Palo Alto Networks Inc. (NASDAQ:PANW) reported fiscal third-quarter 2026 results after the market close Tuesday, beating Wall Street expectations on revenue and earnings while raising its full-year outlook.
Revenue, Earnings Top Estimates
Revenue rose 31% year over year to approximately $3 billion, topping analyst estimates of $2.94 billion. Adjusted earnings came in at 85 cents per share, ahead of consensus estimates of 80 cents per share.
The cybersecurity company also reported remaining performance obligations (RPO) of $18.4 billion, up 36% from a year earlier, reflecting strong demand and future revenue visibility.
Next-Generation Security Growth Accelerates
Annual recurring revenue (ARR) for Palo Alto’s Next-Generation Security business reached $8.13 billion, up 60% year over year and above company guidance. Excluding contributions from CyberArk and Chronosphere, organic NGS ARR increased 28%.
Current RPO climbed 34% to $8.3 billion, while total RPO increased 36% to $18.4 billion. On an organic basis, total RPO grew 22%.
Services revenue increased 31% to $2.4 billion, while product revenue rose to $594 million during the quarter.
SASE ARR reached $1.6 billion, up 40% year over year, driven by demand for integrated hybrid-security platforms.
The company also reported strong firewall demand. Software firewall ARR grew 25%, while next-generation firewall bookings increased nearly 40%, marking the strongest hardware demand environment in a decade.
XSIAM ARR surpassed $600 million, doubling from a year ago. The platform now serves 740 customers, with most achieving incident response times of less than 10 minutes.
Net retention rate was 120%, while churn remained in the low single digits.
Outlook Raised
For the fiscal fourth quarter, Palo Alto Networks expects revenue of $3.35 billion to $3.36 billion, above analyst estimates of $3.28 billion. Adjusted earnings are projected between 96 cents and 98 cents per share, compared with consensus estimates of 94 cents.
The company raised its full-year revenue outlook to $11.42 billion-$11.43 billion from its prior forecast of $11.28 billion-$11.31 billion. Analysts were expecting $11.30 billion.
Palo Alto also increased its full-year adjusted earnings outlook to $3.77-$3.79 per share from $3.65-$3.70 per share. Analysts were projecting $3.69 per share.
The company expects full-year NGS ARR of $8.9 billion-$8.95 billion, representing growth of 59%-60%.
AI Threats Drive Security Urgency
Palo Alto executives said the rapid advancement of artificial intelligence is creating a new wave of cybersecurity spending.
During the earnings call, CEO Nikesh Arora warned that frontier AI models can identify and weaponize software vulnerabilities in minutes, compared with a process that previously took months of manual effort.
He added that the company’s Unit 42 researchers recently simulated a ransomware attack from initial access to data exfiltration in just 25 minutes, highlighting the growing urgency for enterprises to adopt AI-driven security defenses.
Price Action And Analyst Outlook
Palo Alto Networks shares were down 3.43% at $287.00 during premarket trading on Wednesday. The stock is approaching its 52-week high of $302.95, according to Benzinga Pro data.
Despite today’s drop, Wall Street sentiment remains overwhelmingly positive. The stock carries a Buy rating with an average price forecast of $263.08. Recent analyst moves include:
- Benchmark: Buy (Raises forecast to $340.00) (June 3)
- DA Davidson: Buy (Raises forecast to $345.00) (June 3)
- Stephens & Co.: Equal-Weight (Raises forecast to $300.00) (June 3)
Photo via Shutterstock
Comments