Palo Alto Networks has raised its annual profit forecast, saying it will control costs by limiting headcount, after rounding off a quarter that showed demand had stayed strong in the face of a turbulent economy.
The earnings support the view that cyber security spending is essential for businesses and governments expanding their digital presence, even as rising interest rates and high inflation weigh on technology budgets.
“We’ve always maintained that we expect cyber security to be resilient, and we continue to see evidence of that,” CEO Nikesh Arora said on a post-earnings call.
Still, the company has sharpened its focus on efficiencies amid the weakening economy and its headcount growth in 2023 is expected to be lower than any of the past three years, Arora said, adding that Palo Alto Networks was working to manage its stock-based compensation to bring it down as percent of its revenue.
“In an environment where investors have become more profitability-focused, Palo Alto Networks’s guidance … is icing on the cake,” said Janice Quek, an analyst at CFRA Research.
Its revenue grew 26 percent to US$1.7 billion (A$2.5 billion) in the second quarter ended January 31, beating analysts’ expectation of US$1.65 billion, according to Refinitiv data.
Palo Alto Networks also reported its third straight quarterly profit on a GAAP basis and said it expects to be GAAP profitable for the fiscal year 2023.
“We believe we now meet the criteria for inclusion in the S&P 500”, said finance chief Dipak Golechha.