Cost-cutting customers come to us in a difficult economic situation

Palo Alto Network CEO says cost-cutting customers are a

Palo Alto Networks sees tailwinds from customers trying to cut costs in the deteriorating economy, CEO Nikesh Arora said Thursday.

“The bright spot in the current environment is that we’re having more consolidation talks — because suddenly the top priority next to safety is, ‘Can you help me with that without me increasing the cost?'” he told Jim Cramer.

Macroeconomic uncertainty, fueled by persistent inflation, US Federal Reserve rate hikes, Russia’s invasion of Ukraine and the Covid-19 shutdown of China, has forced companies across all industries to cut costs by laying off workers , hiring freezes and reductions in other spending.

The cybersecurity company, whose shares are in the bullpen of Cramer’s Charitable Trust, reported better-than-expected first-quarter earnings and earnings per share on Thursday following its IPO. Palo Alto Networks shares were up nearly 7% in extended trading after initially falling on the report’s release. In Friday’s trading, the stock shot up more than 7%.

Arora called prioritizing businesses to streamline cash outflows a “magic bullet” for Palo Alto Networks, also emphasizing that customers are becoming more discerning about their spending.

“You go in there and you say, ‘Listen, I can replace seven vendors for you. I can get you to a better security score. And I can do it at a lower cost,” he said, adding, “We have to increase the activity and focus that we need to have in the market and hope our better execution can help us understand the macro trends, correcting what we see.”

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