Palo Alto Networks Had Record Billings Growth in Fiscal 2Q16


Nov. 20 2020, Updated 5:30 p.m. ET

PANW’s billings growth exceeded analyst expectations

Previously in this series, we looked at Palo Alto Networks’ (PANW) fiscal 2Q16 earnings. The company continued its double-digit revenue growth story in the quarter. Let’s see now how the company’s deferred revenues and billings performed in fiscal 2Q16. The company’s deferred revenue rose 73% on a year-over-year basis to $928.8 million. Billings rose 62% to $459 million.

According to Scott Zeller, a Needham analyst, PANW’s billings of $459 million exceeded consensus expectations of $417 million. It was the company’s highest billings growth for the last 11 consecutive quarters.

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Healthy growth in deferred revenues ensures that significant revenue growth can be expected. Industry analysts keep a watchful eye on billings growth in the cybersecurity space because it gives them an indication of a company’s future revenues. Billings denote future revenues that have yet to become visible in the company’s income statement.

Subscription services and customer additions helped billings exceed peers

Let’s look at billings for two of Palo Alto Networks’ peers in the cybersecurity space. FireEye (FEYE) and Fortinet (FTNT) reported billings growth of 21% and 37%, respectively, in their recent fiscal quarters.

Mark D. McLaughlin, chairman, president, and CEO (chief executive officer) of Palo Alto Networks, stated in the company’s 2Q16 earnings release that the company added 2,000 customers during the quarter. That brought the total number of customers to 30,000 globally.

Palo Alto Networks’ subscription services also increased 68% to $84.3 million in fiscal 2Q16. That helped the company record healthy growth in its deferred revenues and billings.

Investors wanting to gain exposure to the cybersecurity space might consider investing in the PureFunds ISE Cyber Security ETF (HACK). HACK has a portfolio of 32 stocks and invests 5.0% of its holdings in FireEye (FEYE), 4.8% in Qualys, and 4.6% in Palo Alto Networks. Peer companies Cisco Systems (CSCO) and Juniper Networks (JNPR) constitute 3.8% and 4.5% of HACK, respectively.


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