PANW stock dipped over 16% after Palo Alto Networks Inc’s (NYSE:PANW) second-quarter earnings fell short of estimates because of incentives related to its next-generation security products.

Palo Alto Misses Q2 2020 Estimates

The company reported a loss of $73.7 million or $0.75 per share in the second quarter on sales of $816.7 million, which is an increase from $711.2 million last year. Palo Alto reported adjusted earnings per share of $1.19, which is a drop from $1.15 per share a year ago. On average, analysts estimated adjusted earnings per share to be around $1.12 on revenue of $843.3 million.

Nikesh Arora, the CEO of Palo Alto, indicated that the company has been implementing new market programs to enhance its firewall sales. The CEO stated that the company took a hit in the second quarter because of strong billings for its next-generation security products.

It is important to note that the company recently launched its next-generation firewall Fortinet, meant for hyperscale data centers. It also released an extended security orchestration, response, and automation platform called Cortex XSOAR. The company built Cortex XSOAR using tech from Demisto, which is a company it acquired last year.

At the time of writing, PANW stock is down by 15.61% at $200.12.

Palo Alto Slashes Q3 and FY2020 Guidance

In addition to the company’s Q2 earnings falling short of expectation, the company also cut its adjusted earnings and sales revenue for the full year. Similarly, its Q3 earnings forecast fell short of expectations, with the company indicating that it expects revenue of between $835 million and $850 million and earnings of around $0.96 per share to $0.98 per share. For the third quarter, analysts had predicted adjusted earnings per share of $1.25 on sales of around $873 million.

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Palo Alto is now expecting adjusted earnings for the full year to be between $4.55 per share and $4.65 per share, down from the previous projection of around $4.90 per share to $5.00 per share. Revenue has been slashed from around $3.44 billion to $3.48 billion to be between $3.35 billion and $3.39 billion.

PANW stock has lost over 20% since late November.

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