Shares in Palo Alto Networks Inc. rose strongly in late trading after the network management and security firm delivered an earnings beat and lifted its earnings forecast for the year ahead.
For its fiscal second quarter that ended Jan. 31, Palo Alto Networks reported non-generally accepted accounting principles net income of $331.7 million or $1.05 per diluted share, up from $185 million or 58 cents in the same quarter of last year. Revenue came in at $1.7 billion, up 26% year-over-year. Analysts had been expecting earnings per share of 78 cents on revenue of $1.65 billion.
Total billings in the quarter came in at $2.03 billion, up 26% year-over-year and as of the end of the quarter, remaining performance obligations sat at $8.8 billion, up 39%. Operating income in the quarter was up 55% year-over-year to $377 million and adjusted free cash flow was also up 55% to $685 million.
The strong figures were driven by new deals, with Palo Alto seeing strong growth in all market segments. The number of deals the company signed over under $5 million rose 84% in the quarter by volume and 132% by value, while deals under $10 million increased by 144% and 196%, respectively.
Notably, Palo Alto Networks attributes its strong growth as representative of the “early days of consolidation in cybersecurity.” In its earnings presentation, the company highlighted themes driving consolidation, such as zero trust, cloud and security operations center transformation.
Palo Alto Network also noted that they were GAAP profitable and that GAAP net income has been positive for the trailing 12 months.
“We continue to see our teams execute well in the midst of macroeconomic challenges, helping customers consolidate their security architectures,” Nikesh Arora, chairman and chief executive officer of Palo Alto Networks, said in a statement. “The performance of our software-based and cloud-delivered portfolio validates the significant investments we have made over the last several years and has enabled us to raise our billings and NGS ARR guidance.”
Looking ahead, Palo Alto Networks forecasts non-GAAP EPS of 90 cents to 94 cents for its fiscal third quarter on revenue of $1.695 billion to $1.725 billion. Analysts had expected 78 cents and $1.74 billion. For its full fiscal year 2023, the company expected EPS of $3.97 to $4.03 on revenue of $6.85 billion to $6.91 billion. Analysts had forecast an EPS figure of $3.42.
Investors liked the strong earnings beat and a higher-than-expected outlook, with shares in Palo Alto Networks up 7.26% after the close of regular trading.