Palo Alto Networks, Inc. PANW reported better-than-expected results for the fourth quarter of fiscal 2024. The company reported non-GAAP earnings of $1.51 per share for the fiscal fourth quarter, which beat the Zacks Consensus Estimate of $1.41. The bottom line improved 4.9% from the year-ago quarter’s non-GAAP earnings of $1.44 per share and came above the company’s earlier guidance of $1.40-$1.42.
Palo Alto’s fiscal fourth-quarter revenues of $2.19 billion beat the Zacks Consensus Estimate of $2.16 billion and rose 12.3% from the year-ago reported figure. Fourth-quarter revenues also came above management’s previously provided guidance of $2.15-$2.17 billion.
The top line was primarily driven by growth across the Products, Services and Subscription segments. Additionally, the increased adoption of Palo Alto’s Next-Generation Security platforms, driven by the hybrid work culture and the heightened need for stronger security, also aided fiscal fourth-quarter results.
The company’s strong quarterly performance reflects its sustained focus on product innovation, a shift in its business model to subscription-based services, building sales capability, platform integration and continued investments in the go-to-market strategy.
Billings increased 11% to $3.5 billion in the fiscal fourth quarter and outpaced the company’s projection of $3.43-$3.48 billion.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise 
Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote
Fiscal Fourth-Quarter Performance
Product revenues increased 5% year over year to $481 million and contributed to 22% of the total revenues. The company’s Subscription and Support revenues, which accounted for 78% of the total revenues, improved 18.2% to $1.71 billion.
Deferred revenues at the end of the fiscal fourth quarter were $5.54 billion. Palo Alto’s remaining performance obligation climbed to $12.7 billion, reflecting a year-over-year increase of 20%.
Palo Alto’s next-generation security annualized recurring revenues were $4.22 billion in the reported quarter, which grew 43% year over year and 11.3% from the previous quarter.
Non-GAAP gross profits increased 11.5% to $1.68 billion. The non-GAAP gross margin contracted 50 basis points (bps) to 76.8%.
The non-GAAP operating income rose 6% to $588 million. Meanwhile, the non-GAAP operating margin contracted 150 bps to 26.9% compared with the year-ago quarter.
Balance Sheet & Cash Flow
Palo Alto exited the fiscal fourth quarter with cash, cash equivalents and short-term investments of $2.56 billion, down from $2.89 billion at the end of the previous quarter. As of Jul 31, 2024, the company had long-term operating lease liabilities of $380.5 million.
PANW generated an operating cash flow of $512.7 million and non-GAAP adjusted free cash flow of $485.3 million in the fiscal fourth quarter. The non-GAAP adjusted free cash flow margin for the quarter came in at approximately 22.2%. In fiscal 2024, the company generated an operating cash flow of $3.26 billion and non-GAAP adjusted free cash flow of $3.12 billion.
FY25 and First-Quarter Guidance
For fiscal 2025, Palo Alto expects revenues between $9.10 billion and $9.15 billion. The Zacks Consensus Estimate for fiscal 2025 revenue is pegged at $9.11 billion. Remaining Performance Obligation is projected in the range of $15.2-$15.3 billion. Next-Gen Security ARR is estimated in the band of $5.42-$5.47 billion.
PANW’s fiscal 2025 non-GAAP operating margin is projected in the range of 27.5-28%. Its adjusted free cash flow margin is estimated in the range of 37-38%. The company expects net income per share in the range of $6.18-$6.31. The consensus mark for fiscal 2025 earnings stands at $6.20 per share.
For the first quarter of fiscal 2025, PANW projects revenues between $2.10 billion and $2.13 billion, which suggests year-over-year growth of 12-13%. Remaining Performance Obligations are anticipated between $12.4 billion and $12.5 billion. Next-Gen Security ARR is expected in the band of $4.33-$4.38 billion.
Non-GAAP earnings are projected in the range of $1.47-$1.49 per share. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues and non-GAAP earnings is pegged at $2.11 billion and $1.44 per share, respectively.
Zacks Rank & Other Stocks to Consider
Palo Alto currently carries a Zacks Rank #2 (Buy). Shares of PANW have gained 16.4% year to date (YTD).
Some other top-ranked stocks in the broader technology sector are Aspen Technology AZPN, Celestica CLS and Arista Networks ANET, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Aspen’s 2025 earnings has been revised upward by 70 cents to $7.43 per share over the past 30 days, indicating a 12.8% year-over-year increase. It has a long-term earnings growth expectation of 13.1%. The stock has lost 3.1% YTD.
The Zacks Consensus Estimate for Celestica’s 2024 earnings has been revised upward by 33 cents to $3.65 per share in the past 30 days, suggesting year-over-year growth of 50.2%. The stock has risen 84.9% YTD.
The Zacks Consensus Estimate for Arista’s 2024 earnings has been revised upward by 31 cents to $8.24 per share in the past 30 days, indicating an increase of 18.73% on a year-over-year basis. Shares of ANET have jumped 49.5% YTD. It has a long-term earnings growth expectation of 17.2%.
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