Palo Alto Networks Inc. witnessed a significant drop in its shares during Tuesday’s extended trading session following the cybersecurity company’s announcement of lower-than-expected forecasts for the current quarter and a revised downward full-year revenue outlook.
For the fiscal third quarter, the company anticipates revenue ranging from $1.95 billion to $1.98 billion, alongside billings between $2.30 billion and $2.35 billion. Billings, a metric incorporating deferred revenue, fell below analyst expectations, with the FactSet consensus projecting $2.04 billion in revenue and $2.62 billion in billings.
Additionally, Palo Alto Networks forecasts adjusted earnings per share between $1.24 and $1.26, compared to analysts’ expectations of $1.29 per share.
Following this announcement, the company’s stock experienced a 21% decline in after-hours trading on Tuesday. Notably, Palo Alto Networks has previously recorded only one decline of over 20% in a regular session, occurring with a 24.2% daily plunge on March 1, 2017.
Palo Alto Networks is currently pursuing a transformation into a “platform” within the cybersecurity sector, aiming to emulate the success of companies like ServiceNow Inc. and Workday Inc. by encouraging customers to utilize more of its products in a unified ecosystem. However, CEO Nikesh Arora acknowledged the challenges of this transition during the earnings call, emphasizing the company’s commitment to supporting customers through various programs designed to facilitate the adoption of its platform.
Arora reiterated the company’s confidence in the long-term benefits of its strategic shift, despite acknowledging the short-term financial implications. Palo Alto Networks revised its full-year forecast, now expecting total billings of $10.1 billion to $10.2 billion and total revenue of $7.95 billion to $8.00 billion, down from its earlier projections of $10.7 billion to $10.8 billion in billings and $8.15 billion to $8.20 billion in total revenue.
For the fiscal second quarter, Palo Alto Networks reported revenue of $1.98 billion, up from $1.66 billion in the previous year, slightly exceeding analysts’ expectations of $1.97 billion. Adjusted earnings per share came in at $1.46, surpassing analysts’ projections of $1.30 per share.
