The largest cybersecurity company on the stock market just reported upbeat earnings, which is great news for the cybersecurity industry as a whole. Investor uncertainty around the pace of the cybersecurity market has forced many companies within it to stay flat so far this year, but a strong earnings season could supercharge these stocks higher. Names like CrowdStrike, Palo Alto Networks, Zscaler…etc. have lagged far behind the market rally, largely because their earnings weren’t as exciting as semiconductor earnings, but as investors look for new opportunities, cybersecurity has a high probability of being seen as an opportunity for profit.
Palo Alto Networks was one of the first cybersecurity companies to report quarterly earnings in the space, kicking things off by surpassing expectations and raising forecasts. Palo Alto’s quarterly revenue came in at $2.2 billion, up 12% from the year before. Quarterly earnings came in $522 million, or $1.51 per share. Investors also celebrated the company’s announcement to implement a $500 million stock buyback.
Looking at the bigger picture, PANW has a record of consistently posting growth. Between 2020 and 2023, the company increased its revenue by 100%, and moved from being in negative income to profitability. Their year over year revenue has grown at about an average of 26% for the past three years, and is once again expected to upkeep that same growth over the next 12 months.
Although their numbers are impressive, investors should note that Palo Alto (PANW) is trading at value of $111 billion, nearly doubling the market cap of its nearest competitor, CrowdStrike. PANW does generate double the revenue that CRWD does, but it will need to continue posting strong revenue growth for investors to justify its current valuation. According to their latest earnings, PANW is expected to post between $9.10-$9.15 billion in revenue for their next fiscal year, which would bring it closer to a more reasonable valuation if they reach that milestone.