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Palo Alto (PANW) to Report Q3 Earnings: What's in the Cards?

Palo Alto Networks PANW is scheduled to report its third-quarter fiscal 2023 results on May 23.

Palo Alto projects its fiscal third-quarter revenues in the $1.695-$1.725 billion range, suggesting a year-over-year increase of 22%-24%. The Zacks Consensus Estimate for the same is pegged at $1.71 billion, implying growth of 23.7% from the year-ago reported figure.

For the fiscal third quarter, the company expects non-GAAP earnings in the range of 90-94 cents per share. The Zacks Consensus Estimate for PANW’s non-GAAP earnings stands at 92 cents per share, indicating an increase of 53.3% from the year-ago quarter’s earnings of 60 cents.

Palo Alto’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 17.2%.

Palo Alto Networks, Inc. Price and EPS Surprise

Palo Alto Networks, Inc. price-eps-surprise | Palo Alto Networks, Inc. Quote

Factors to Note Ahead of Q3 Results

In the third quarter, Palo Alto is likely to have benefited from the strong momentum stemming from deal wins, which is expected to have boosted its top line. The strong demand for form factor hardware products, particularly machine learning-powered models that ensure zero-trust network security for organizations, is expected to have contributed to the quarterly performance.

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The growing and accelerated migration to the cloud in a post-pandemic era is likely to have boosted the adoption of the aforementioned platforms. The company projects year-over-year billings growth between 22% and 25% ($2.20 billion-$2.25 billion) in the to-be-reported quarter.

Moreover, the increased use of the cloud and remote networks amid a hybrid working environment has resulted in escalating cyberattacks currently. This is leading to a rise in the demand for cybersecurity solutions. PANW’s fiscal third-quarter performance is likely to have benefited from this demand surge.

Palo Alto has been gaining from the Bridgecrew acquisition, which forms the crux of the Prisma public cloud and Xpanse, which form the basis of Cortex. Prisma and Cortex are likely to have continued performing well in the fiscal third quarter as well.

Federal Risk and Authorization Management Program (FedRAMP) recognitions are boosting the adoption of Palo Alto’s products by government organizations. The company’s Prisma Access, Cortex XDR, Cortex Data Lake, Prisma Cloud and WildFire received FedRAMP recognitions.

This FedRAMP recognition reflects the U.S. public sector’s trust in Palo Alto’s IoT security solutions. This is anticipated to have encouraged the adoption of its products during the period in discussion.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for PANW this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

Though Palo Alto currently carries a Zacks Rank of 3, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, HP Inc. HPQ, Agilent A and NVIDIA NVDA have the right combination of elements to post an earnings beat in their upcoming releases.

HP is set to report second-quarter fiscal 2023 results on May 30. The company has a Zacks Rank #2 and an Earnings ESP of +2.24% at present. HP’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 1.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HPQ’s second-quarter earnings is pegged at 76 cents per share, suggesting a decline of 29.6% from the year-ago quarter’s earnings of $1.11. HP’s quarterly revenues are estimated to decrease 19.9% year over year to $13.21 billion.

Agilent carries a Zacks Rank #3 and has an Earnings ESP of +0.40%. The company is scheduled to report second-quarter fiscal 2023 results on May 23. Its earnings beat the Zacks Consensus Estimate in the preceding four quarters, with the average surprise being 7%.

The Zacks Consensus Estimate for Agilent’s second-quarter earnings stands at $1.27 per share, implying a year-over-year increase of 12.4%. It is estimated to report revenues of $1.67 billion, which suggests an increase of approximately 3.8% from the year-ago quarter.

NVIDIA carries a Zacks Rank #3 and has an Earnings ESP of +2.43%. The company is slated to report first-quarter fiscal 2024 results on May 24. Its earnings surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing the same on two occasions, the average surprise being -3.2%.

The Zacks Consensus Estimate for NVDA’s first-quarter earnings is pegged at 92 cents per share, indicating a year-over-year decline of 32.4%. The consensus mark for revenues stands at $6.51 billion, suggesting a year-over-year drop of 21.5%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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