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Palo Alto Networks to Report Q3 Earnings: Buy, Sell or Hold the Stock?
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Key Takeaways
PANW expects Q3 revenue growth of 28-29%, driven by platformization and AI security demand.
Palo Alto Networks added 110 new platform customers in Q2 as large enterprise deals gained traction.
PANW faces pressure from acquisition costs, share dilution and softer enterprise IT spending.
Palo Alto Networks, Inc. (PANW - Free Report) is scheduled to report its third-quarter fiscal 2026 results on June 2.
Palo Alto Networks projects its fiscal third-quarter revenues in the range of $2.941-$2.945 billion, which suggests a year-over-year increase of 28-29%. The Zacks Consensus Estimate is pegged at $2.94 billion, which implies growth of 28.6% from the year-ago reported figure.
For the fiscal third quarter, the company expects non-GAAP earnings per share between 78 cents and 80 cents. The consensus mark for PANW’s fiscal third-quarter non-GAAP earnings has remained unchanged at 81 cents per share over the past 30 days, which indicates a 1.3% increase from the year-ago quarter’s earnings.
Image Source: Zacks Investment Research
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.8%.
Our proven model does not conclusively predict an earnings beat for Palo Alto Networks this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Palo Alto Networks has an Earnings ESP of 0.00% and carries a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Palo Alto Networks’ third-quarter fiscal 2026 performance is likely to have benefited from the robust traction stemming from deal wins, along with continued progress in its platformization strategy. The increased adoption of its AI-powered XSIAM, SASE and software firewall offerings, which enable enterprises to advance zero-trust network security, is expected to have contributed to the growing share of incremental Next-Generation Security (NGS) Annual Recurring Revenues (ARR).
Through its platformization strategy, Palo Alto Networks is enabling larger customers to adopt its full security platform, which is helping the company grow faster and secure bigger deals. In the second quarter of fiscal 2026, PANW’s NGS ARR grew 33% year over year to $6.33 billion, where the platformization strategy was a key driver. In the second quarter of fiscal 2026, PANW added about 110 net new platform customers. The total number of platformized customers reached about 1,550, up 35% year over year.
Large deals also supported growth. A global automotive company signed a security transformation deal worth more than $50 million. The deal included $30 million for SASE and $20 million for XSIAM to run its global security operations center. A global technology supplier also signed a transformation deal worth more than $40 million that included XSIAM and expanded SASE adoption. In another case, a large IT services provider expanded its relationship through a $20 million deal centered on XSIAM. These gains show that large enterprises are consolidating security budgets with PANW as customers want fewer tools and simpler security operations, which is likely to have boded well for the company’s prospects in the to-be-reported quarter.
However, PANWs' fiscal third-quarter prospects are expected to be weighed down due to rising integration and acquisition-related costs. Earlier in 2026, PANW completed two major acquisitions, which include its $25 billion CyberArk Software buyout and $3.35 billion Chronosphere acquisition. As a result, PANW is incurring high integration-related costs, including onboarding employees, aligning go-to-market teams and integrating systems and operations. Acquisition-related costs in the second quarter of fiscal 2026 amounted to $24 million, a whopping increase from $5 million incurred in the prior quarter. These costs are expected to have hurt the company's profitability in the to-be-reported quarter before the benefits of synergies from acquisitions are fully realized.
Equity dilution effect is expected to have significantly hurt PANW’s bottom line in the fiscal third quarter. In the second quarter of fiscal 2026, PANW issued 112 million shares as part of the CyberArk deal. This is expected to result in a significant equity dilution effect, hurting the company’s bottom-line results. Further, PANW’s near-term prospects might be hurt by softening IT spending due to the current uncertain macroeconomic environment. Enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This is expected to have hurt Palo Alto Networks’ prospects in the to-be-reported quarter.
Price Performance & Stock Valuation
Palo Alto Networks’ shares have surged 34.3% over the past year, outperforming the Zacks Security industry and its peers, including Okta Inc. (OKTA - Free Report) , Fortinet (FTNT - Free Report) and Zscaler (ZS - Free Report) .
The Zacks Security industry has jumped 26.6% over the past year. Shares of Fortinet have surged 25.4%, while Okta and Zscaler shares have lost 14.9% and 49.4%, respectively.
One-Year Price Return Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Palo Alto Networks offers investors at the current levels. Palo Alto Networks is currently trading at a premium with a forward 12-month P/S of 15.97X compared with the industry’s 15.13X, reflecting a stretched valuation.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Palo Alto Networks stock also trades at a higher P/S multiple compared with other industry peers, including Okta, Fortinet and Zscaler. At present, Okta, Fortinet and Zscaler have P/S multiples of 5.07X, 12.17X and 7.71X, respectively.
Investment Consideration
Palo Alto Networks is incurring significant integration and acquisition-related costs as a result of completing back-to-back acquisitions in early 2026. Higher costs arising from these acquisitions are expected to continue and significantly hurt the company's profitability in the near term.
Another concern is the equity dilution effect stemming from PANW issuing 112 million shares as part of the CyberArk deal in the second quarter of fiscal 2026, which is expected to significantly hurt PANW’s bottom-line results. PANW expects fiscal 2026 earnings per share (EPS) to be in the range of $3.65-$3.70, down from its prior guidance of $3.80-$3.90 per share.
The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 and 2027 earnings per share is pegged at $3.70 and $3.98, respectively. Estimates for fiscal 2026 have remained unchanged over the past 60 days, while estimates for fiscal 2027 have been revised downward by a penny over the past 60 days.
Further, Palo Alto Networks’ near-term prospects might be hurt by softening IT spending as enterprises postpone large tech investments due to macroeconomic uncertainties and geopolitical issues.
Conclusion: Sell Palo Alto Networks Stock Right Now
Palo Alto Networks faces risks from rising integration costs due to large acquisitions, share dilution impact is meaningful, and downward revision of EPS guidance. These factors could hurt the company’s prospects in the near-term. Further, given its premium valuation, it is wise to wait for the company’s upcoming quarter’s results before investing in the stock for now.
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Palo Alto Networks to Report Q3 Earnings: Buy, Sell or Hold the Stock?
Key Takeaways
Palo Alto Networks, Inc. (PANW - Free Report) is scheduled to report its third-quarter fiscal 2026 results on June 2.
Palo Alto Networks projects its fiscal third-quarter revenues in the range of $2.941-$2.945 billion, which suggests a year-over-year increase of 28-29%. The Zacks Consensus Estimate is pegged at $2.94 billion, which implies growth of 28.6% from the year-ago reported figure.
For the fiscal third quarter, the company expects non-GAAP earnings per share between 78 cents and 80 cents. The consensus mark for PANW’s fiscal third-quarter non-GAAP earnings has remained unchanged at 81 cents per share over the past 30 days, which indicates a 1.3% increase from the year-ago quarter’s earnings.
Image Source: Zacks Investment Research
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.8%.
Palo Alto Networks, Inc. Price and EPS Surprise
Palo Alto Networks, Inc. price-eps-surprise | Palo Alto Networks, Inc. Quote
Earnings Whispers for PANW
Our proven model does not conclusively predict an earnings beat for Palo Alto Networks this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Palo Alto Networks has an Earnings ESP of 0.00% and carries a Zacks Rank #4 (Sell) at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Influence PANW’s Q3 Results
Palo Alto Networks’ third-quarter fiscal 2026 performance is likely to have benefited from the robust traction stemming from deal wins, along with continued progress in its platformization strategy. The increased adoption of its AI-powered XSIAM, SASE and software firewall offerings, which enable enterprises to advance zero-trust network security, is expected to have contributed to the growing share of incremental Next-Generation Security (NGS) Annual Recurring Revenues (ARR).
Through its platformization strategy, Palo Alto Networks is enabling larger customers to adopt its full security platform, which is helping the company grow faster and secure bigger deals. In the second quarter of fiscal 2026, PANW’s NGS ARR grew 33% year over year to $6.33 billion, where the platformization strategy was a key driver. In the second quarter of fiscal 2026, PANW added about 110 net new platform customers. The total number of platformized customers reached about 1,550, up 35% year over year.
Large deals also supported growth. A global automotive company signed a security transformation deal worth more than $50 million. The deal included $30 million for SASE and $20 million for XSIAM to run its global security operations center. A global technology supplier also signed a transformation deal worth more than $40 million that included XSIAM and expanded SASE adoption. In another case, a large IT services provider expanded its relationship through a $20 million deal centered on XSIAM. These gains show that large enterprises are consolidating security budgets with PANW as customers want fewer tools and simpler security operations, which is likely to have boded well for the company’s prospects in the to-be-reported quarter.
However, PANWs' fiscal third-quarter prospects are expected to be weighed down due to rising integration and acquisition-related costs. Earlier in 2026, PANW completed two major acquisitions, which include its $25 billion CyberArk Software buyout and $3.35 billion Chronosphere acquisition. As a result, PANW is incurring high integration-related costs, including onboarding employees, aligning go-to-market teams and integrating systems and operations. Acquisition-related costs in the second quarter of fiscal 2026 amounted to $24 million, a whopping increase from $5 million incurred in the prior quarter. These costs are expected to have hurt the company's profitability in the to-be-reported quarter before the benefits of synergies from acquisitions are fully realized.
Equity dilution effect is expected to have significantly hurt PANW’s bottom line in the fiscal third quarter. In the second quarter of fiscal 2026, PANW issued 112 million shares as part of the CyberArk deal. This is expected to result in a significant equity dilution effect, hurting the company’s bottom-line results. Further, PANW’s near-term prospects might be hurt by softening IT spending due to the current uncertain macroeconomic environment. Enterprises are postponing their large IT spending plans due to a weakening global economy amid ongoing macroeconomic and geopolitical issues. This is expected to have hurt Palo Alto Networks’ prospects in the to-be-reported quarter.
Price Performance & Stock Valuation
Palo Alto Networks’ shares have surged 34.3% over the past year, outperforming the Zacks Security industry and its peers, including Okta Inc. (OKTA - Free Report) , Fortinet (FTNT - Free Report) and Zscaler (ZS - Free Report) .
The Zacks Security industry has jumped 26.6% over the past year. Shares of Fortinet have surged 25.4%, while Okta and Zscaler shares have lost 14.9% and 49.4%, respectively.
One-Year Price Return Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Palo Alto Networks offers investors at the current levels. Palo Alto Networks is currently trading at a premium with a forward 12-month P/S of 15.97X compared with the industry’s 15.13X, reflecting a stretched valuation.
PANW Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
Palo Alto Networks stock also trades at a higher P/S multiple compared with other industry peers, including Okta, Fortinet and Zscaler. At present, Okta, Fortinet and Zscaler have P/S multiples of 5.07X, 12.17X and 7.71X, respectively.
Investment Consideration
Palo Alto Networks is incurring significant integration and acquisition-related costs as a result of completing back-to-back acquisitions in early 2026. Higher costs arising from these acquisitions are expected to continue and significantly hurt the company's profitability in the near term.
Another concern is the equity dilution effect stemming from PANW issuing 112 million shares as part of the CyberArk deal in the second quarter of fiscal 2026, which is expected to significantly hurt PANW’s bottom-line results. PANW expects fiscal 2026 earnings per share (EPS) to be in the range of $3.65-$3.70, down from its prior guidance of $3.80-$3.90 per share.
The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 and 2027 earnings per share is pegged at $3.70 and $3.98, respectively. Estimates for fiscal 2026 have remained unchanged over the past 60 days, while estimates for fiscal 2027 have been revised downward by a penny over the past 60 days.
Further, Palo Alto Networks’ near-term prospects might be hurt by softening IT spending as enterprises postpone large tech investments due to macroeconomic uncertainties and geopolitical issues.
Conclusion: Sell Palo Alto Networks Stock Right Now
Palo Alto Networks faces risks from rising integration costs due to large acquisitions, share dilution impact is meaningful, and downward revision of EPS guidance. These factors could hurt the company’s prospects in the near-term. Further, given its premium valuation, it is wise to wait for the company’s upcoming quarter’s results before investing in the stock for now.