What happened
Palo Alto Networks (PANW 1.10%) shareholders lost ground to a falling market this week. The cybersecurity stock fell 7% through trading on Thursday compared to a 3% slump in the S&P 500, according to data provided by S&P Global Market Intelligence.
The decline was powered by worries about the company's quarterly earnings announcement, which occurred after the market closed on Thursday. That report contained mostly good news about the business, though, which might power a rebound in the stock on Friday.
Image source: Getty Images.
So what
Palo Alto Networks said late Thursday that sales grew 29% in the selling period that ran through late April. That result easily outpaced management's February guidance calling for sales gains of between 24% and 25%. It was powered by continued strong demand for cybersecurity services as more business functions shift online.
"We saw strong top-line growth in Q3, which is a testament to our teams' consistent execution in capitalizing on the strong cybersecurity trends," CEO Nikesh Arora said in a press release. Palo Alto Networks also reported strong gross profitability, although the business continued to post net losses as it focuses on growth.
Now what
The sales outperformance this past quarter wasn't simply a matter of timing for a few large contracts, either. Executives boosted their fiscal-year outlook for a second straight quarter and now see sales rising by between 30% and 31%, compared to the prior range of 25% to 26%.
Palo Alto's lack of net profitability may continue to pressure the stock. However, its accelerating growth and improving cash flow trends imply that these annual losses might be ending soon. Investors should expect the stock price to eventually respond to those positive financial developments.
