- Stock jumps nearly 9% on Q1 beat and massive new contract
- Defense Department deal ‘one of largest’ in company history
- Q1 earnings surged 20% ahead of ‘Street’ estimates
Silicon Valley’s Palo Alto Networks (PANW:NASDAQ) beat consensus first-quarter forecasts, but that is not the only reason behind the stock’s pre-market 9% surge.
Bizarrely buried in the release was news of a multi-year deal to equip the US Department of Defence with Palo Alto’s Internet Operations Management capabilities, including the attack surface management solution, Cortex Xpanse.
Coming through Palo Alto reseller ThunderCat Technology, this is major news, and according to Citi analysts, ‘is one of the largest software transactions in company history.’
‘It will help give the DoD centralised visibility of its entire global network,’ wrote the analysts.
The company said it received an initial $67 million purchase order for the first three years during Q1 2023.
MASSIVE RECURRING REVENUE DEAL
Citi is modelling $64 million total net new annual recurring revenue for the whole quarter and said the deal not only reinforces its conviction on Palo Alto’s accelerating momentum in the US public sector but strengthens its ‘conviction that next-generation security annual recurring revenue, despite its rough $2 billion scale, has scope to see durable 35% to 40%-plus compounding growth.’
‘Our fears of large deal execution are significantly assuaged,’ added the analysts.
Palo Alto, one of the most closely watched US cyber security companies, posted earnings per share of $0.83 on $1.6 billion revenues, versus $0.69 and $1.55 billion expected.
Palo Alto, which split its stock in a three-for-one deal earlier this year, is seen opening around $13 higher when Wall Street reopens later today, at $170, although still well off $209 year-to-date peaks.
