PANW reported results 23Aug

PANW reported results yesterday. It’s worthwhile following PANW as they compete with CRWD. I listened to the earnings call.

PANW had an excellent quarter which adds to the mounting evidence that the cyber security sector has some nice tailwinds right now.

PANW has a lot of legacy firewall business but they have been working on their cloud native security products and services for several years. This business line is most relevant to CRWD because it competes with CRWD and can provide some predictive value for CRWD’s upcoming earnings on 31Aug (next Tuesday).

PANW’s cloud security business is about 1/3 the size of CRWD’s business.

  • ARR of this business is $1.18B (+81% y/y)
  • 2703 customers to CRWD’s >11,000 (PANW customer count +47% y/y)

Overall, PANW’s business grew 28% in their 31Jul quarter. Guidance for Q1 is for 28% and for the full year it’s 25%. The market responded by sending the shares up 17% this morning.

All of this bodes well for CRWD earnings next week. I’m optimistic.



GR: It’s worthwhile following PANW as they compete with CRWD.

Chris, I wholeheartedly agree. Another formidable competitor is Fortinet (FTNT) that I recently looked at in my recent FTNT vs CRWD, NET & ZS post at Champico’s board.…

First of all, in that thread I stated: although FTNT is fundamentally an all around solid growth and value company, it has not been given any attention or recognition at Saul’s highly popular discussion board simply and primarily because its current year-over-year quarterly and yearly revenue growth falls short of the board’s current 35% or more high growth standard.. I’ll add here that FTNT makes hardware that was addressed in a recent SA article: Product distinctive features
Despite being “blamed” by investors who favor fast-growing pure-cloud cybersecurity plays like CRWD or OKTA for its hardware business, Fortinet’s appliance-centric business model looks to be more sustainable in the long run. Since the company’s founding back in 2000, FTNT has invested in hardware design and development, and its software integration. Their hardware endeavours have resulted in super powerful processing chips, called ASICs, that can handle all the necessary security and networking functions and can be packed together into one device - the FortiGate. Thanks to that, FTNT can deliver SASE in a different way from its competitors. It forms a converged security and networking protection, both on-premise and at any edge (i.e. at employees’ homes). This flexibility should benefit FTNT as they can cater to more customer requirements than rivals.
Additionally, FTNT’s hardware focus has helped the company to cultivate an impressive SD-WAN capability (a key part of the SASE platform solution). Except for Palo Alto Networks (NYSE:PANW) (who acquired its SD-WAN capability and almost every other solution they offer), all other SASE players need to integrate with SD-WAN specialist vendors in order to deliver the networking technology. Still, FTNT is the only security provider to have a home-grown SD-WAN which manifests various benefits related to deployments and suggests that native solutions are strategically more competitive and tend to be of higher quality than acquired ones. So, having the hardware/compute advantage, the SD-WAN edge, one of the broadest sets of security suites, and their own private network, puts FTNT in a very strong position to become a leader in the SASE market.
FTNT is considered the best-of-breed firewall producer and has occupied leading positions in Gartner’s magic quadrants both in SD-WAN and Firewall markets, as its tailor-made ASICs are estimated to have 6x-10x higher connections throughput than comparable solutions.

I also stated: Champ, you and I are in the same boat, i.e., current shareholders of CRWD, NET and ZS and looking at and analyzing FTNT for the very first time as a possible investment candidate.

So my response here addresses Fortinet as a formidable competitor not only for CRWD but also ZS for the following reasons:,

(a)) Fortinet (FTNT)) competitors include Barracuda Networks, Inc., Check Point Software Technologies Ltd., Cisco Systems, Inc., CrowdStrike Holdings, Inc., F5 Networks, Inc., FireEye, Inc., Forcepoint LLC, Imperva, Inc., Juniper Networks, Inc., McAfee, LLC, Palo Alto Networks, Inc., Proofpoint, Inc., SonicWALL, Inc., Sophos Group Plc, Trend Micro Incorporated and Zscaler, Inc.

(b) Here are some Big Charts showing FTNT with far less volatility than CRWD, NET and ZS.
Y-T-D FTNT out performing CRWD, NET, ZS & SP500…
1-YEAR FTNT performing well vs CRWD, NET, ZS & SP500…

(c)) The following table and Big Charts show FTNT stock prices substantially outperforming those of its closest two well-known competitors, Palo Alto Networks (PANW) and Check Point Software (CHKP), year-to-date and over the recent year as of 8/20/2021:

Price Change    FTNT    PANW     CHKP
Y-T-D         100.6%    3.4%    (6.1%)
1-Year        126.2%   36.4%    (2.7%)

Y-T-D Big Chart showing FTNT substantially outperforming PANW and CHKP…
1-year Big Chart as well.…

(d)) Fortinet Second Quarter 2021 Financial Results reported on 7/29/21…
Second Quarter 2021 Highlights
• Total revenue of $801.1 million, up 30% year over year
• Product revenue of $298.3 million, up 41% year over year
• Service revenue of $502.8 million, up 24% year over year
• Billings of $960.9 million, up 35% year over year
• Deferred revenue of $2.91 billion, up 27% year over year
• GAAP operating margin of 18.4%
• Non-GAAP operating margin of 25.4%
• GAAP diluted net income per share of $0.82
• Non-GAAP diluted net income per share of $0.95
• Cash flow from operations of $418.2 million
• Free cash flow of $394.7 million, a Fortinet quarterly record

(e) Here’s a recent 2021 Analyst Day Finance Update presented by Fortinet CFO Keith Jensen.…

Bottom-line: gotta keep an eye on competitors as well.



This is very interesting to me, especially given the response in the stock price post earnings. PANW tech is notoriously difficult to get up and going since I evaluated a couple of their cloud products (an acquisition that did flow log analysis). Now, I did do the evaluation a year and a half ago (conclusion was we can use it but not without a whole bunch of professional services to get it going and keep it going), so unless they have materially changed the ease of adoption of their solutions, I expect CRWD to surpass their adoption rate significantly.