Palo Alto Networks Faces Growing Competition from Wiz

According to a recent market report, the global cyber security market size is expected to grow at 13% CAGR from $155.8 billion in 2022 to $376.3 billion by 2029. Security player Palo Alto Networks (NYSE:PANW) continues to invest in product upgrades as it deals with increasing competition.

Palo Alto Network’s Financials
Palo Alto Networks’ second quarter revenues grew 26% to $1.66 billion, ahead of the Street’s estimate of $1.65 billion. Non GAAP net income was $1.05 per share. The market was looking for net income of $0.78 per share.

By segment, Product revenues grew 14.6% to $352.9 million. Subscription and support revenues grew 29% to $1.302 billion.

Among other metrics, billings improved 26% to $2 billion.

For the third quarter of fiscal 2021, Palo Alto expects revenues of $1.695-$1.725 billion and an EPS of $0.90-$0.94. The market was looking for revenues of $0.79 billion and an EPS of $1.74.

For the year, Palo Alto expects revenues between $6.85-$6.91 billion and an EPS of $3.97-$4.03. The market was looking for revenues of $6.89 billion and an EPS of $3.42.

Palo Alto Network’s Growing Competition

Earlier last month, cybersecurity player Wiz raised another $300 million to accelerate its growth. Analysts believe that Wiz was able to raise the funds even amid the current economic conditions because customers are choosing Wiz’s products over Prisma Cloud. Wiz’s products are able to handle more complex situations, has a stronger cloud strategy, and is easier to deploy, making them the preferred choice over Palo Alto’s solutions.

To address the growing competition, Palo Alto is improving its product portfolio. It recently released its Zero Trust operational technology (OT) Security Solution. The industrial OT security solution is a cloud-delivered service that provides comprehensive visibility into cyber-physical systems, including industrial control systems and IoT devices such as security cameras and HVAC systems. The service will leverage machine learning capability to power the OT visibility engine to identify over 350 OT asset profiles, over 1,000 ICS/OT applications, and more than 650 threat signatures. The service will also provide capabilities such as least-privilege access control, continuous risk monitoring, and security inspection capabilities. Built on an AI-powered foundation, the solution will be easy to deploy and enable customers to secure their OT environments from sophisticated threats while simplifying their operations.

The cybersecurity player has also announced the launch of its cloud infrastructure in Switzerland that will allow Swiss customers to access the Palo Alto’s security solutions. The new cloud infrastructure will ensure that Swiss customers have access to Prisma Access, Cortex XDR, Cortex XSIAM, AIOps, Advanced WildFire, and the Cortex Data Lake.

Palo Alto’s stock is trading at $191.3 with a market capitalization of $57.9 billion. It was trading at a 52-week high of $213.63 in April last year. The recent market turmoil has sent the stock to a 52-week low of $132.22 in January.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.