Palo Alto Surges On Strong Q4 Revenue Growth; Incurs Loss

Shares of Palo Alto Networks Inc. (PANW – Snapshot Report) gained about 5% in after-hour trade yesterday in response to the strongest revenue growth reported by the company in the last 10 quarters. The robust fourth-quarter fiscal 2015 top-line performance was mainly driven by increased spending by corporate and governments to protect themselves from cyber attacks.

However, higher operating expenses more than offset the benefits of robust revenue growth resulting in wider year-over-year loss. Palo Alto Networks reported adjusted loss per share (excluding amortization and other one-time items but including stock-based compensation), on a proportionate tax basis, of 44 cents. The figure was significantly wider than the Zacks Consensus Estimate of a loss of 23 cents as well as 26 cents loss suffered last year.

Palo Alto Networks Inc. – Earnings Surprise | FindTheBest

Revenues

Palo Alto Networks reported revenues of $283.9 million, which not only increased 59.3% year over year but also came ahead of the Zacks Consensus Estimate of $255 million. Improvement in revenues was primarily backed by the strength in the network security market, strong product line-up, deal wins and investment plans.

Product revenues increased 54.5% to $154 million, primarily driven by growth in data center products. Also, a 65.4% surge in service revenues on a year-over-year basis positively impacted results. SaaS-based subscription revenues (part of service revenues) surged 70% from the year-ago period.

Geographically, on a year-over-year basis, revenues from the Americas increased 68% and represented 71% of total revenue. Europe, the Middle East and Africa (EMEA) went up 32%, accounting for 18%. Asia-Pacific was up 61% and contributed the remaining 11%.

Notably, over the past few quarters the demand for cyber security has increased manifold because of a series of data breaches at high-profile business houses and government agencies. As a result, the industry is flourishing and companies like Palo Alto Networks, Fortinet Inc. (FTNT – Snapshot Report) and Cisco (CSCO – Analyst Report) are capitalizing on the opportunities.