Palo Alto Expands Its Regionally-Hosted Cloud Services

Palo Alto Networks PANW has been focusing on offering regionally-hosted cloud-based cybersecurity solutions to meet regulatory requirements. In this connection, it recently established a new cloud location in Indonesia for hosting its cloud services.

The local customers of Indonesia had to use Prisma Access to be able to operate the Palo Alto products till now. The new cloud location will now enable these customers to expand on a range of locally hosted cloud products that include Prisma Cloud, Cortex XDR, Cortex XSOAR, Cortex Xpanse and Cortes XSIAM.

With the rising demand for cloud-based services and products, companies are focusing on stricter data security measures. Numerous countries have made it necessary to have data centers and cloud locations inside the national boundaries. The regionally-hosted cloud locations help Palo Alto in meeting the regulatory requirements, thereby gaining more customers.

PANW's new local cloud establishment will build the trust of companies operating in Indonesia which might further increase the market share and add to its top line. Apart from Indonesia, Palo Alto has its local cloud locations in more than 87 countries.

Palo Alto's year-to-date (YTD) share price performance has been marked by significant volatility, reflecting broader market fluctuations and company-specific developments. YTD, the stock has gained 2.3%, underperforming the Zacks Internet – Software industry's growth of 11.5%.

Indonesian Market Offers Huge Opportunity

Per a report by Mordor Intelligence, the Indonesian cloud market is projected to reach $4.21 billion by 2029 from $2.13 billion in 2024, witnessing a CAGR of 14.52%.

The growing cloud dependency of Indonesian corporations had previously attracted industry giants, including Alphabet GOOGL, Amazon's AMZN Amazon Web Services ("AWS") and Microsoft MSFT.

Alphabet and Microsoft entered the local cloud-hosting landscape of Indonesia in 2020 and 2021, respectively. Per a report by Statista, Alphabet's Google Cloud, Amazon's AWS and Microsoft's Azure currently hold a market share of 15%, 30% and 13%, respectively, in the public cloud market.

With the expansion of cloud services in Indonesia, the need for cloud security will increase in the country and PANW will be able to capitalize on it. This will enable Palo Alto to provide cyber-threat prevention to companies using cloud services locally.

The growth in cloud reliance had earlier prompted the Indonesian government to issue Law No. 27 of 2022 on Personal Data Protection. The law controls cloud service providers with a range of clauses. PANW's local cloud location expansion in Indonesia will allow it to meet local data residency needs.

Palo Alto will also be able to get a competitive advantage over its competitors that do not have their local cloud facilities in Indonesia. New and existing clients in the country having stricter data security measures will stick with PANW's solutions.

Conclusion

PANW is expanding its cloud footprint in developing nations and is capitalizing on the massive demand for cloud-based cybersecurity services in these nations. This will definitely contribute positively to this Zacks Rank #3 (Hold) company's top line over the long run.

Palo Alto has been benefiting from continuous deal wins and the increasing adoption of its next-generation security platforms, attributable to the rise in the hybrid work environment and the heightened need for stronger security. PANW's strong back-to-back quarterly performances reflect its sustained focus on product innovation, a shift in its business model to subscription-based services, platform integration and continued investments in the go-to-market strategy. The normalization of the supply chain is also aiding growth across the Products, Services and Subscription segments.

Palo Alto expects its revenues in the range of $7.99-$8.01 billion for fiscal 2024. The Zacks Consensus Estimate for the same is pegged at $8 billion, indicating year-over-year growth of 16%.

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