Cyber security company Palo Alto Networks reported its strongest revenue growth in 10 quarters and forecast better-than-expected growth in the current quarter as governments and companies spend more to protect themselves from cyberattacks.
Palo Alto's shares rose about 5 percent in extended trading on Wednesday.
The company and its rivals such as FireEye and Fortinet provide cloud-based advanced threat protection and malware analysis products, which have helped them grab market share from traditional firewall suppliers.
"We're seeing gains pretty much everywhere where we compete and also now including on the end point side as well, and that plays into the product growth," Chief Executive Mark McLaughlin said on a conference call with analysts.
McLaughlin said Palo Alto was winning larger deals with larger customers. He said the company had replaced Cisco Systems and Checkpoint Systems as the preferred security provider in some companies in the fourth quarter.
Palo Alto's customer base grew 35 percent to more than 26,000 with over 2000 new customers in the quarter ended July 31. Billings rose 69 percent to $393.6 million.
"I believe they are only about 10-15 percent penetrated in the market, so there is a lot of room to grow in the coming years for Palo Alto," FBR Capital Markets & Co. analyst Daniel Ives said.
The global cyber security market is estimated to grow to $170.21 billion by 2020 from $106.32 billion in 2015, according to market research firm MarketsandMarkets.
Palo Alto's revenue rose 59.3 percent to $283.9 million in the quarter, beating Wall Street's estimates of $256.4 million. Revenue growth was higher in the second quarter of fiscal 2013.
Net loss widened to $46 million from $32.1 million. Excluding items, the company's profit of 28 cents per share was better than analysts' estimate of 25 cents.
Palo Alto expects revenue to increase 46 percent to 48 percent to $280 million to $284 million in the current quarter ending October.
Analysts on average were expecting revenue of $269.7 million, according to Thomson Reuters I/B/E/S.
Up to Wednesday's close, Palo Alto's stock had risen nearly 35 percent this year compared with a 4.8 percent drop in the Dow Jones U.S. technology index.