• Palo Alto Networks surpassed expectations on the top and bottom lines and on full-year guidance.
• The company announced software to help companies deal with virtual supply-chain issues.

Palo Alto Networks shares rose 12% in extended trading on Thursday after the network security hardware maker announced fiscal third-quarter results that came in stronger than analysts had expected.

Here's how the company did:

• Earnings: $1.79 per share, adjusted, vs. $1.68 per share as expected by analysts, according to Refinitiv.
• Revenue: $1.39 billion, vs. $1.36 billion as expected by analysts, according to Refinitiv.

Palo Alto Networks said revenue grew 29% year-over-year in the quarter, which ended on April 30, according to a statement. Revenue jumped 30% in the prior quarter.

"We saw strong top-line growth in Q3, which is a testament to our teams' consistent execution in capitalizing on the strong cybersecurity demand trends," Palo Alto Networks CEO Nikesh Arora was quoted as saying in the statement.

Palo Alto Networks has observed Russian cyberattacks since the war broke out during the quarter, and it's seeing greater interest in protection from corporations and government agencies across Europe, Arora told analysts on a conference call.

Supply shortages are posing challenges, Arora said. Higher component and shipping costs narrowed the company's adjusted gross margin in the quarter, said Dipak Golechha, its finance chief. Constraints "are likely to persist for yet another year," Arora said.

Both in the U.S. and abroad, prices of goods are moving higher. But so far that's not a big challenge for Palo Alto Networks.

"We're not seeing the pressure from inflation or reduced economic activity perspective," Arora said.

In the quarter Palo Alto Networks announced a next-generation firewall tool available exclusively through Amazon's public cloud. The company also announced a tool to help companies detect vulnerabilities in software supply chains following issues stemming from malicious updates to SolarWinds' Orion software.

Executives raised their guidance for the full fiscal year. They now expect adjusted earnings of $7.43 to $7.46 per share on $5.481 billion to $5.501 billion in revenue. Analysts polled by Refinitiv had been looking for $7.29 in adjusted earnings per share on $5.46 billion in revenue.

The guidance takes wage inflation into consideration, Arora said, in part because of Santa Clara, California-based Palo Alto Networks' proximity to large technology companies in Silicon Valley.

"We haven't hired as many people as we are expecting during this market," he said. "It's a very tight labor market in its current point, as you see. Having said that, my personal view is the labor markets are going to become easier in the next six to 12 months."

He said the company's employees had been leaving to join start-ups six months ago. Now that has changed.

"The market rationalization is causing people to take stock and say, 'Wait, do I really want to go make this move?'" Arora said.

Before the close of trading, the stock was down almost 21% since the start of 2022, while the S&P 500 index has fallen about 18% over the same period.