Palo Alto Shares Drop 6.8% on Weak Profit Outlook

Palo Alto Networks shares plunged more than 6 percent in Wednesday's trading session, bucking a broader market rally, after the cybersecurity company issued profit guidance that fell short of analyst expectations despite strong quarterly results and upbeat revenue forecasts.

The stock closed down 6.8 percent at around $163.50, after dipping as much as 10 percent during the day. The decline followed the company's release of fiscal second-quarter earnings on Tuesday after the market close, which exceeded Wall Street targets. For the quarter ended January 31, Palo Alto reported adjusted earnings of $1.03 per share on revenue of $2.59 billion, surpassing analyst estimates of 94 cents per share and $2.58 billion in sales, respectively. Overall revenue rose 14.6 percent year over year, driven by robust demand for the company's next-generation security offerings, with annual recurring revenue in that segment climbing 33 percent and remaining performance obligations increasing 23 percent.

Management attributed the pressure on profitability to elevated integration costs from recent acquisitions aimed at expanding its platform for enterprise security. Key deals include the $2.5 billion...