Shares of Palo Alto Networks Inc. sagged more than 5% in late trading today after the network management and security firm reported mixed results in its fiscal 2025 first quarter.

For the quarter ended Oct. 31, Palo Alto Networks reported adjusted earnings per share of $1.56, up from $1.38 in the same quarter of the previous year, on revenue of $2.14 billion, up 14% year-over-year. Earnings came in ahead of the $1.48 expected by analysts, while revenue came in just ahead of an expected $2.12 billion.

In the quarter, Palo Alto Networks hit $4.52 billion in annual recurring income, up 40% year-over-year, while remaining performance obligations, a metric that represents the total value of contracted revenue that the company has not yet recognized, rose 20% from a year ago, to $12.6 billion.

The company secured notable customer wins in the first quarter, including a $30 million platform expansion with a business services company, a $15 million network security platform project with a national hospital system and a $50 million security operations center transformation deal with a technology firm.

Business highlights in the quarter included Palo Alto Networks moving forward with its “platformization” strategy, meaning customer use of multiple security tools from the company, hitting about 1,100 cumulative platformizations across its customer base. The company remains on track to reach its target of 2,500-3,500 platformizations by fiscal year 2030 by leveraging its portfolio to drive integrated security adoption among top customers.

During the quarter, Palo Alto introduced artificial intelligence-powered operational technology solutions and expanded its secure access service edge portfolio. The quarter saw the release of Strata Copilot, a service designed to enhance network security operations by providing real-time insights, guided actions and natural language interfaces for threat detection and remediation trained on nearly 50,000 vetted sources.

In cloud and automation, the company reported over 15% growth in its Prisma Cloud and Cortex customer base, with significant traction for AI copilots and automated data security remediation tools. Cortex XSIAM saw strong growth, adding more than 400 new machine learning detection modules and capturing over $80 million in QRadar-to-XSIAM transitions.

“Our Q1 results reinforced our conviction in our differentiated platformization strategy,” Nikesh Arora, chairman and chief executive of Palo Alto Networks, said in the company’s earnings release. “We see a growing market realization that platformization is the game changer that will solve security and enable better AI outcomes. I expect this will be a multiyear trend for which we are best positioned to deliver to our customers.”

For its fiscal second quarter, Palo Alto Networks expects to see adjusted earnings per share of $1.54 to $1.56 on revenue of $2.22 billion to $2.25. At the midpoint, earnings were in line with the $1.55 expected by analysts, while revenue was slightly ahead of an expected $2.23 billion.

For the full fiscal year, the company expected adjusted earnings per share of $6.29 to $6.39 on revenue of $9.12 billion to $9.17 billion. Analysts had been expecting $6.28.

“Experts tell us that Palo Alto Networks is well-positioned to benefit from secular trends towards cybersecurity toolset consolidation in the broader market, a reality which should help support the company’s platformization ambitions,” said Third Bridge analyst Jordan Berger. “Despite reporting top-line growth that topped guidance in its Q1 FY25 period, bigger questions remain around the company’s ability to execute its platformization strategy in a way that generates material and sustainable revenue upside, which according to some experts may represent a greater challenge.”

Photo: Palo Alto Networks