After a big move lower on Tuesday, the Nasdaq Composite (^IXIC 0.88%) struggled to regain its footing early Wednesday. Futures contracts on the Nasdaq were up about a quarter percent in premarket trading, barely making a dent in Tuesday's 2.5% drop. Still, investors are hopeful that a less hawkish tone in the minutes from the most recent meeting of the Federal Open Market Committee could bring a bit of solace after recent worries about rising rates.
Within the Nasdaq, a pair of tech stocks helped contribute to the more positive tone. Palo Alto Networks (PANW 0.03%) enjoyed a big boost as the cybersecurity stock proved the resilience of its business model in its most recent financial report. Meanwhile, Chinese internet search giant Baidu (BIDU 0.84%) kept wowing investors with its prospects for tapping artificial intelligence (AI) and jumping into the latest momentum trends.
Palo Alto keeps investors safe
Palo Alto Networks stock was sharply higher in premarket trading, rising 10% early Wednesday. The provider of cybersecurity services reported fiscal second-quarter financial results for the period ending Jan. 31 that showed continuing strength in the industry.
Palo Alto's growth numbers stayed solidly on track. Revenue of $1.66 billion was up 26% year over year, on a nearly 30% rise in subscription-based sales. Adjusted net income soared an even more impressive 79% to $332 million, working out to $1.05 per share. Those figures were better than many investors had expected from the cybersecurity company.
2023 looks like it will be better for Palo Alto than the tech company previously thought. Palo Alto updated its fiscal 2023 guidance, now expecting revenue to rise 25% to 26% to between $6.85 billion and $6.91 billion, with adjusted earnings around $4 per share.
Many have feared that an uncertain macroeconomic environment would lead enterprise customers to pull back on their software spending. However, with digital transformation efforts already largely having taken place, cybersecurity is only becoming more essential. Palo Alto expects to ride that wave as long as it can, and its stock has avoided the worst of the bear market and is a lot closer to its all-time highs than most of its peers.
A big day for Baidu
Shares of Baidu were up 7% in premarket trading early Wednesday. The Chinese internet search company released its fourth-quarter financial results and announced a big stock repurchase plan.
Baidu, which now bills itself as a "leading AI company with strong internet foundation," was able to make a lot more profit from essentially no sales growth. Revenue of $4.8 billion during the fourth quarter was unchanged from year-ago levels. However, adjusted net income of $779 million was up 32% year over year. That produced adjusted earnings of $2.21 per share.
Many think of Baidu as a search engine provider, but the company highlighted numerous initiatives. AI-based smart transportation services, the Apollo Go autonomous ride-hailing service, and the iQiyi streaming video service all contributed to Baidu's sales during the period. Indeed, Baidu is optimistic enough about its business units and their future impact on its stock that it announced a new $5 billion repurchase authorization, which will be effective from now until the end of 2025.
Baidu has high hopes to join the new movement toward AI-powered chat-based search, and investors have high expectations that Baidu will get the job done. As the amount of data available for machine learning continues to rise, shareholders hope that Baidu will reward them in the long run for their discipline and patience.
