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Palo Alto (PANW) Gains From Higher Cyber Safety Demand, Tie Ups

Palo Alto Networks PANW is benefiting from the increased adoption of its next-generation security platforms, driven by a rise in the remote working policy among top-notch companies. The cyber security firm continues to win back-to-back deals for offering unique cyber safety solutions, which ensure the blocking of attacks or malicious content. It is currently focusing on selling more subscription-based services, which, in turn, are helping it to generate stable revenues while expanding margins.

Palo Alto's subscription-based services like AutoFocus, Aperture, Traps, WildFire and Virtual are not only witnessing solid growth but also bolstering the customer base. We believe that the subscription-based business model will continue to improve the company’s top and bottom lines.

Growing traction in Palo Alto's Prisma and Cortex offerings continues to act as a tailwind. In September, the company collaborated with the Bangalore-based technology firm, Infosys INFY, to secure a postal operator and e-commerce logistics provider, Bpost (Belgium Post)’s cloud environment by monitoring and utilizing advanced threat hunting capabilities through Infosys’ Cyber Next solution portfolio.

Infosys implemented Palo Alto’s Cortex XSOAR solution, a comprehensive security orchestration, automation and response (“SOAR”) platform, to create robust cyber resilience for mail delivery and e-commerce logistics services of Bpost. Cortex XSOAR’s fully automated response playbooks and artificial intelligence-led predictions will protect Bpost from threats and strengthen its cloud security.

Notably, Palo Alto’s acquisition of The Crypsis Group in 2020 strengthened its Cortex platform with expert services for incident response and proactive assurance.

In May 2022, the company entered an agreement with Oracle Corporation's ORCL Oracle Cloud Infrastructure Network Firewall to integrate its VM-Series Next-Generation Firewall solution with Oracle Network Firewall for blocking threats and reducing risk breaches.

Oracle’s Cloud Infrastructure Network Firewall helps customers defend against emerging threats in their cloud adoption journey. With the unified network solution, customers can quickly turn on and secure their applications and cloud environment with Palo Alto’s firewall features and scale their security across their cloud deployment.

In April, Palo Alto’s Internet of Things Security solution obtained "Moderate Authorization" status for the Federal Risk and Authorization Management Program. This recognition highlights the trust that the U.S. government puts in PANW's standardized threat prevention and Zero Trust enforcement capabilities.

However, Palo Alto faces stiff competition from several big and small players in the security application market. Over the past couple of years, demand for IT security has been on a rise, driven by increased awareness about cyber attacks, making the market more attractive for new players. Established players like Cisco Systems CSCO are sparing no effort to position well in this intensely competitive space.

In February, Cisco reportedly made a takeover offer worth more than $20 billion for software maker Splunk Inc. The potential deal is likely to combine Cisco’s strength in network security with Splunk’s strength in data-focused security operations, positioning it well in the security operations space. This deal could mark the networking giant’s biggest acquisition move, making it a daunting competitor for Palo Alto.

In the last reported quarter, Palo Alto reported revenues of $1.60 billion. The top line, which grew 27% from the year-earlier reported figure, was aided by several deal wins and increased adoption of Palo Alto’s Next-Generation Security platforms due to the hybrid work culture and the need for stronger security.

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