Seeking Alpha

Palo Alto's guidance in-line; investors applaud deferred revenue growth

  • Palo Alto Networks (PANW) has guided on its FQ1 CC for FQ2 revenue of $132M-$136M and EPS of $0.08-$0.09, in-line with a consensus of $132.3M and $0.09.
  • Investors, however, are more interested in the fact Palo Alto's deferred revenue balance rose 12% Q/Q and 74% Y/Y in FQ1 to $279M. The Y/Y growth rate was well above FQ1's 49% revenue growth rate.
  • The deferred revenue growth highlights Palo Alto's strong focus (relative to some peers) on security services subscriptions, which only get recognized a quarter at a time (even if an entire subscription is paid up-front). Services revenue rose 73% Y/Y, and made up 41% of total revenue. Product revenue rose 36%.
  • Opex rose 56% Y/Y, thanks in large part to a 58% increase in sales/marketing spend to $67.4M (53% of revenue).
  • PANW +8% AH. FQ1 results, PR.
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