“This MF’er don’t miss…” - rest of cybersecurity industry on Palo Alto

Palo Alto Networks dropped earnings that hit every number Wall Street prayed for, and the stock is ripping 4.73% on the day. $2.5 billion in revenue, up 16% year-over-year. Ninety-five cents EPS adjusted, comfortably above the $0.89 consensus. Oh, and ARR for its “next-gen security” pile ballooned to $5.6 billion… presumably because CIOs are finally tired of explaining to their boards why their IT defenses look like a backyard fence built out of pool noodles.

(Source: Giphy) 

With that said, CEO, Nikesh Arora, gave his usual “platformization” sermon: fragmented defenses don’t work, buy our all-in-one package or enjoy your data getting auctioned off on Telegram. It’s not subtle, but it’s working. Big customers signed eight-figure platform deals like it’s Costco… except the pallet of bulk goods is firewalls and ransomware insurance.

(Source: IBD) 

The genius though, isn’t even the tech….  It's that Palo Alto convinces companies the only way to save money is to spend even more consolidating under one roof. Investors love it because monopoly-by-narrative is the most bulletproof business model in capitalism. And yet, the irony is that Palo Alto’s $25 billion CyberArk deal suddenly doesn’t look like desperation anymore. A few weeks ago, people whispered that they were overpaying for growth they couldn’t generate organically. Now? It looks like empire-building from a position of strength. Investors basically said: fine, colonize more territory, just keep the moat filled with burning oil.

Additionally, the founder, Nir Zuk (no relation to Lizard Zuck), also announced he’s retiring. Now unless you’re Lyft, normally that sort of headline would trigger a five-point drawdown and three CNBC panels on “leadership stability.” Instead, Wall Street shrugged. Zuk got to ride the company to the top and cash out without taking blame for the endless software patches. Meanwhile, product chief Lee Klarich slides into the CTO seat like it’s just another Jira ticket.

(Source: Giphy) 

But, but, but… all in all, the best part about Palo’s reporting is that their blowout quarter didn’t just moon shares for investors… it kneecapped its peers. CrowdStrike, Zscaler, and Check Point all sold off in sympathy, because that’s what happens when the sector alpha dog throws its weight around. Even Fortinet’s weak results last quarter look worse in hindsight. The takeaway: this isn’t a market of multiple winners. This is Palo Alto dunkin’ on dem hoes until everyone else looks like regional mall cops.

And it makes sense. The numbers are clean, guidance took analyst estimates behind the barn, and ARR is accelerating. Not to mention that RPO is expected to be north of $18 billion next year. You don’t have to like cybersecurity to see the trade… Palo is winning big right now. Meaning, it might be a good idea to keep your eyes on shares going forward… and you know, place your bets accordingly. Until next time, friends… 

At the time of publishing, Stocks.News does not hold positions in companies mentioned in the article.