Palo Alto Networks saw early customer behavior changes and expects “short-term bumps” to the security spending pace due to the macroeconomic impacts, despite reporting a strong first fiscal quarter of 2023.

The security powerhouse reported $1.56 billion in revenue for the quarter, a nearly 25% increase year over year. And its total billings grew 27% year over year to $1.7 billion.

Security spending is a little bit more resilient than other IT segments, but Chairman and CEO Nikesh Arora cautioned it’s “not immune” to the potential recessionary concerns. “We believe that whilst there may be short-term bumps to the pace of investment by some of the customers, these projects will continue for the medium and long term.”

“While some deals have been sized down or broken into phases, we are experiencing few deal cancellations. We expect this behavior to become the norm over the next year,” he said, but “The impact is not uniform across all sectors. But those feeling the impact of interest rate increases are more likely to scrutinize their budgets than those prospering in a high-interest rate environment, [for example] technology, CPG and some parts of retail are feeling the impact, [but] utilities, oil and gas, defense and public sector verticals continue to be on course their plans.”

The company also noticed CFOs are more involved in security spending and large deals are getting more scrutiny, according to Arora.

On the headcount side, he expressed a relatively positive sentiment, given several other tech giants recently announced layoff plans. Palo Alto Networks had front-loaded hiring with 550 new direct sales representatives to increase coverage across its customer base and expedite the execution.

But the company also saw lower attrition rates, which leads to fewer overall new hires, Arora said. “We will closely monitor our hiring as well as our overall spending before the sharper focus on efficiency.”

As part of the execution doubling down, Palo Alto Networks is prioritizing secure access service edge (SASE) sales and extending its Prisma Access to the entire sales force.

“We have trained all of our salespeople to become SASE-first, and we have hired a bunch of people from SASE competitors to lead some of that data for us. So we continue that field force transformation,” Arora said.

He noted SASE has gained industry recognition and touted the vendor’s competitive advantage. “We have lots of eight-figure deals out there that are being completed in the SASE space. And then there's two and a half vendors fighting for those deals. ”

“An $8 to $10 billion SASE market is out there, and that space is growing in double digits,” Arora said.

During the earnings call, Arora announced the signing of a definitive agreement to acquire application security startup Cider Security for around $195 million in cash, excluding the value of replacement and assumed equity awards.

The deal is expected to close during Palo Alto Networks’ second fiscal quarter of 2023. The vendor plans to integrate Cider Security’s technology into its Prisma Cloud platform to strengthen its supply chain security and code–to-cloud cloud-native application protection platform (CNAPP) capabilities.

“Cider [Security] brings the ability to visualize customers’ application development and deployment environment, analyze the tools, identify risks and how to remediate them. This ability to secure the software supply chain is backed up by Cider’s leading CI/CD security research team,” Arora said.

It’s been almost two years since Palo Alto Networks announced its last acquisition in February of 2021. The company bought DevOps security startup Bridgecrew for $156 million in cash, then also folded the technology into its Prisma Cloud security platform to add infrastructure as code capabilities.