Palo Alto Earnings Surge Amid Crowdstrike Outage

Palo Alto surged in after-hours trading after reporting better-than-expected earnings on AI and cloud computing solutions in the wake of the Crowdstrike outage.

Solid Earning Results

Palo Alto beat analysts' expectations for both top and bottom lines: revenue and earnings. Analysts had forecast revenues of $2.16 billion, but the company reported $2.19 billion, above the $1.95 billion figure from a year earlier. Earnings per share (EPS) came in at $1.51 compared to the projected $1.41 and up from $1.44 a year earlier. The company's CEO, Nikesh Arora, attributed that performance to the "strong execution" of the company's "platformisation strategy", addressing prior investor concerns.

The concept behind "platformisation" aims to gain more customers across the company's "platform" through discounts, in some cases essentially providing some of its products free of charge. This plan may have benefited from a recent outage experienced by rival Crowdstrike last month, which left 8.5 million enterprise computers offline and disrupted air travel for hours. While not directly referencing the incident, Arora noted that “a high-profile security outage has further elevated the discussion around cybersecurity", therefore making no judgment on the company's potential gains from its competitor's issues.​

Guidance for Fiscal 2025

Following its Q4 fiscal results, Palo Alto provided sales guidance between $9.10-9.15 billion, compared to analyst forecasts averaging $9.11 billion, enabling an EPS of $6.18-6.31, with a midpoint of $6.25 against expectations of $6.22. Additionally, the company announced a $500 million share buyback programme.

Palo Alto shares rose 1.9% after the report as investors focused on the 43% revenue increase in its cloud computing segment, revealing the company's success in AI, which contrasts with slower traditional firewall appliance sales, indicating cloud software and platforms are becoming core offerings. An ongoing area of interest is whether profitability can continue to increase after prioritising new customer acquisition over margin.​

Palo Alto Breaks Pennant

Palo Alto's recent bounce from $280 up has seen rapid price growth, which may have left behind a pennant formation. This follows an initial rise to $380, closing in on the all-time, and a subsequent drop to $260. Should bullish sentiment continue and push past the peak, prices could potentially extend further to $435, the measured-move target from the breakout point near $330. Conversely, if bears take hold of price action and the stock slides below $330, which prior support at $320, Palo Alto could again fall back down to test lower levels of $285 and perhaps $260.​

Source: SpreadEx

Key Takeaways

Palo Alto reported fiscal quarter revenues of $2.19 billion and EPS of $1.51, exceeding analyst estimates, driven by 43% growth in cloud computing solutions amid increased demand for security following Crowdstrike's outage. For the next fiscal year, the company provided guidance for $9.10-9.15 billion in sales and $6.18-6.31 in EPS. Investors responded positively to the continued momentum in cloud computing, but sustained profitability will depend on balancing growth and margins going forward.​