Palo Alto Networks (PANW) is set to unveil its third-quarter fiscal 2024 earnings on May 20.
The company forecasts third-quarter revenues to fall within the $1.95-$1.98 billion range, signaling a 13-15% year-over-year growth. The Zacks Consensus Estimate stands at $1.97 billion, reflecting a 14.3% increase from the previous year.
For the third quarter, Palo Alto expects non-GAAP earnings to be in the $1.24-$1.26 per share range. The Zacks Consensus Estimate for non-GAAP earnings is $1.25 per share, representing a 13.6% surge from the prior year’s $1.10.
Over the last four quarters, Palo Alto has consistently surpassed the Zacks Consensus Estimate, with an average surprise of 15.8%.
Let’s examine the factors influencing this pending announcement.
Exploring Growth Factors
Palo Alto’s performance in the third quarter is likely to benefit from the strong impetus derived from recent deal wins, propelling top-line growth. Increased demand for form factor hardware products, especially machine learning-backed models securing zero-trust network security for enterprises, is expected to contribute significantly.
The ongoing shift towards cloud adoption post-pandemic is anticipated to accelerate, driving the utilization of the aforementioned platforms. The company projects a year-over-year growth in billings of 2-4% amounting to $2.3-$2.35 billion for the upcoming quarter.
Furthermore, the surge in cloud and remote network usage within hybrid work settings has led to a spike in cyber threats, fueling the demand for cybersecurity solutions. Palo Alto’s third-quarter performance is expected to reflect this heightened demand.
The acquisition of Bridgecrew has been instrumental for Palo Alto, bolstering Prisma public cloud and Xpanse, the foundation of Cortex. Prisma and Cortex are likely to sustain their strong performance into the current fiscal quarter.
The company’s products including Prisma Access, Cortex XDR, Cortex Data Lake, Prisma Cloud, and WildFire received Federal Risk and Authorization Management Program (FedRAMP) recognition. This recognition underscores trust from U.S. government bodies in PANW’s IoT security solutions, likely boosting product adoption in the period under review.
Expectations are high for improved gross margins driven by a higher software mix, normalized supply-chain conditions, enhanced customer support efficiencies, and better cost management resulting in increased bottom-line performance this quarter.
Earnings Prediction Model
Our forecasting model does not definitively project an earnings beat for Palo Alto this quarter. While a combination of positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy), or 3 (Hold) typically indicates a higher likelihood of surpassing estimates, this scenario does not align with PANW’s current standing.
With a Zacks Rank of #2, Palo Alto holds an Earnings ESP of 0.00%. Discover potential investment opportunities before earnings reports through our Earnings ESP Filter.
Among the Standouts
Per our analysis, NVIDIA (NVDA), Zscaler (ZS), and Agilent Technologies (A) present a promising outlook for beating earnings expectations in their upcoming disclosures.
NVIDIA boasts a Zacks Rank of #1 with an Earnings ESP of +2.38%. The company is slated to reveal first-quarter fiscal 2025 results on May 22, having exceeded the Zacks Consensus Estimate in the last four quarters, with an average surprise of 20.2%. Explore the complete list of today’s Zacks #1 Rank stocks here.
Zscaler possesses a Zacks Rank #2 and an Earnings ESP of +0.39%, ahead of its third-quarter fiscal 2024 results publication on May 30. The company has consistently beaten the Zacks Consensus Estimate in recent quarters, with an average surprise of 28.2%.
Agilent Technologies is expected to announce second-quarter fiscal 2024 results on May 29. With a Zacks Rank of #3 and an Earnings ESP of +0.42%, the company has surpassed the Zacks Consensus Estimate in the past four quarters, recording an average surprise of 3.5%.
Keep track of upcoming earnings announcements using the Zacks Earnings Calendar.