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Palo Alto Networks (PANW, Financials) beat Wall Street's fiscal Q3 earnings and revenue forecasts Tuesday, but a weaker-than-expected gross margin sent the stock down 4% in after-hours trading.
Revenue rose 15% year over year to $2.29 billion, just above the $2.28 billion expected, according to LSEG. Adjusted earnings per share came in at 80 cents, topping the 77-cent estimate.
Net income slipped to $262.1 million (37 cents per share), down from $278.8 million (39 cents per share) in the year-ago quarter.
The company's non-GAAP gross margin came in at 76%, trailing the 77.2% consensus estimate. That miss on profitability metrics tempered investor enthusiasm despite the top-line beat.
Capital expenditures totaled $68.3 million, lower than analyst expectations of $70.8 million.
Looking ahead, Palo Alto Networks guided for Q4 adjusted EPS between 87 and 89 cents, slightly above the 86 cents analysts expected.
The Q4 outlook reflects confidence in sustained cybersecurity demand, but margins may remain under pressure from cost inflation and pricing competition.
Investors should monitor how the company balances growth and margin preservation amid a competitive landscape in enterprise security.
This article first appeared on GuruFocus.