Palo Alto Stock Slumps on Downbeat Q2 Billings Forecast

Palo Alto stock plummeted over 6% in pre-market trading today as the renowned cybersecurity firm rattled investors with a forecast of second-quarter billings that fell below market expectations, citing an adverse impact on billings due to the rising borrowing costs.

Palo Alto Networks (NASDAQ: PANW) projected second-quarter billings in the range of $2.34 billion to $2.39 billion, falling short of analysts’ expectations set at $2.42 billion, according to LSEG data. The company also revised its annual billings forecast to be between $10.7 billion and $10.8 billion, down from the earlier forecast of $10.9 billion to $11 billion.

Clients across the cybersecurity sector are tightening their belts on digital spending amid persistent inflation and rising borrowing costs. Palo Alto’s rival, Fortinet (NASDAQ: FTNT), echoed a similar sentiment, projecting downbeat quarterly revenue amidst fierce competition and constrained consumer budgets.

Palo Alto reported a 20% increase in first-quarter revenue to $1.88 billion, above analysts’ average estimate of $1.84 billion. On an adjusted basis, it earned $1.38 per share in the three months ended October 31, outperforming LSEG estimates of $1.16 per share.

However, the California-based cybersecurity firm anticipates its annual adjusted profit to be between $5.40 and $5.53 per share, revising its previous range of $5.27 to $5.40 per share. This positive outlook comes against the backdrop of heightened demand for cybersecurity products driven by the growing threats of cybercrimes, privacy concerns, and high-profile hacks in the past year.

Earlier this month, Palo Alto Networks (NASDAQ: PANW) revealed its plan to acquire Israeli startup Talon Cyber Security to bolster its cybersecurity offerings for enterprises.

Palo Alto stock is trading at $240.60 as of the last check.