PANW earnings out after close and look good

Here is what I wrote on the PANW board and thought I’d add it here as well….

I need to listen to the conference call and read through more thoroughly, but all looks good.

  • Fiscal third quarter revenue grew 24% year over year to $1.7 billion
  • Fiscal third quarter billings grew 26% year over year to $2.3 billion
  • Remaining performance obligation grew 35% year over year to $9.2 billion
  • Fourth consecutive GAAP net income positive quarter

All good stuff, but for me, the best might be that NGS ARR was up 60% to $2.57B. This is the cloud SAAS component of thier sales and the future in my opinion. Just as good, non-GAAP earnings was $1.10 / share up 83% yr/yr and free cash flow was $401 Million in the quarter.

Growth rates have slowed down in the cyber security industry but they seem to be hanging in there with little overall slowing, especially for a company of this size.

I need to do a little more investigation but initial results look good to me.

Here is a link to the press release:

And the presentation which is always very enlightening:

Long PANW and happy Tickerguide.


Whilst we cannot invest in the cloud based ARR only Palo Alto without the rest of the business it doesn’t stop the 60% growth taking away opportunity from investible cloud players, (Sentinel One and Crowdstrike and ZS) and whilst I’m sure some of the 60% growth they are managing comes from easy to execute self cannibalisation from existing on prem revenues and legacy solution sales, one cannot help but wonder if they really have a competitive advantage with “platformization”. (Ugh - when did that become a word?).



Yes! My first thought was Nutanix. It’s easy to have one area of your business growing fast if another area is shrinking.

@CMF_BigECat, you said 2.57b ARR for NGS revenue so +60% means it grew about 1B YoY. Did total ARR grow more than 1B? If it grew less, that means legacy revenue is shrinking, and that’s a big red flag, because NGS will likely slow a lot when there’s no more legacy revenue to cannibalize.



Oops. Obviously the legacy revenue was not necessarily ARR. Looks like subscription/support revenue was 1.035b in this Q last year so a 4.14b run rate. And this year 1.333b so a 5.33b run rate.

It’s good that it grew more than 1b. That means even after (maybe) some cannibalization, legacy revenue is slightly growing, not shrinking.

No red flag that I can see…but of course, I don’t really follow this company.



Yes, there is always a confusion about ARR and revenues. Obviously ARR is annual recurring so the quarterly amount (and growth) is 1/4.

So a $2.57 run rate means $0.64 B quarterly and the yearly growth would be (0.64 - 0.64/1.6)= $0.24B

Total revenues were $1.721 for the quarter, last years revs were 1.381 so yearly growth was $0.34B

So rough estimate was $100M increase in legacy firewalled sales. That comes on rough estimated total legacy sales of (1.721- 0.64) = $1.08B so last years sales were 0.98 and growth was roughly 10%.

So the legacy business’s growth is 10%. Not bad in this environment, especially since it is extremely profitable and is feeding a very fast growing SAAS business.

I’ve said it before, everyone keeps saying this business is dying. I am not so sure. No doubt the cloud is the future, but it is not hard to imagine that there isn’t a portion of business that wants to stay firewalled. I am sure there will be people on here that says no way. Well, all I can do is look at the numbers (as Saul has said about a thousand times) and they say that doesn’t appear to be true yet.

You know, Sometimes the incumbent wins. I imagine that back in the 80’s there were people who swore Supercalc and WordPerfect were better and had to win the office document wars…. But most people on these boards only know Excel and Word….

Just a joke there, please don’t tell me why my analogy is wrong.

Long PANW and NET with a small position in both Sentinel and Crowdstrike