• Palo Alto Networks accelerated revenue growth in the quarter.
• The company saw momentum in hardware sales after subdued activity through much of the pandemic.

Shares of security hardware and software company Palo Alto Networks rose 10% in extended trading on Monday after the company announced better-than-expected earnings and a rosy profit forecast for the new fiscal year.

Here's how the company did:

• Earnings: $1.60 per share, adjusted, vs. $1.44 as expected by analysts, according to Refinitiv.
• Revenue: $1.22 billion, vs $1.17 as expected by analysts, according to Refinitiv.

Revenue grew 28% year-over-year in the quarter, which ended July 31, compared with 24% in the prior quarter, according to a statement.

"On the high end of our hardware strategy, we're beginning to start seeing refreshes," CEO Nikesh Arora said on a conference call with analysts. "This has been a trend which had been subdued. People were holding back....We realize the pandemic has eased up as companies are starting to come back to work."

The company is raising prices of hardware products in the low single digits because supply constraints have increased component costs, Arora said.

At the same time, Palo Alto Networks can benefit from cloud adoption happening across industries, and the company can expand its margins by optimizing its own use of cloud resource, Arora said.

Ransom demands grew in the first half of this year, Arora said. The company has 300 ransomware readiness engagements in the pipeline, presenting business opportunities, he said.

With respect to guidance, for the fiscal first quarter, the company called for $1.55 to $1.58 in adjusted earnings per share on $1.19 billion to $1.21 billion in revenue. Analysts polled by Refinitiv had expected $1.59 in adjusted earnings per share on $1.15 billion in revenue.

For the 2022 fiscal year, Palo Alto Networks sees adjusted earnings of $7.15 to $7.25 per share on $5.28 billion to $5.33 billion in revenue. That's well ahead of Refinitiv estimates, which were $7.07 in adjusted earnings per share and $4.99 billion in revenue.

Excluding the after-hours move, Palo Alto Networks stock had risen about 5% since the start of the year, while the S&P 500 index over the same period is up almost 32%.

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