2. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Investors in Q1 2024: 78
Palo Alto Networks, Inc. (NASDAQ:PANW) is a diversified cybersecurity company that offers a variety of products and services such as firewalls, malware protection, and cloud security. Like other software stocks, recurring revenue, billings, margins, and free cash flow are key to its hypothesis. Palo Alto Networks, Inc. (NASDAQ:PANW) has also been positioning itself well to capture the current growth in the interest surrounding cybersecurity. It acquired a Secure Access Service Edge (SASE) platform provider in December 2023 to grow its portfolio to also secure employees who might be using unofficial devices to access business networks. Palo Alto Networks, Inc. (NASDAQ:PANW) also expanded its event management platform in May 2024 by allowing businesses to integrate their own machine learning models into the service. The firm has also been performing well on the financial front, with its first quarter seeing a whopping 47% ARR jump to $3.8 billion. Its SASE expansion comes when remote work has gained a permanent foothold across industries, and is delivering stable billings for other cybersecurity stocks such as Fortinet even though their billings as a whole are dropping.
Palo Alto Networks, Inc. (NASDAQ:PANW)’s management commented on its customer relationships during the Q32 2024 earnings call where it outlined:
“We have also had questions from analysts and investors on this topic since we reported our Q2 results in February. I thought I’d share more background on how we got here to provide context and also offer a platformization framework for you to help understand why we’re convinced that we can build a much larger business over the next several years and platformization is key to achieving that. When we embarked on our journey to transform our company, we were keen to create interest and convince our customers that we could solve their problems not just with our next-generation firewalls and the associated subscriptions, but also with a set of best-of-breed products across 20-plus categories organized across three platforms. That strategy was hugely successful and saw us achieving nearly $4 billion in NGS ARR.
The majority of focus of our teams was landing multiple products across our three platforms and our customers. Whether we were able to land at a brand new customer for Palo Alto Networks or we added products from new platforms to our existing customers, we were happy. Landing could range from a single product used in part of the organization to broader usage across the organization. From that lens, if you look at our top 5,000 customers, we have landed two or more of our platforms at about half these customers, and these customers contribute just over 80% of NGS ARR. If you look at it by — this by platform, we have landed 97% of these top 5,000 network security, over 20% of them in Prisma Cloud, and over 40% with Cortex. By all means, our land-the-platform strategy was extremely successful.”
