Competing against CrowdStrike in the XDR market has been challenging for Palo Alto Networks given CrowdStrike’s substantial advantage in salespeople dedicated to the emerging technology.
The Santa Clara, Calif.-based platform security vendor said Sunnyvale, Calif.-based endpoint security vendor CrowdStrike has eight times more dedicated salespeople chasing the extended detection and response (XDR) category, neutralising whatever technical advantage Palo Alto Networks brings to the table, according to CEO Nikesh Arora.
“While our product now technically ranks better than CrowdStrike and on par with SentinelOne and the others, the challenge we see is we don’t have as much coverage as CrowdStrike,” Arora told investors.
So they’re in more deals than we are, and that’s by virtue of the fact that they have eight times more dedicated salespeople chasing the XDR category, and we don’t.”
Palo Alto Networks pretty much never loses XDR deals to CrowdStrike for technical reasons, but will lose some deals it if becomes a price war since the company isn’t willing to bend on price, Arora said.
He added that Palo Alto Networks’ products are slightly more expensive than some of the other players in the market. CrowdStrike and SentinelOne didn’t immediately respond to CRN requests for comment.
“We see reasonably good win rates against them [CrowdStrike] where we are present,” Arora said. “I think our challenge is we’re not present in as many deals as we’d like to be present in, because they’ve been at it for seven years, we’ve been at it for two-and-a-half.”
Arora said Palo Alto Networks’ Cortex XDR is great from a technical standpoint, and the company is now trying to create more muscle around being able to do those deals. Given how competitive the XDR market is with the likes of CrowdStrike and SentinelOne, Arora said Palo Alto Networks has to do a whole bunch of US$1 million to US$5 million deals in the space in order to be successful.
Palo Alto Networks now must decide if it wants to hire another 300 salespeople to be in as many XDR deals as CrowdStrike, or just hire another 100 salespeople and settle for a lower growth rate, Arora said.
The company’s products almost never get thrown out because they don’t cut it from a technical standpoint and clients are increasingly willing to pay a premium if feel they’re getting better protection.
“We have to look hard at how much investment we want to make on the sales side," Arora said. “[But] we don’t want to throttle the growth opportunity for us … And if that requires us to invest and look for leverage in future years, we’ll do that.”
Palo Alto Networks sales for the quarter ended April 30 jumped to USUS$1.07 billion, up 23.5 percent from USUS$869.4 million a year ago. That edged out Seeking Alpha’s estimate of USUS$1.06 billion.
The company recorded a net loss of USUS$145.1 million, or USUS$1.50 per diluted share, 94 percent worse than a net loss of USUS$74.8 million, or USUS$0.77 per diluted share, the year before. On a non-GAAP basis, net income soared to USUS$139.5 million, or USUS$1.38 per diluted share, up 21.7 percent from USUS$114.6 million, or USUS$1.17 per diluted share, last year. That beat Seeking Alpha’s net income projection of USUS$1.29 per diluted share.
Palo Alto Networks’ stock climbed USUS$20.46 (5.97 percent) to USUS$363.05 per share in after-hours trading Thursday. That’s the highest the company’s stock has traded since April 19.
Subscription and support revenue for the quarter leapfrogged to USUS$785 million, up 33.4 percent from USUS$588.5 million last year. Product revenue for the quarter inched ahead to USUS$288.9 million, up 2.8 percent from USUS$280.9 million the year prior.
For the coming quarter, Palo Alto Networks expects diluted non-GAAP net income of USUS$1.42 to USUS$1.44 per share on total sales of USUS$1.165 billion toUSUS$1.175 billion. Analysts had been expecting non-GAAP earnings of USUS$1.43 per share on total revenue of USUS$1.16 billion, according to Seeking Alpha.