Palo Alto Networks reported better-than-expected earnings and revenue for its fiscal third quarter, but its gross margin missed analyst estimates. The company’s stock dropped 4% in after-hours trading on Tuesday.
The cybersecurity firm posted adjusted earnings per share of 80 cents, beating the 77 cents expected by analysts. Revenue rose 15% year-over-year to $2.29 billion, slightly above the $2.28 billion forecast. However, the non-GAAP gross margin came in at 76%, below the predicted 77.2%.
Net income declined to $262.1 million, or 37 cents per share, down from $278.8 million, or 39 cents per share, a year earlier. Capital expenditures for the quarter were $68.3 million, under Wall Street’s estimate of $70.8 million.
Looking ahead, Palo Alto Networks expects adjusted earnings per share between 87 and 89 cents for the fourth quarter, surpassing analysts’ estimate of 86 cents. The company also forecast revenue around $2.5 billion, reflecting continued growth in its cloud security offerings.
Despite the mixed results, Palo Alto Networks highlighted strong growth in its Next-Generation Security annual recurring revenue, which rose 34% year-over-year to $5.1 billion. Remaining performance obligations grew 19% to $13.5 billion, signaling solid demand for its cybersecurity platform.
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