Palo Alto Network's Q2: 10 key takeaways

Palo Alto Networks is landing customers with its next-gen firewalls and increasingly adding subscriptions to its revenue model.

Palo Alto Networks continues to put up strong quarterly growth metrics as it gains traction with its next-gen firewall products and services that go with them.

The company reported better-than-expected fiscal second quarter earnings. Palo Alto reported earnings of $2.5 million, or 4 cents a share, on revenue of $96.5 million, up 70 percent from a year ago. Non-GAAP earnings were 5 cents a share, a penny better than estimates.

As for the outlook, Palo Alto projected third quarter sales to be between $100 million to $104 million with non-GAAP earnings of about 5 cents a share. That guidance was in line with estimates, but Palo Alto noted that it was investing heavily in sales and infrastructure.

Palo Alto's run since going public in 2012.


Here's a look at 10 need-to-know tidbits from the quarter:

  1. The company added more than 1,000 customers in the quarter for the fifth consecutive time.
  2. Palo Alto Networks is gaining share in the next-gen firewall market. The company cited customer wins primarily from Check Point, Cisco and Juniper.
  3. The company has launched malware detection as a service with an effort called Wildfire. Palo Alto introduced a free version of Wildfire in late 2011 and it identifies malware on a customer network. A pay version was rolled out in November 2012 with remediation and identification. Paying and free subscribers in the January quarter rose 20 percent from the previous quarter to 1,200. Management expects more free subscribers will convert to free.
  4. Palo Alto ended the quarter with about 11,000 customers.
  5. Splunk, a big data play, partnered with Palo Alto as a software-hardware tag team in security accounts.
  6. FBN Securities analyst Shebly Seyrafi said that Palo Alto is part of a contingent that includes Fortinet and Sourcefire that is taking share from security incumbents such as Check Point, Juniper and Cisco.
  7. Analysts estimate that Palo Alto will add about 75 to 100 employees a quarter.
  8. Deferred revenue in the fourth quarter was $188 million, well ahead of Jefferies estimates of $177 million.
  9. The company has a hybrid business model that revolves around product sales, services and maintenance.
  10. Sixty-three percent of the company's revenue in the fourth quarter came from the Americas with 25 percent from EMEA and 12 percent via Asia Pacific.


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