$Palo Alto Networks(PANW)$ is scheduled to release its fiscal Q3 2025 earnings (for the quarter ending 30 April 2025) on Tuesday, 20 May 2025, after the U.S. markets close.
Revenue: Palo Alto Networks provided guidance for total revenue in the range of $2.26 billion to $2.29 billion, representing year-over-year growth of 14% to 15%. The consensus revenue forecast from analysts is around $2.279 billion.
Non-GAAP EPS: The company expects diluted non-GAAP net income per share to be in the range of $0.76 to $0.77. The consensus EPS forecast from analysts is $0.359 or $0.41, depending on the source. It's important to note the difference and that company guidance is often more reliable.
Next-Generation Security (NGS) ARR: Palo Alto Networks anticipates NGS ARR to be between $5.03 billion and $5.08 billion, representing year-over-year growth of 33% to 34%.
Remaining Performance Obligation (RPO): The expected RPO is between $13.5 billion and $13.6 billion, indicating a year-over-year growth of 19% to 20%.
Palo Alto Networks (PANW) Last Positive Earnings Call Saw Share Price Declined By 4.15%
Palo Alto had a positive earnings call on 13 Feb 2025 which saw its share price declined by 4.15% since.
The earnings call presented a positive outlook with strong revenue growth, significant progress in platformization, and robust performance across various business segments. However, there were concerns regarding gross margin pressures and the impact of deferred payments on cash flow visibility.
Palo Alto Networks (PANW) Guidance
During the conference call for Palo Alto Networks, Inc.'s second quarter of fiscal year 2025, the company provided updated guidance reflecting strong financial performance and strategic advancements. The company reported total revenue of $2.26 billion, a 14% year-over-year increase, with product revenue growing by 8% and services revenue by 16%, supported by a substantial 20% rise in subscription revenue. The company highlighted a robust performance in its Next-Generation Security (NGS) Annual Recurring Revenue (ARR), which grew by 37% to reach $4.78 billion, driven by strength across advanced subscriptions, SaaS, and Cortex. Operating margins surpassed internal targets, prompting an increase in full-year operating margin guidance to a range of 28% to 28.5%.
The company also projected diluted non-GAAP EPS for the fiscal year to be between $3.18 and $3.24, marking a 12% to 14% increase. Free cash flow generation remained strong, with expectations of an adjusted free cash flow margin between 37% and 38% for the year. Looking forward, Palo Alto Networks, Inc. anticipates revenue for fiscal year 2025 to range between $9.14 billion and $9.19 billion, reflecting a 14% increase, while continuing to capitalize on its platformization strategy and AI-driven initiatives to maintain momentum and drive future growth.
Key Things to Watch in PANW Q3 2025 Earnings Report
Performance against guidance: Investors will be closely monitoring if Palo Alto Networks meets or exceeds its own revenue and EPS guidance.
Total revenue for Q2 2025 was $2.26 billion, growing 14% year-over-year, above the high end of guidance. 74 accounts with transactions over $500,000, up 25% year over year, and 32 accounts with transactions over $10 million, up over 50%.
NGS ARR growth: This metric is crucial as it reflects the growth of their next-generation security services, which are a key focus for the company's future. NGS ARR grew 37% to $4.78 billion, driven by strong performance across advanced subscriptions, SaaS, and Cortex.
Progress on platformization: The company's strategy to integrate various security solutions into a unified platform is a key narrative. Any updates on its adoption and benefits will be important.
Approximately 75 new platformizations in Q2, up from 45 a year ago, with over 1,150 total platformizations among the top 5,000 customers.
Operating margin trends: The company has been aiming to improve its operating margins, and the Q3 results will provide insights into this progress. Double-digit revenue growth across all theaters: Americas up 13%, EMEA up 18%, and JPAC up 17%.
Gross margin at 76.6%, slightly down due to newer SaaS offerings not yet achieving scale and higher-than-typical inventory and product transition costs.
Operating expenses as a percentage of revenue decreased by only 120 basis points, indicating potential room for improvement in cost management.
Impact of AI: Palo Alto Networks is increasingly incorporating AI into its solutions and operations. Any discussion on the impact of these initiatives will be of interest.
Introduction of Cortex Cloud, merging Prisma Cloud with CDR capabilities, offering enhanced AI-powered cloud security solutions.
Future outlook and guidance: Investors will be keen to hear any updates to the full-year fiscal 2025 guidance and any initial commentary on fiscal year 2026.
Increase in deals with deferred payments, which affects cash flow visibility and management.
Palo Alto Networks (PANW) Price Target
Based on 48 analysts from Tiger Brokers offering 12 month price targets for Palo Alto Networks in the last 3 months. The average price target is $208.72 with a high forecast of $235.00 and a low forecast of $123.00. The average price target represents a 7.87% change from the last price of $193.50.
Based PANW fiscal Q2 2025 performance, revenue had went up 14% YoY, NGS ARR went up 37% YoY, RPO was $13 billion with 21% increase YoY. Palo Alto Networks also raised its operating margins and EPS guidance for the full fiscal year 2025 during the Q2 earnings call.
As of 12 May 2025, the stock closed at around $193.50. Analysts generally have a positive outlook on the stock, with a consensus rating of "Moderate Buy" to "Buy". The average price target among analysts ranges from $213.40 to $215.47, suggesting potential upside. However, individual price targets vary significantly.
Technical Analysis - Exponential Moving Average (EMA)
The company's focus on AI-powered security, cloud security, and a unified platform strategy appears to be resonating with customers. Acquisitions, such as the recent intent to acquire Protect AI, demonstrate their commitment to expanding their capabilities in emerging areas like AI security.
PANW have been trading on the upside with the bulls finally regained control, the RSI have also showed increased momentum, this show that investors have confidence on PANW unified platform strategy to increase its profitability performance, and also RPO and NGS ARR performance would also be watched closely.
But we need to be cautious that if corporate were to decrease their CAPEX spendings, then PANW share price might drop to the 180s level.
The short interest does show that some investors might start to take profits if PANW did have a surge when earnings came in better-than-expected. So we need to be careful if this could bring down the share price before the earnings and also post earnings.
Summary
The fiscal Q3 2025 earnings report for Palo Alto Networks will be a key indicator of the company's continued growth and execution of its strategic initiatives. The market will be paying close attention to their performance in NGS ARR, revenue, and profitability, as well as any updates on their platformization strategy and future outlook.
Appreciate if you could share your thoughts in the comment section whether you think PANW could improve on its RPO, and also increase the performance in NGS ARR and profitability.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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