CEO says the platformization strategy caused 'significant consternation' earlier this year but is showing 'heartening' results.
Shares of Palo Alto Networks Inc. delivered an upbeat earnings report Monday afternoon that offered some relief following a dramatic stretch for the cybersecurity market.
The company reported fiscal fourth-quarter net income of $358 million, or $1.01 a share, compared with $228 million, or 64 cents a share. On an adjusted basis, Palo Alto Networks (PANW) posted earnings of $1.51 a share, while analysts tracked by FactSet were modeling $1.41 a share.
Palo Alto Networks' revenue rose to $2.19 billion from $1.95 billion a year prior, while analysts had been projecting $2.16 billion.
Shares were up 2% in Monday's extended session.
"We finished off the year with strong execution on our platformization strategy in Q4," Chief Executive Nikesh Arora said in a release. Platformization refers to the company's strategy of trying to get customers to adopt more of its offerings, though the tactic has worried investors a bit this year as analysts noted that Palo Alto Networks would be giving away some free or discounted product in order to pursue its long-term ambitions.
Management noted on the call that some customers who've since embraced a broader portion of Palo Alto Networks' platform may have had time remaining on contracts elsewhere and needed an "economic bridge" until those arrangements expired.
"I know there was significant consternation around our platformization strategy six months ago," Arora said on the earnings call. "All I want to say is, I wish we had started down that path sooner. The amount of interest and activity around it has certainly been heartening and shows promise."
He noted that the company has expanded the work it does with Schlumberger $(SLB)$, one customer that replaced some incumbent offerings recently while adopting more services from Palo Alto Networks.
Arora seemed to allude to CrowdStrike Holdings Inc. $(CRWD)$ in his prepared remarks, commenting that "a recent high-profile outage involving security tools has elevated the cybersecurity conversation further" and got companies "digging deeper into the technologies being deployed to mitigate these risks."
Rival CrowdStrike made itself into a household name when a bad software update triggered a global technology outage, and there's some hope from Palo Alto Networks investors that the company ultimately could benefit from its peer's brand damage
For the current quarter, Palo Alto Networks projects $2.10 billion to $2.13 billion in revenue, while the FactSet consensus was for $2.10 billion. The company also anticipates $1.47 to $1.49 in adjusted earnings per share, whereas analysts were looking for $1.42.
Palo Alto Networks offered a forecast for its new fiscal year as well. The company expects $9.10 billion to $9.15 billion in revenue and $6.18 to $6.31 in adjusted earnings per share. That compares with the consensus forecast of $9.11 billion and $6.22, respectively.
Among the highlights from last fiscal year were top-line momentum, operating-margin expansion and "best-in-class cash conversion," according to Arora. "We are confident we can continue this in fiscal year 2025."
Palo Alto Networks is also boosting its buyback program by $500 million, bringing the total amount remaining for share repurchases to $1 billion.
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