Palo Alto Networks Inc. Litigation Report

Case Introduction

Schlaegel v. Palo Alto Networks Inc., et al 5:24-cv-01156

On February 26, 2024, investors sued Palo Alto Networks Inc. (“Palo Alto Networks” or the “Company”) in United States District Court, Northern District of California.

Plaintiffs in the federal securities class action allege that they acquired Palo Alto Networks stock at artificially inflated prices between August 18, 2023 and February 20, 2024 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. To learn whether you may be eligible for a recovery under this class action, go to: https://zlk.com/pslra-1/palo-alto-networks-lawsuit-submission-form?wire=31  

Summary of the Allegations

Company Background

Palo Alto Networks (NASDAQ:PANW) purportedly does business as “the world’s cybersecurity leader.”

As such, the Company claims that it engages in the provision of “next-gen cybersecurity to thousands of customers globally, across all sectors.” Specifically, Palo Alto Networks offers an enterprise cybersecurity platform for network security, cloud security, and various cloud-delivered security.

According to the Company, these  cybersecurity platforms and services are all backed by “industry-leading threat intelligence and strengthened by state-of-the-art automation.”

Summary of Facts

Palo Alto Networks and three of its senior officers (the “Individual Defendants”) now stand accused of deceiving investors by lying and withholding important information about the Company’s business practices, financial standing, and prospects during the Class Period.

In particular, they are accused of omitting truthful information about the efficacy of certain business initiatives and ancillary issues from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused Palo Alto Networks stock to trade at artificially inflated prices during the time in question.

The truth came out in events that transpired after the market closed on February 20, 2024. First, the Company announced its financial results for the second quarter of 2024 and lowered its third quarter and full-year billings and revenue guidance, with expected billings growth between 2-4 percent and total revenue growth between 13-15 percent.

During an ensuing earnings call that same day, the Company’s CEO (an Individual Defendant) explained that “our guidance is a consequence of us driving a shift in our strategy in wanting to accelerate both our platformization and consolidation and activating our AI leadership.” He also revealed that U.S. federal

government deals for several large projects did not close and resulted in “a significant shortfall in our U.S. federal government business” that is expected to continue into the third and fourth quarters of 2024. He then concluded by noting that “[t]he situation [sic] started off towards the end of Q1 were worsened in Q2.”

A closer look…

As alleged, Palo Alto Networks and/or the Individual Defendants repeatedly made false and misleading public statements throughout the Class Period.

During an earnings call held at the beginning of the Class Period, for instance, the Company’s CEO stated in pertinent part: “Our platformization is continuing to drive large deal momentum. One way to illustrate the traction of our next-generation security capability across network security, cloud security and SOC automation, so look at the makeup of some of our largest deals.”

Then, during a conference call on September 7, 2023, the Company’s CEO stated in relevant part: “Yes. Yes. I think our newest platform around the SOC is -- has tremendous potential. I think that's kind of the integrated platform. Most of our competitors in that space are 15-year old tech. I think it’s the CrowdStrike, Palo Alto, SentinelOne moment that happened to endpoints, which is happening to SOC except to standard SOCs.”

Next, during an earnings call on November 15, 2023, the Company’s CEO stated in relevant part: “… a federal government agency signed a $25 million expansion transaction, including adding Cortex XDR and Prisma Access in highly competitive situations, expanding their network security footprint. This customer has now spent over $100 million over its lifetime across our [ chief ] platform.”

Actions You May Take

If you have purchased the Company’s stock during the Class Period, you may join the class action as a lead plaintiff, remain a passive class member, or opt out of this litigation and pursue individual claims that may not be available to the class as a whole. To learn more about your options, go to: https://zlk.com/pslra-1/palo-alto-networks-lawsuit-submission-form?wire=31

NOTE: The deadline to file for lead plaintiff in this class action is April 26, 2024. You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court.