Palo Alto gets pandemic boost

Sharing a name with the city in Silicon Valley, Palo Alto Networks provides cybersecurity platform solutions with a focus on firewall appliances and software. According to its website, the company has over 82,000 clients in more than 150 countries.

In its third-quarter 2021 results ending April 30, the company reported $1.074 billion in total revenue, up from $869 million in 2020 with $4.4 billion in deferred revenue. Chair and CEO Nikesh Arora attributes some of the revenue growth to a greater focus on security due to the work-fromhome shift in 2020 and recent cybersecurity issues.

Despite the company’s growth in revenue, it reported a net loss of $145 million in 2021, compared with $75 million in 2020.

Jonathan Ho, an Equity Research Analyst at William Blair & Company, notes that Palo Alto’s strong first-quarter results are driven by its cloud business and the selling of products in other categories, such as artificial intelligence.

“What’s happening in the network security space is that we are seeing this transition to the cloud where two things are happening. One is that many of the traditional on-premises servers are moving to cloud environments like Amazon Web Services and Microsoft Azure.

What Palo Alto is seeing is a shift from traditional hardware firewalls to virtual firewalls,” Ho said.

“The second area of cloud growth that we are seeing with work from home and remote branch offices is that there is a much larger opportunity for the company to sell firewalls that are hosted as a service.

“In the past you used to buy firewalls and network security in the physical format, but it doesn’t really protect you on the network security side when you are travelling or working remotely from home,” he said.

As for Palo Alto’s competitive advantage, Ho acknowledges that the company “is known for having strong technical solutions.”