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Earnings Results: Palo Alto Networks takes an M&A break; stock rallies 10% following strong results, outlook

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Palo Alto Networks Inc. shares rallied in the extended session Monday after the cybersecurity company’s quarterly results and outlook exceeded Wall Street expectations, but what was unique about this earnings report was the lack of any new acquisitions.

It’s almost become a tradition over the past few years that Palo Alto Networks announces a new acquisition with its earnings report, having acquired 14 companies over the past three-and-a-half years.

This time last year, Palo Alto Networks was still on its multiyear M&A spree, announcing its acquisition of Crypsis Group for $265 million. Over the next several months, the company laid out another $1 billion in acquisitions, with its $800 million purchase of attack-surface-management company Expanse Inc., which was integrated into the company’s Cortex AI security platform, along with a $156 million acquisition of cloud-security company Bridgecrew and software company Sinefa for an undisclosed price.

This earnings period, however, Palo Alto Networks is taking a break from M&A, having organized all the moving parts from those acquisitions into its cybersecurity platform.

“We did 53 product releases the last three years,” Nikesh Arora, Palo Alto Networks chairman and chief executive, said on a conference call with analysts. “These are all showing up, hopefully in the billions that you’re seeing, that we are able to provide more capabilities more subscriptions our customers.”

While Arora said that Palo Alto Networks “might talk” to a company “here or there,” concerning an acquisition, “we’re not looking for substantive acquisitions, at this current point in time.”

Palo Alto Networks
PANW,
+1.39%

shares surged more than 7% after hours, following a 1.4% rise in the regular session to close at $372.57.

The company reported a fiscal fourth-quarter loss of $119.3 million, or $1.23 a share, compared with a loss of $58.9 million, or 61 cents a share, in the year-ago period. Adjusted earnings, which exclude share-based compensation charges and other items, were $1.60 a share, compared with $1.48 in the year-ago period.

Revenue rose to $1.22 billion from $950.4 million in the year-ago quarter. Billings, which reflects future business under contract, rose to $1.87 billion, compared with $1.39 billion a year ago.

Analysts surveyed by FactSet had forecast earnings of $1.43 a share on revenue of $1.17 billion and billings of $1.71 billion. Palo Alto Networks had forecast $1.42 to $1.44 a share on revenue of $1.17 billion to $1.18 billion, and billings of $1.7 billion to $1.72 billion.

Palo Alto Networks expects adjusted fiscal-first quarter earnings of $1.55 to $1.58 a share on revenue of $1.19 billion to $1.21 billion and billings of $1.29 billion to $1.31 billion, while analysts had forecast $1.59 a share on revenue of $1.15 billion and billings of $1.25 billion.

For the year, Palo Alto Networks expects adjusted earnings of $7.15 to $7.25 a share on revenue of $5.28 billion to $5.33 billion, while analysts expect $7.03 a share on revenue of $5 billion. The company also sees billings of $6.6 billion to $6.65 billion, while analysts forecast $6.18 billion.

Palo Alto Networks shares are up 38% for the past 12 months. In comparison, the ETFMG Prime Cyber Security ETF 
HACK,
+1.38%

 is up 29%, while both the S&P 500 index 
SPX,
+0.85%

and the tech-heavy Nasdaq Composite Index 
COMP,
+1.55%

are up 32%.

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