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Palo Alto Networks shares fell 3.5% on Tuesday after fourth-quarter revenue forecasts were largely in line with the short-term impact of the cybersecurity company’s attempts to consolidate its services onto a single platform.
The company is betting on its “platforming” strategy to drive growth. However, Palo Alto expects this trend to continue as customers face higher borrowing costs, which drives an increase in bookings for deferred payment rather than upfront payment over the life of the purchase.
The company expects fourth-quarter revenue to be between $3.43 billion and $3.48 billion, with the midpoint basically in line with LSEG’s forecast of $3.45 billion.
“Clearly, investors are hopeful for more, as shares have been rising on earnings expectations since early April,” Bernstein analysts said in a client note.
As of Monday’s close, Palo Alto shares had risen about 11% this month.
Still, analysts remain optimistic as new AI products and a deal with IBM to provide AI-driven security are expected to boost the company’s results.
“We continue to believe the company remains well-positioned to consolidate safety spending and maintain growth above peers,” RBC Capital Markets analysts said.
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