In a recent development, Palo Alto Networks saw a sharp decline in its shares, dropping 28% on Wednesday, marking its worst trading session since its initial public offering in 2012. The cybersecurity hardware and software maker's setback followed a downgrade by analysts, attributing the drop to the company's struggle with its U.S. government client base.

CEO Nikesh Arora addressed the company's challenges during a call with analysts, emphasizing slower growth as Palo Alto Networks focuses on encouraging clients to utilize multiple products. The dip in shares came after the company revised its full-year revenue guidance downwards due to underwhelming performance in securing major federal contracts.

Despite experiencing a significant increase in stock value in 2023, driven by a surge in cybersecurity spending following cyberattacks on various entities such as 23andMe, Chinese bank ICBC, and MGM Resorts, Palo Alto Networks is now facing hurdles in meeting revenue expectations. The company reduced its full-year billings outlook range to $10.1 billion to $10.2 billion and its revenue guidance to $7.95 billion to $8 billion.

Analysts from Loop Capital and Rosenblatt Securities downgraded the stock following the report, expressing concerns about Palo Alto Networks' shift towards platformization and the impact it may have on billings and revenue growth in the coming months. Despite ongoing efforts to enhance protective measures, U.S. government agencies faced challenges in securing expected contracts, leading to a downward revision in the company's financial outlook.