Demand surges for Palo Alto's XSIAM security tool

Palo Alto Networks added $500m to sales pipeline for XSIAM security operations tool last quarter, boosting total pipeline to $1bn

Palo Alto Networks is continuing to see surging customer demand for its AI-powered security operations offering, Cortex XSIAM, with an acceleration in sales pipeline growth for the tool during the latest quarter, CEO Nikesh Arora said Wednesday.

Arora made the comments during Palo Alto Networks' quarterly call with analysts, following the financial report for the cybersecurity giant's fiscal first quarter, ended 31 October.

It was just the fourth quarter for XSIAM (extended security intelligence and automation management) in the market, following its debut in October 2022.

"On the back of potential customers hearing about early XSIAM success, our pipeline for XSIAM is over $1bn, of which $500 mwas created just in this last quarter," Arora said during the call.

The disclosure also came just two days after the company released XSIAM 2.0 with improvements around the user experience and support for custom machine learning (ML) models.

During Palo Alto Networks' latest quarter, the company saw its first expansion purchase of XSIAM at a customer, Arora said, via an eight-figure deal for the technology.

Meanwhile, the company's largest XSIAM customer to date deployed the tool across more than 300,000 endpoints, he added.

"We're seeing XSIAM transform customer security operations and significantly improve their security outcomes," Arora said.

"This includes significant reductions in the meantime to detect and resolve security incidents."

During its first three quarters in the market, the "autonomous SOC" platform had crossed $200m in bookings, Palo Alto Networks said in August - far surpassing the company's goal of $100m for its first year.

During the call with analysts, chief product officer, Lee Klarich, said XSIAM has generated the "fastest growth of a new product that we've ever seen."

The growth in the XSIAM business and other key categories - including SASE (secure access service edge) and cloud security - helped Palo Alto Networks to beat expectations on revenue and earnings for its fiscal Q1.

Revenue grew 20 per cent to reach $1.88bn, compared to the same period a year ago. Non-GAAP net income came in at $1.38 per diluted share, compared to 83 cents the year before.

However, Palo Alto Networks' stock price slipped 5.4 per cent in after-hours trading, to $242.28 a share, in response to a reduction in the company's billings forecast.

The stock price drop was steeper immediately following the financial report's release, at one point exceeding 9 per cent.

However, investors appeared to be swayed somewhat by Palo Alto Networks executives, who argued forcefully during the call that the vendor's strong demand outlook remains intact.

For instance, in response to a question from an analyst on the billings guidance, Arora said that "you're going to keep calling it ‘guiding down on billings' - and I'm going to keep telling you, it doesn't change my numbers."

"Nothing has changed in the prospects of Palo Alto from three months ago," he said.

Earlier in the call, Arora and CFO Dipak Golechha said that the billings adjustment was merely the result of more customers requesting deferred payment terms.

Arora concluded: "It does not change anything in my pipeline, in my close rates or in my demand function."