Palo Alto Networks is set to capture significant attention as it prepares to unveil its fourth-quarter results on Monday. This moment is critical, especially with the company’s guidance for fiscal 2025 being a central topic of discussion, aligning with the cybersecurity firm’s ambitious "platformization" strategy, as highlighted in a recent note from Wedbush Securities. The concept of platformization serves as a transformative opportunity within the cybersecurity realm, aiming to streamline security measures by conducting a comprehensive review of existing cybersecurity tools.
This initiative focuses on finding synergies that allow for consolidation, as expressed by Paul Kaspian, the principal product marketing manager of Palo Alto’s Zero Trust offering, in an April blog. Kaspian pointed out that as individual tools undergo consolidation, security teams should experience numerous benefits, such as simplified management processes, decreased training overhead, and significantly enhanced security measures as a result of this strategic shift. Currently, only 900 out of Palo Alto’s top 5,000 customers have fully adopted the company’s platform approach.
However, Wedbush anticipates that the adoption rate will accelerate moving forward. Analysts led by Daniel Ives opined that the primary focal point for the quarter hinges on the guidance for fiscal 2025, a crucial metric for gauging the effectiveness of Palo Alto's platform strategy as it rolls out programs across various geographies. Recent analyses from Wedbush have indicated some "slight headwinds" impacting Palo Alto's sales cycles, largely attributed to an outage experienced by CrowdStrike, which has had a short-term effect on billings.
Notably, this outage could potentially create a tailwind for Palo Alto Networks as they transition into fiscal 2025, according to the insights shared by the Wedbush team. For the upcoming fiscal fourth quarter, Wall Street's consensus anticipates revenue for Palo Alto to be $2.16 billion with billings expected to reach $3.45 billion.
Wedbush categorizes these projections as "hittable to slightly beatable," with the firm forecasting that the company will report revenue of approximately $2.19 billion for the quarter. While the analysts do not expect a dramatic surprise in the earnings announcement on Monday, they acknowledge that the foundations for growth are being established for what is projected to be a significant fiscal 2025.
The current expectations from the market suggest that Palo Alto’s fiscal 2025 revenue could approximate $9.11 billion, reflective of a commendable 14% annual growth rate, according to Wedbush. The firm has retained its price target of $375 along with an outperform rating on Palo Alto. As it stands, the company continues to remain a preferred choice within the cybersecurity sector for strategists looking ahead to the next 12-18 months.
Despite experiencing immediate challenges tied to their platformization strategy, Palo Alto Networks is progressively building a stable pipeline for long-term contracts, particularly as the narrative surrounding cloud penetration surfaces as a significant tailwind looking into the future..