Shares of Palo Alto Networks (PANW), a network and enterprise security group, slumped early on Tuesday after its full-year earnings guidance missed expectations and higher costs undermined a first-quarter beat that the firm recorded off the back of a surge in sales.
Revenue at the Santa Clara, California-based firm surged by 18% year-over-year in the first quarter to $771.9 million, according to results published after markets closed on Monday. This beat the $769.34 million average analyst estimate compiled by Capital IQ.
“Our security offerings performed extremely well in our first fiscal quarter, bolstering confidence in long-term prospects for Prisma and Cortex,” Chief Executive Officer Nikesh Arora said in the earnings statement late on Monday.
Adjusted earnings per share, however, slid to $1.05 from $1.17 a year ago due in part to research and development, as well as subscription and support costs, surging by twice as fast as revenue. The company, however, still managed to outpace the $1.03 forecast of analysts.
Looking ahead to the second quarter of fiscal 2020, the company expects adjusted earnings per share to be in the range of $1.11 to $1.13 on revenue of $838 million to $848 million. That compares with estimates of $1.3 and $845.1 million, respectively, as per data compiled by Yahoo Finance.
For the full financial year, the firm anticipates sales of $3.44 billion to $3.48 billion and proforma earnings of $4.9 to $5. That compares with consensus forecasts of $5.07 in earnings per share on a turnover of $3.46 billion.
In a separate statement also on Tuesday, Palo Alto said that it has agreed to acquire Aporeto, a machine identity-based micro-segmentation firm, for $150 million in cash. The company said its earnings projections include net expenses related to the proposed acquisition.
“At our recent conference, we introduced significant product enhancements that should sustain this momentum” in the next generation of security offerings, Arora said. “Additionally, we expect our proposed acquisition of Aporeto will further extend our leadership in cloud security.”
Nevertheless, shares slumped by 7.9% in recent trade on Tuesday.