ETR Earnings Preview

Deep Dive on Palo Alto Data

ETR Research 

| February 16, 2024

As this quarter's earnings season rolls along, this week, we take a deep dive into Palo Alto Network's most recent spending intentions data ahead of their expected report on Tuesday, February 20th. Shares of Palo Alto have been on a tremendous trajectory for the last four years, rising from pre-pandemic levels of $80 to more than $365 as of press time, driven by strong revenues, EPS growth, and a steady buyback program. Let's take a look at the data to see if there are any signs of a slowdown in their forward-looking spending intentions. As always, you can read the full JAN24 Palo Alto Networks report or see the data for yourself on the ETR research platform.  

In the most recent Technology Spending Intentions Survey (TSIS), 507 IT decision makers cited a spending intention for Palo Alto. Of those respondents, 28% came from the C-suite, and another 49% of respondents held VP / Director level titles, with the remaining 23% coming from the practitioner level. As far as industry demographics, the deep pocketed Financials/Insurance, IT/TelCo, and Services/Consulting verticals accounted for more than half of the vendor's citations in this survey. Once known primarily as a hardware and firewall company, Palo continues to transform itself into a software-defined information security leader with products, services, and offerings across the entire gamut of the security landscape.

Currently, ETR tracks Palo Alto in our diverse Information Security sector, where the JAN24 spending intentions Net Score among All Respondents was in line with year-ago levels and stands at the 86th percentile across the entire sector. That steady year-over-year Net Score masks the significant improvement in expected spend among Global 2000 organizations. After decelerating throughout 2023, Global 2000 Net Score is now up 14 percentage points from year-ago levels, which represents the vendor's largest improvement in over five years among this cohort, driven by expanding spending intent among both existing customers and net-new adoptions.

In the data illustration above, we see that the primary driver of the improving Net Score captured among Global 2000 respondents is a continued decline in Flat spending, with more respondents planning to Increase their annual spending on Palo Alto. The percentage of respondents Increasing spend on the company is now above those keeping their spend Flat for the first time since APR22. In addition, a rising trend of Adoptions is also contributing to the better outlook. If large organizations are the bright spot for Palo this survey period, it is the Midsize organization respondents that cause some concern. Midsize organizations indicated the largest increase in Negative percentage (Decrease % + Replacing %) in the January 2024 survey.

As mentioned earlier, 28% of this survey's respondents came from C-suite executives. However, those respondents held the lowest expectations for their total annual spending trajectory. As seen below, when broken down by title, it was the C-Suite that had the lowest overall Net Score and the IT practitioner level that held the highest spending expectations for the company, with a wide spread of nearly 20 percentage points disparity between the two groups. C-Suites Net Score, at 25%, is down from 31% in OCT23 and 34% in the year-ago survey. Whereas Net Score at the Analyst/Practioner level is up to 44% from an average of 27% in the comparable periods.

Lastly, we leverage ETR's two syndicated data sets across both public and private technology companies to highlight our featured Targets and Disruptor's analysis. Beginning in the second half of 2022 and throughout 2023, we believed Palo Alto would get more acquisitive given the slowing spending intent and stagnating Pervasion we were beginning to see show up in the vendor's data set. Coupled with the broader information security sector trend toward platform consolidation, the company has been on an acquisition spree over the past 12 months, acquiring six companies and broadening its already robust security portfolio.

Using both ETR’s TSIS and Emerging Technology Survey (ETS) data, we can analyze which private vendors might be ideal for Palo Alto to acquire, given customer overlap and positive sentiment among common customers. Highlighted vendors in the data illustration below have above average Net Sentiment and customer overlap with the company.

Overall, the most recent spending intentions data for Palo Alto has stabilized, and the vendor sits firmly positioned among its broader security peers. In fact, among all security vendors that ETR tracks, with more than 100 unique respondent citations in this survey, Palo Alto is in the top ten Net Score ranking (shown below). Although not shown, the company also holds the 9th-highest increased spend intent ranking and third in total Penetration rates among that same group of vendors.

Following ETR’s OCT23 TSIS survey, spending intent on Palo Alto was decelerating into year-end with continued stagnating Pervasion and a broad rise in negativity across customer types, which caused some concern for the forward-looking growth trajectory. While some of that trepidatious data could still play out in the form of softer guidance in the first half of this year, the overall outlook for 2024 is improving based on the most recent data set, with material improvements captured among large organizations, in particular. ETR will keep a watchful eye on the next spending intentions data set to see if this recent improvement can continue. In the meantime, we look forward to the company's earnings report next week with keen and cautious curiosity about the full-year guide.

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Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to provide actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at