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Palo Alto Networks sees strong year on solid demand for cybersecurity

Cybersecurity company Palo Alto Networks Inc raised its annual profit forecast on Tuesday and said 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.

Shares of the company rose more than 7% in extended trading and lifted rival Crowdstrike Holdings Inc.

The earnings burnished the view that cybersecurity 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 cybersecurity to be resilient, and we continue to see evidence of that,” Chief Executive Officer 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.

Adjusted net income for the full year is now expected to be between $3.97 and $4.03 per share, compared with its previous forecast of $3.37 to $3.44 a share.

“In an environment where investors have become more profitability-focused, PANW’s guidance … is icing on the cake,” said Janice Quek, an analyst at CFRA Research.

Its revenue grew 26% to $1.7 billion in the second quarter ended Jan. 31, beating analysts’ expectation of $1.65 billion, according to Refinitiv data.

Excluding items, the company earned a net income per share of $1.05, higher than analysts’ expectations of $0.78.

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. Reuters

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