Palo Alto Networks Inc. shares declined in the extended session Wednesday after the cybersecurity company announced two more acquisitions and an earnings beat, but admitted a wave of acquisitions is going to hurt its earnings in the current quarter.
Palo Alto Networks PANW, +0.39% shares fell 5% after hours, following a 0.4% rise to close Wednesday’s regular session at $215.34. The company announced that it was acquiring container security company Twistlock for $410 million and serverless security company PureSec for an undisclosed amount. Palo Alto Networks also launched a new cloud security service called Prisma.
For the fiscal fourth quarter, Palo Alto Networks forecast adjusted earnings of $1.41 to $1.42 a share on revenue of $795 million to $805 million. The company said the outlook included a charge of 12 cents a share for its $560 million Demisto acquisition, announced in February, and the proposed acquisitions of Twistlock and PureSec. At the time, the Demisto acquisition was the company’s fifth announced acquisition in 12 months.
Read: Palo Alto Networks has transformed itself with more than $1 billion in acquisitions
On the conference call, Chairman and Chief Executive Nikesh Arora said the new acquisitions are complementing previous ones, such as cloud-threat defense company RedLock, which the company announced it was acquiring for $173 million in cash back in October.
“If you look in the market there were only two players and Twistlock was by far the leader, and talking to customers they still want to buy best-of-breed, so our team made the decision that it’s important for us to acquire Twistlock and integrate that with RedLock as soon as possible,” Arora said. “So you’ll see us integrating both RedLock and Twistlock, and then the next one people want to talk about is server and how we look to the market in PureSec, by far the leader in serverless security.”
On the conference call, Chief Financial Officer Kathy Bonanno said that the fourth-quarter outlook also included a charge of 2 cents a share to account for U.S. tariffs on goods from China.
“Excluding these acquisition and tariff expenses, we would expect non-GAAP EPS to be in the range of $1.55 to $1.56,” Bonanno said on the call.
Analysts surveyed by FactSet had forecast fourth-quarter earnings of $1.55 a share on revenue of $793.5 million.
Bonanno said third-quarter billings rose 13% from a year ago to $821.9 million, while Wall Street expected billings of $872.6 million.
Palo Alto Networks reported a fiscal third-quarter loss of $20.2 million, or 21 cents a share, compared with a loss of $40.4 million, or 44 cents a share, in the year-ago period. Adjusted earnings were $1.31 a share, while analysts surveyed by FactSet had forecast earnings of $1.25 a share. Revenue rose to $726.6 million from $567.7 million in the year-ago quarter while the Street expected $703.8 million.
For the third quarter, Palo Alto Networks had forecast adjusted earnings of $1.23 to $1.25 a share on revenue of $697 million to $707 million.
Shares closed up 14% for the year Wednesday, while the S&P 500 index SPX, -0.69% is up 11% and the ETFMG Prime Cyber Security ETF HACK, -1.00% is up nearly 15%.
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