Shares of Palo Alto Networks (PANW 6.97%) popped 7% during the after-hours session on Nov. 17 following its latest quarterly report. For the first quarter of fiscal 2023, which ended on Oct. 31, the cybersecurity company’s revenue rose 25% year over year to $1.56 billion, which beat analysts’ estimates by $10 million. Its adjusted net income grew 56% to $266 million, or $0.83 in earnings per share (EPS), which also topped expectations by $0.14.

Palo Alto’s earnings beat reinforces the notion that cybersecurity leaders are well-insulated from macroeconomic headwinds. That resilience is driven by the fact that most companies won’t lower their digital defenses simply to save a few dollars. It explains why Palo Alto’s stock has only declined about 10% over the past 12 months as the Nasdaq Composite tumbled 30%.

But will Palo Alto continue to resist the bear market and rebound toward fresh highs over the next 12 months? Let’s try to get a clearer picture.

A track record of rock-solid growth

Palo Alto operates three main ecosystems: Strata, which houses its legacy next-gen firewall and network security services; Prisma, which provides cloud-based security services; and Cortex, which specializes in artificial-intelligence threat detection tools. Strata primarily competes against older cybersecurity firms like Check Point Software Technologies, while Prisma and Cortex enable Palo Alto to keep pace with newer cloud-based challengers like CrowdStrike Holdings, and SentinelOne.

Palo Alto serves more than 80,000 enterprise customers, while the number of clients that spent at least $1 million on bookings over the past four quarters rose 59% year over year and 23% sequentially to reach 1,262 in the first quarter of fiscal 2023. That ongoing expansion has enabled it to consistently grow its revenue and billings by double digits while gradually expanding its non-GAAP (generally accepted accounting principles) operating margins.

Data source: Palo Alto Networks. YOY = year over year.

A rosy outlook for fiscal 2023

For the second quarter, Palo Alto expects its revenue to rise 24% to 26% year over year, its billings to increase 21% to 24%, and its non-GAAP EPS to climb 31% to 34% (after factoring in its 3-for-1 stock split this year).

For the full year, it expects revenue to grow 25% to 26%, its billings to improve 20% to 22%, and its non-GAAP EPS to increase 34% to 37%. All three estimates are slightly higher than its previous guidance. To top it all off, Palo Alto reiterated its expectations of achieving GAAP profitability for the full year compared to its net loss of $267 million in fiscal 2022.

Those rosy estimates indicate the company is still well-insulated from the macro headwinds that broadly hampered the growth of less mission-critical enterprise software companies over the past year. They also tell us that Palo Alto’s expansion of Prisma and Cortex, which it collectively dubs its next-gen security (NGS) services, will continue to drive its near-term growth and keep it relevant against higher-growth companies like CrowdStrike and SentinelOne.

On a trailing-12-month basis, Palo Alto’s NGS revenue rose 67% year over year to $2.1 billion in the first quarter and accounted for 36% of its total revenue. That’s up from 35% of its trailing-12-month revenue in the fourth quarter and just 28% in the first quarter of 2022.

A lot of that growth was driven by acquisitions over the past several years, but the company has also been reining in spending and only making smaller acquisitions (like Bridgecrew in 2021 and Cider Security this year) to support the ongoing expansion of its NGS ecosystem. That more-conservative approach is boosting Palo Alto’s operating margins while proving that it operates a sustainable business that isn’t simply driven by big acquisitions.

So where will Palo Alto’s stock be in a year?

At $167 per share, the stock still isn’t cheap at 49 times the midpoint of its non-GAAP EPS forecast for fiscal 2023. But higher-growth tech stocks are generally valued by their sales instead of their near-term profits. By that measure, Palo Alto trades at seven times this year’s sales, which still makes it a bargain relative to many of its industry peers. CrowdStrike, which is growing faster than Palo Alto but is far less profitable, trades at 15 times this year’s sales.

Palo Alto should remain an attractive choice for investors looking for a healthy balance of growth and value in the cybersecurity space. As a long-term investor in this company, I firmly believe its stock should gradually climb higher over the next 12 months as it repeatedly impresses investors with its rock-solid growth.