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PANW Q4 Earnings Beat Estimates on Platformization Strength
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Key Takeaways
PANW's Q4 revenues rose 34% to $3.41B as broad platform strength and record adoption fueled growth.
PANW added about 220 net new platformizations, up 44%, while net new NGS ARR surged 98% to about $970M.
Palo Alto Networks sees fiscal 2027 revenues of $14.10-$14.20B and NGS ARR of $11.075-$11.175B.
Palo Alto Networks, Inc. (PANW - Free Report) delivered fourth-quarter fiscal 2026 non-GAAP earnings of $1.02 per share, which beat the Zacks Consensus Estimate by 4.1%. The figure improved 7.4% year over year.
Revenues climbed 34% year over year to $3.41 billion and topped the consensus estimate by 1.8%. Broad-based strength across Network & AI Security, Cortex and Idira, along with record platformization adoption, drove the fourth-quarter results. Next-Generation Security ARR jumped 63% to $9.10 billion.
PANW's Revenue Mix Shows Broad-Based Growth
Product revenues increased 28.6% year over year to $738 million from $574 million in the year-ago quarter, accounting for 21.6% of total revenues. Subscription and support revenues rose 36.2% to $2.672 billion from $1.962 billion, which represented 78.4% of total revenues.
By platform, fourth-quarter revenues were $2.331 billion for Network & AI Security, $586 million for Cortex and $336 million for Idira. Other revenues, including Unit 42, professional services and financing income, totaled $157 million.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto Networks' Platformization Hits Record Levels
Remaining performance obligations rose 34% year over year to $21.2 billion. Net new NGS ARR reached approximately $970 million, up 98% year over year, reflecting the strongest quarterly addition reported by the company.
Palo Alto Networks added roughly 220 net new platformizations in the quarter, up 44% year over year. Net retention among platformized customers exceeded 120%, while more than 65% of NGS ARR came from platformized customers.
PANW's AI Security Products Gain Scale
Prisma AIRS reached roughly $120 million in ARR within one year of general availability and had over 800 customers, more than doubling sequentially. Software firewall ARR grew 29% year over year, while SASE competitive displacements totaled about $450 million in fiscal 2026.
Cortex momentum also remained strong. XSIAM ARR exceeded $700 million and grew about 70% year over year, while observability ARR surpassed $500 million and increased more than 2.5 times from the second quarter. CyberArk, now called Idira, generated more than 200 new-logo wins from PANW's installed base.
Non-GAAP gross profit was $2.552 billion, with gross margin at 74.8%, down from 75.8% a year earlier. Management attributed the pressure to a mix shift toward faster-growing SaaS offerings that have not yet reached gross-margin maturity.
Non-GAAP operating income was $1.011 billion, translating to a 29.6% margin compared with 30.3% a year ago.
Adjusted free cash flow increased to $1.289 billion from $954 million, with margin edging up to 37.8% from 37.6%. Cash and cash equivalents stood at $2.514 billion, with $557 million in short-term investments.
PANW Guides Strong Growth for Fiscal 2027
For the first quarter of fiscal 2027, Palo Alto Networks expects revenues of $3.300-$3.310 billion, indicating 33-34% growth. NGS ARR is projected to be in the range of $9.54-$9.56 billion, RPO in the band of $20.8-$20.9 billion and non-GAAP earnings per share between 96 cents and 98 cents.
For fiscal 2027, revenues are forecast at $14.10-$14.20 billion, implying 23-24% growth. NGS ARR is expected to be in the range of $11.075-$11.175 billion, RPO in the band of $25.2-$25.4 billion and non-GAAP earnings per share between $4.16 and $4.19. The company targets a 29.5% non-GAAP operating margin and a 38.0% adjusted free cash flow margin.
Palo Alto Networks Maps Platform Growth Ahead
Management expects fiscal 2027 Network & AI Security revenues to grow in the low double digits, Cortex revenues to rise about 30%, and Idira revenues to reach approximately $1.5 billion, implying pro forma growth in the high teens to 20%.
The company expects 60-61% of fiscal 2027 net new NGS ARR to arrive in the second half. Its outlook assumes the tail end of a large LLM customer's migration to Chronosphere continues through the first quarter, but contributes less net new ARR than it did in the fourth quarter.
PANW’s Zacks Rank and Other Stocks to Consider
Palo Alto Networks has a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $12.76 per share, up by 3 cents over the past seven days, indicating a year-over-year increase of 35.5%. Applied Materials shares have surged 72.5% year to date (YTD).
The Zacks Consensus Estimate for Lam Research’s fiscal 2027 earnings has moved northward by a penny to $9.33 per share over the past seven days and calls for a year-over-year jump of 60.6%. Lam Research shares have soared 69.8% YTD.
The Zacks Consensus Estimate for Amphenol’s 2026 earnings has remained unchanged at $5.25 per share over the past 30 days, implying a year-over-year increase of 57.2%. Amphenol shares have rallied 20.8% YTD.
View the Zacks #1 Rank List
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PANW Q4 Earnings Beat Estimates on Platformization Strength
Key Takeaways
Palo Alto Networks, Inc. (PANW - Free Report) delivered fourth-quarter fiscal 2026 non-GAAP earnings of $1.02 per share, which beat the Zacks Consensus Estimate by 4.1%. The figure improved 7.4% year over year.
Revenues climbed 34% year over year to $3.41 billion and topped the consensus estimate by 1.8%. Broad-based strength across Network & AI Security, Cortex and Idira, along with record platformization adoption, drove the fourth-quarter results. Next-Generation Security ARR jumped 63% to $9.10 billion.
PANW's Revenue Mix Shows Broad-Based Growth
Product revenues increased 28.6% year over year to $738 million from $574 million in the year-ago quarter, accounting for 21.6% of total revenues. Subscription and support revenues rose 36.2% to $2.672 billion from $1.962 billion, which represented 78.4% of total revenues.
By platform, fourth-quarter revenues were $2.331 billion for Network & AI Security, $586 million for Cortex and $336 million for Idira. Other revenues, including Unit 42, professional services and financing income, totaled $157 million.
Palo Alto Networks, Inc. Price, Consensus and EPS Surprise
Palo Alto Networks, Inc. price-consensus-eps-surprise-chart | Palo Alto Networks, Inc. Quote
Palo Alto Networks' Platformization Hits Record Levels
Remaining performance obligations rose 34% year over year to $21.2 billion. Net new NGS ARR reached approximately $970 million, up 98% year over year, reflecting the strongest quarterly addition reported by the company.
Palo Alto Networks added roughly 220 net new platformizations in the quarter, up 44% year over year. Net retention among platformized customers exceeded 120%, while more than 65% of NGS ARR came from platformized customers.
PANW's AI Security Products Gain Scale
Prisma AIRS reached roughly $120 million in ARR within one year of general availability and had over 800 customers, more than doubling sequentially. Software firewall ARR grew 29% year over year, while SASE competitive displacements totaled about $450 million in fiscal 2026.
Cortex momentum also remained strong. XSIAM ARR exceeded $700 million and grew about 70% year over year, while observability ARR surpassed $500 million and increased more than 2.5 times from the second quarter. CyberArk, now called Idira, generated more than 200 new-logo wins from PANW's installed base.
Palo Alto Networks' Margins Reflect SaaS Mix Shift
Non-GAAP gross profit was $2.552 billion, with gross margin at 74.8%, down from 75.8% a year earlier. Management attributed the pressure to a mix shift toward faster-growing SaaS offerings that have not yet reached gross-margin maturity.
Non-GAAP operating income was $1.011 billion, translating to a 29.6% margin compared with 30.3% a year ago.
Adjusted free cash flow increased to $1.289 billion from $954 million, with margin edging up to 37.8% from 37.6%. Cash and cash equivalents stood at $2.514 billion, with $557 million in short-term investments.
PANW Guides Strong Growth for Fiscal 2027
For the first quarter of fiscal 2027, Palo Alto Networks expects revenues of $3.300-$3.310 billion, indicating 33-34% growth. NGS ARR is projected to be in the range of $9.54-$9.56 billion, RPO in the band of $20.8-$20.9 billion and non-GAAP earnings per share between 96 cents and 98 cents.
For fiscal 2027, revenues are forecast at $14.10-$14.20 billion, implying 23-24% growth. NGS ARR is expected to be in the range of $11.075-$11.175 billion, RPO in the band of $25.2-$25.4 billion and non-GAAP earnings per share between $4.16 and $4.19. The company targets a 29.5% non-GAAP operating margin and a 38.0% adjusted free cash flow margin.
Palo Alto Networks Maps Platform Growth Ahead
Management expects fiscal 2027 Network & AI Security revenues to grow in the low double digits, Cortex revenues to rise about 30%, and Idira revenues to reach approximately $1.5 billion, implying pro forma growth in the high teens to 20%.
The company expects 60-61% of fiscal 2027 net new NGS ARR to arrive in the second half. Its outlook assumes the tail end of a large LLM customer's migration to Chronosphere continues through the first quarter, but contributes less net new ARR than it did in the fourth quarter.
PANW’s Zacks Rank and Other Stocks to Consider
Palo Alto Networks has a Zacks Rank #2 (Buy) at present.
Some other top-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Applied Materials (AMAT - Free Report) , Lam Research (LRCX - Free Report) and Amphenol (APH - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $12.76 per share, up by 3 cents over the past seven days, indicating a year-over-year increase of 35.5%. Applied Materials shares have surged 72.5% year to date (YTD).
The Zacks Consensus Estimate for Lam Research’s fiscal 2027 earnings has moved northward by a penny to $9.33 per share over the past seven days and calls for a year-over-year jump of 60.6%. Lam Research shares have soared 69.8% YTD.
The Zacks Consensus Estimate for Amphenol’s 2026 earnings has remained unchanged at $5.25 per share over the past 30 days, implying a year-over-year increase of 57.2%. Amphenol shares have rallied 20.8% YTD.