Shares of Palo Alto Networks Inc. plunged just over 20% in late trading today after the network management and security firm offered lower-than-expected guidance for revenue and earnings in its latest earnings report.

For its fiscal second quarter ended Jan. 31, Palo Alto Networks reported adjusted earnings per share of $1.46, up from $1.05 in the same quarter of last year, on revenue of $2 billion, up 19% year-over-year. Both were beats, as analysts expected adjusted earnings per share of $1.30 on revenue of $1.97 billion.

Operating income in the quarter rose 50% year-over-year, to $564 million, driven by customer growth, with Palo Alto adding 368 new accounts worth more than $1 million annually in the quarter and 10 accounts worth more than $20 million. Existing customers also spent more, with the company’s top 10 customers increasing their spending by 36% in the quarter.

Customer growth equals increased annual recurring revenue, with Palo Alto reporting a 50% increase, to $3.49 billion. Billings in the quarter rose 16% year-over-year, to $2.35 billion.

Business highlights in the quarter included Palo Alto announcing a new zero-trust management solution, security features and next-gen firewalls in November. Among the products announced was “Strata Cloud Manager,” a new service designed to address the issue of inadequate predictive and actionable insights and a lack of seamless integration across security tools.

A week later, the company added new artificial intelligence-related security features to its Cortex line. The features allows Cortex XSIAM v2.0 to add any machine learning framework to Cortex to enable better fraud detection and data visualization.

Fresh off acquiring Dig Security Solutions Ltd. at the end of October, Palo Alto Networks continued its acquisition spree in the quarter by announcing on Nov. 5 that it’s acquiring Israeli enterprise browsing platform company Talon Cyber Security Ltd. for a reported $625 million.

“Our leadership across all of our three platforms and growing cross-platform adoption puts us in a strong and unique position,” Nikesh Arora, chairman and chief executive officer of Palo Alto Networks, said in the company’s earnings release. “With this backdrop, we are activating our accelerated platformization and consolidation strategy, as well as our AI leadership strategy.”

Palo Alto Networks may be pursuing further growth, but those results may be some time in the making, given the company’s lower-than-expected outlook.

For its fiscal 2024 third quarter, Palo Alto said that it expects adjusted earnings per share of $1.24 to $1.26 on revenue of $1.95 billion to $1.96 billion. Both were misses, as analysts expected $1.29 and $2.04 billion.

For the full fiscal year, the company expects adjusted earnings of $5.45 to $5.55 on revenue of $7.95 billion to $8 billion. Analysts were looking for figures of $5.51 and $8.2 billion.

Image: Palo Alto Networks