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Unpacking Q1 Earnings: Palo Alto Networks (NASDAQ:PANW) In The Context Of Other Cybersecurity Stocks


Jabin Bastian /
2024/06/27 5:12 am EDT

As the Q1 earnings season wraps, let's dig into this quarter's best and worst performers in the cybersecurity industry, including Palo Alto Networks (NASDAQ:PANW) and its peers.

Cybersecurity continues to be one of the fastest-growing segments within software for good reason. Almost every company is slowly finding itself becoming a technology company and facing rising cybersecurity risks. Businesses are accelerating adoption of cloud-based software, moving data and applications into the cloud to save costs while improving performance. This migration has opened them to a multitude of new threats, like employees accessing data via their smartphone while on an open network, or logging into a web-based interface from a laptop in a new location.

The 9 cybersecurity stocks we track reported a slower Q1; on average, revenues beat analyst consensus estimates by 1.4%. while next quarter's revenue guidance was 0.5% below consensus. Stocks--especially those trading at higher multiples--had a strong end of 2023, but 2024 has seen periods of volatility. Mixed signals about inflation have led to uncertainty around rate cuts, and while some of the cybersecurity stocks have fared somewhat better than others, they collectively declined, with share prices falling 1% on average since the previous earnings results.

Palo Alto Networks (NASDAQ:PANW)

Founded in 2005 by cybersecurity engineer Nir Zuk, Palo Alto Networks (NASDAQ:PANW) makes hardware and software cybersecurity products that protect companies from cyberattacks, breaches, and malware threats.

Palo Alto Networks reported revenues of $1.98 billion, up 15.3% year on year, in line with analysts' expectations. It was an ok quarter for the company: Revenue beat by a small amount and operating profit as well as EPS beat by more convincing amounts. 

"We are pleased with the enthusiastic response to platformization from our customers in Q3. Platformization is a long-term strategy that addresses the increasing sophistication and volume of threats, and the need for AI-infused security outcomes," said Nikesh Arora, chairman and CEO of Palo Alto Networks.

Palo Alto Networks Total Revenue

The stock is up 0.3% since the results and currently trades at $324.95.

Is now the time to buy Palo Alto Networks? Access our full analysis of the earnings results here, it's free.

Best Q1: Zscaler (NASDAQ:ZS)

After successfully selling all four of his previous cybersecurity companies, Jay Chaudhry's fifth venture, Zscaler (NASDAQ:ZS) offers software-as-a-service that helps companies securely connect to applications and networks in the cloud.

Zscaler reported revenues of $553.2 million, up 32.1% year on year, outperforming analysts' expectations by 3.2%. It was a very strong quarter for the company, with an impressive beat of analysts' billings estimates and a solid beat of analysts' ARR (annual recurring revenue) estimates.

Zscaler Total Revenue

Zscaler achieved the biggest analyst estimates beat among its peers. The stock is up 15.1% since the results and currently trades at $178.92.

Is now the time to buy Zscaler? Access our full analysis of the earnings results here, it's free.

Weakest Q1: Rapid7 (NASDAQ:RPD)

Founded in 2000 with the idea that network security comes before endpoint security, Rapid7 (NASDAQ:RPD) provides software as a service that helps companies understand where they are exposed to cyber security risks, quickly detect breaches and respond to them.

Rapid7 reported revenues of $205.1 million, up 12% year on year, in line with analysts' expectations. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter and decelerating customer growth.

Rapid7 had the weakest full-year guidance update in the group. The company lost -64 customers and ended up with a total of 11,462. The stock is down 11.7% since the results and currently trades at $40.44.

Read our full analysis of Rapid7's results here.

Okta (NASDAQ:OKTA)

Founded during the aftermath of the financial crisis in 2009, Okta (NASDAQ:OKTA) is a cloud-based software-as-a-service platform that helps companies manage identity for their employees and customers.

Okta reported revenues of $617 million, up 19.1% year on year, surpassing analysts' expectations by 2.1%. It was a solid quarter for the company, with optimistic revenue guidance for the next quarter and a decent beat of analysts' ARR (annual recurring revenue) estimates.

Okta pulled off the highest full-year guidance raise among its peers. The stock is down 9% since the results and currently trades at $87.75.

Read our full, actionable report on Okta here, it's free.

Qualys (NASDAQ:QLYS)

Founded in 1999 as one of the first subscription security companies, Qualys (NASDAQ:QLYS) provides organizations with software to assess their exposure to cyber-attacks.

Qualys reported revenues of $145.8 million, up 11.6% year on year, in line with analysts' expectations. It was a weak quarter for the company, with underwhelming revenue guidance for the next quarter and a miss of analysts' billings estimates.

Qualys had the weakest performance against analyst estimates among its peers. The stock is down 16.2% since the results and currently trades at $139.35.

Read our full, actionable report on Qualys here, it's free.

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