Shares of Palo Alto Networks Inc. fell nearly 9% in late trading today after the network management and security firm reported beats in its fiscal third quarter but disappointed investors with its fourth-quarter forecast.

For the quarter that ended on April 30, Palo Alto Networks reported adjusted earnings per share of $1.32, up from $1.10 per share in the same quarter of last year, on revenue of $1.98 billion, up 15% year-over-year. Both were beats, as analysts had been expecting adjusted earnings per share of $1.26 on revenue of $1.97 billion.

Operating income in the quarter came in at $508 million, up 25% year-over-year, while Palo Alto Network’s operating margin grew 200 basis points year-over-year, to 25.6%. Multi-guaranteed subscription annual recurring revenue grew 47% year-over-year, to $3.79 billion, remaining performance obligations rose 23% to $11.3 million, and total billings in the quarter inched up 3%, to $2.33 billion.

Recent business highlights included Palo Alto Networks launching Prisma SASE 3.0 on May 2 to enhance device security. Aimed at addressing security issues in a world where work happens anywhere and on any device, Prisma SASE 3.0 offers a unified, artificial intelligence-powered solution that enhances security and performance across all types of devices, managed or unmanaged.

On May 5, Palo Alto Networks announced a suite of new security solutions powered by its Precision AI technology designed to protect enterprises against artificial intelligence-generated threats and to secure AI by design. The solutions leverage Palo Alto’s Precision AI and combine machine learning and deep learning with the accessibility of generative AI to deliver security that the company says can outpace adversaries and more proactively protect networks and infrastructure.

More recently, on May 15, Palo AltoNetworks and IBM Corp. announced a new partnership in which Palo Alto Networks will acquire IBM’s QRadar software-as-a-service assets and become IBM’s preferred cybersecurity partner across network, cloud and security operation centers.

“We have remained disciplined in our execution while investing in go-to-market and innovation,” Chief Financial Officer Dipak Golechha said in the company’s earnings release. “We delivered consistent, profitable growth yet again in Q3 and look forward to executing against our strategic goals and financial targets as we close out the year.”

For its fiscal fourth quarter, Palo Alto Networks expects adjusted earnings per share of $1.40 to $1.42, revenue of $2.15 billion to $2.17 billion, and total billings of $3.43 billion to $3.48 billion. The figures were roughly in line with what analysts were expecting — revenue of $2.16 billion and billings of $3.45 billion — but as MarketWatch noted, there wasn’t any notable upside, driving the late trading stock decline.

Discussing the results, Jordan Berger, analyst at global research firm Third Bridge Group Ltd., told SiliconANGLE that “lowered expectations for revenue and billings growth in Palo Alto Networks’ Q3 FY24 report were apparently not unfounded following Q2’s announcement surrounding a revamped platformization initiative. Minor full-year FY24 guidance revisions failed to indicate a meaningful upswing in momentum, and the downstream benefit of increasing platform buy-in from large customers remains to be seen.”

Despite wider concerns around spending fatigue in the cybersecurity market, he added, “our experts indicate that Palo Alto Networks’ revitalized platformization initiative is well-positioned to address burdened customers suffering from cybersecurity tool proliferation and pick up market share along the way.”

Photo: Palo Alto Networks/LinkedIn