New Customers Lead To A Big Sales Boost In Q2 For Palo Alto Networks

A healthy demand by customers for security technologies lead to a huge boost in second quarter sales for security vendor Palo Alto Networks.

Palo Alto Networks CEO Mark McLaughlin, during the company's second quarter financial analyst conference call, said healthy security spending and demand for new security platforms has led to nearly 3,000 new customers, giving the company a total of about 48,000 customers worldwide.

[Related: Palo Alto Networks President: Customers Want Fewer Vendors That Can Do More Than Traditional Antivirus Products]

"We continue to see customers adopt and to expand the uses of our platforms at rapid rates," he said.

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As companies digitize more information, store more data in the cloud and use digital technologies to drive productivity gains, Palo Alto Networks sees increased security demand to go with that expansion, McLaughlin said.

"This digital transformation is also creating significant cyberrisk that requires a corresponding security transformation," he said. "At Palo Alto Networks, we have been consistently delivering on the transformation of security through increasingly rapid technical evolutions that build on each other, reinforce each other, share the attributes of automation, leverage consistency of easy use, and get more powerful and valuable through the ecosystem growth."

Palo Alto Networks has transformed to meet customer requirements of the cloud, McLaughlin said. In the second quarter, it became the only security vendor to get Amazon Web Services networking competency status, which complements the AWS security competency it achieved in 2016, he said.

In addition, the company two weeks ago introduced enhanced security capabilities with AWS and Azure, and extended its capabilities to the Google Cloud Platform, McLaughlin.

Of Palo Alto Network's 48,000 global customers, about 42,000 are using the company's threat protection, 35,000 are using its URL filtering, 23,000 are using its WildFire malware analysis technology, and 7,000 are using its GlobalProtect mobile security technology, he said.

Over a dozen customers are already using Palo Alto Networks' new GlobalProtect Cloud Service, which he said delivers its next-generation security capabilities in the cloud.

During the question and answer period of the call, McLaughlin indicated that new customers were affecting the company's growth to a larger degree than product refreshes. "The refresh is going very well, but it has not been the major driver for us," he said. "We think that is something that is in front of us."

However, McLaughlin said, Palo Alto Networks' service provider business is growing well and is expected to continue to do so. "As we've said, every time we do a release, whether it's hardware or software, we've been having more features and functionalities to make us more attractive for service providers," he said.

For its second fiscal quarter 2018, which ended January 31, Palo Alto Networks reported total revenue of $542.4 million, up about 28 percent over the $422.6 million the company reported for the second fiscal quarter 2017.

On a GAAP basis, the company reported a net loss of $34.9 million, or $0.38 per share, down from the net loss of $60.6 million, or $0.63 per share, reported last year. Net income on a non-GAAP basis in the second quarter was $91.5 million, or $0.97 a share, compared to the previous year's $59.6 million, or $0.63 per share. The non-GAAP earnings saw a boost of $10.6 million, or $0.11 per share, from the new Tax Cuts and Jobs Act.

Looking forward, Palo Alto Networks expects its third fiscal quarter 2018 revenue to be in the $538 million to $548 million range, up at least 25 percent from last year. Non-GAAP net income per share is expected to be in the range of $0.94 to $0.96.

For the full fiscal year 2018, revenue is expected to be in the range of $2.190 billion and $2.220 billion, or up year-over-year at least 24 percent. The company expects non-GAAP net income per share between $3.84 and $3.91, which includes a $0.36 per share benefit from the lower tax rate.