | 3.63B | 2.90B | 3.75B | Total Assets |
| 20.95B | 19.99B | 14.50B | 12.25B | 10.24B | 9.07B | Total Debt |
| 896.80M | 1.41B | 2.27B | 3.95B | 3.54B | 3.42B | Net Debt |
| -1.33B | -124.90M | 1.14B | 1.83B | 1.67B | 462.70M | Total Liabilities |
| 14.58B | 14.82B | 12.75B | 12.04B | 9.48B | 7.96B | Stockholders Equity |
| 6.38B | 5.17B | 1.75B | 210.00M | 763.60M | 1.10B |
| Cash Flow | Free Cash Flow | ||||
| 3.02B | 3.10B | 2.63B | 1.79B | 1.39B | 821.30M | Operating Cash Flow |
| 3.11B | 3.26B | 2.78B | 1.98B | 1.50B | 1.04B | Investing Cash Flow |
| -980.00M | -1.51B | -2.03B | -933.40M | -1.48B | 288.00M | Financing Cash Flow |
| -1.68B | -1.34B | -1.73B | -806.60M | -1.10B | 673.00M |
Palo Alto Networks Technical Analysis
Negative
184.28
Price Trends
186.78
Negative
189.18
Negative
176.99
Positive
Market Momentum
-0.80
Positive
42.79
Neutral
17.91
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PANW, the sentiment is Negative. The current price of 184.28 is below the 20-day moving average (MA) of 193.01, below the 50-day MA of 186.78, and above the 200-day MA of 176.99, indicating a neutral trend. The MACD of -0.80 indicates Positive momentum. The RSI at 42.79 is Neutral, neither overbought nor oversold. The STOCH value of 17.91 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PANW.
Palo Alto Networks Risk Analysis
Palo Alto Networks disclosed 47 risk factors in its most recent earnings report. Palo Alto Networks reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Palo Alto Networks Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $122.08B | 104.11 | 23.38% | ― | 13.86% | -46.44% | |
80 Outperform | $29.74B | ― | -3.24% | ― | 30.77% | 79.05% | |
79 Outperform | $24.33B | 29.71 | 30.15% | ― | 6.22% | 6.15% | |
79 Outperform | $81.88B | 47.26 | 338.74% | ― | 12.27% | 54.69% | |
74 Outperform | $251.67B | 27.72 | 20.02% | 2.53% | -5.34% | -30.57% | |
67 Neutral | $48.63B | ― | -8.71% | ― | 28.76% | 58.13% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% |
* Technology Sector Average
Performance Comparison
PANW
Palo Alto Networks
184.28
41.04
28.65%
CHKP
Check Point
221.60
63.19
39.89%
CSCO
Cisco Systems
63.96
16.56
34.94%
FTNT
Fortinet
106.80
33.73
46.16%
ZS
Zscaler
196.45
-4.82
-2.39%
NET
Cloudflare
143.75
43.00
42.68%
Palo Alto Networks Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -8.72% | Next Earnings Date: May 21, 2025
Earnings Call Sentiment Positive
The earnings call presented a positive outlook with strong revenue growth, significant progress in platformization, and robust performance across various business segments. However, there were concerns regarding gross margin pressures and the impact of deferred payments on cash flow visibility.Highlights
Strong Revenue Growth
Total revenue for Q2 2025 was $2.26 billion, growing 14% year-over-year, above the high end of guidance.
Impressive Platformization Progress
Approximately 75 new platformizations in Q2, up from 45 a year ago, with over 1,150 total platformizations among the top 5,000 customers.
NGS ARR Growth
NGS ARR grew 37% to $4.78 billion, driven by strong performance across advanced subscriptions, SaaS, and Cortex.
Large Deal Success
74 accounts with transactions over $500,000, up 25% year over year, and 32 accounts with transactions over $10 million, up over 50%.
Global Expansion
Double-digit revenue growth across all theaters: Americas up 13%, EMEA up 18%, and JPAC up 17%.
Innovation in AI and Cloud Security
Introduction of Cortex Cloud, merging Prisma Cloud with CDR capabilities, offering enhanced AI-powered cloud security solutions.
Lowlights
Gross Margin Pressure
Gross margin at 76.6%, slightly down due to newer SaaS offerings not yet achieving scale and higher-than-typical inventory and product transition costs.
Deferred Payments Impact
Increase in deals with deferred payments, which affects cash flow visibility and management.
Operating Margin Concerns
Operating expenses as a percentage of revenue decreased by only 120 basis points, indicating potential room for improvement in cost management.
Company Guidance
During the conference call for Palo Alto Networks, Inc.'s second quarter of fiscal year 2025, the company provided updated guidance reflecting strong financial performance and strategic advancements. The company reported total revenue of $2.26 billion, a 14% year-over-year increase, with product revenue growing by 8% and services revenue by 16%, supported by a substantial 20% rise in subscription revenue. The company highlighted a robust performance in its Next-Generation Security (NGS) Annual Recurring Revenue (ARR), which grew by 37% to reach $4.78 billion, driven by strength across advanced subscriptions, SaaS, and Cortex. Operating margins surpassed internal targets, prompting an increase in full-year operating margin guidance to a range of 28% to 28.5%. The company also projected diluted non-GAAP EPS for the fiscal year to be between $3.18 and $3.24, marking a 12% to 14% increase. Free cash flow generation remained strong, with expectations of an adjusted free cash flow margin between 37% and 38% for the year. Looking forward, Palo Alto Networks, Inc. anticipates revenue for fiscal year 2025 to range between $9.14 billion and $9.19 billion, reflecting a 14% increase, while continuing to capitalize on its platformization strategy and AI-driven initiatives to maintain momentum and drive future growth.Palo Alto Networks Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Palo Alto Networks Expands Board with Notable Appointments
Positive
Feb 13, 2025
On February 12, 2025, Palo Alto Networks appointed Helle Thorning-Schmidt, former Prime Minister of Denmark, and Ralph Hamers, former CEO of UBS Group AG and ING Group, to its Board of Directors as Class II directors. With these appointments, the board expands from nine to eleven members, reflecting the company’s strategic effort to enhance its global reach and secure its position as a cybersecurity leader. Both appointees bring extensive experience in political and business landscapes, expected to influence the company’s strategic direction and strengthen its industry position.
Shareholder MeetingsStock SplitBusiness Operations and Strategy
Palo Alto Networks Announces Stock Split and Share Increase
Positive
Dec 12, 2024
Palo Alto Networks’ shareholders approved several key initiatives at the 2024 Annual Meeting, including a two-for-one stock split and an increase in shares under the 2021 Equity Incentive Plan by 3 million shares. The stock split aims to enhance stock market liquidity, while the approved proposals reflect strategic decisions on executive compensation and corporate governance, positioning the company for growth and operational efficiency.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.