What Happened?
Shares of cybersecurity provider Palo Alto Networks (NASDAQ:PANW) fell 5.3% in the afternoon session after the company reported underwhelming first quarter 2025 results, with remaining performance obligations (RPO - leading revenue indicator) falling below expectations.
Still, there were bright spots. Sales grew 15% from the previous year, thanks in large part to growing demand for its next-generation security platform, which pulled in over $5 billion in annual recurring revenue. But with RPO only growing 19%, markets were likely wondering if growth was starting to lose steam.
Looking ahead, the company guided for revenue to grow around 14-15% in the next quarter and for EPS to rise significantly, both roughly in line with expectations but not enough to excite the market. Overall, this print had some key positives, but the market seemed to be hoping for more.
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What The Market Is Telling Us
Palo Alto Networks’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock gained 9% on the news that the company reported second-quarter earnings results that topped analysts' expectations for most of the key topline metrics we track.
Notably, billings, remaining performance obligations (RPO - leading revenue indicator), and revenue exceeded expectations. Profitability ratios also outperformed with operating income, EPS, and free cash flow, all exceeding Wall Street's estimates.
Looking ahead, the management provided full-year revenue guidance in line with consensus. Lastly, the company's board approved an additional $500 million buyback authorization, demonstrating the commitment to returning value to shareholders. Zooming out, this was a solid quarter featuring some areas of strength.
Palo Alto Networks is up 1.6% since the beginning of the year, but at $183.70 per share, it is still trading 11.8% below its 52-week high of $208.28 from February 2025. Investors who bought $1,000 worth of Palo Alto Networks’s shares 5 years ago would now be looking at an investment worth $4,802.
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