Palo Alto Networks Inc. (PANW) reported earnings Wednesday evening that checked all the right boxes—and then watched its stock tumble anyway. Sometimes Wall Street just wants more.
The Numbers Look Good
The cybersecurity giant delivered adjusted earnings of 93 cents per share for its fiscal first quarter, topping the 89-cent consensus estimate. Revenue came in at $2.47 billion, slightly ahead of the $2.46 billion analysts were expecting. Not a blowout, but a clean beat nonetheless.
The more interesting story is what's happening underneath those headline numbers. Palo Alto's platform strategy continues to gain traction with enterprise customers. Next-generation security annual recurring revenue jumped 29% year-over-year to $5.9 billion. That's the kind of growth that shows customers aren't just buying point solutions—they're committing to the broader ecosystem.
Remaining performance obligations, which essentially represent future contracted revenue, climbed 24% to $15.5 billion. That's a strong signal that customers are signing longer, multi-product deals tied to the company's unified security platform. In other words, the stickiness factor is real.
AI Security and Strategic Moves
Management emphasized growing demand for AI-related security capabilities during the earnings call. The company pointed to recent acquisitions, including CyberArk and the newly announced deal for observability platform Chronosphere, as strategic investments to deepen its data and security offerings for enterprise clients navigating the AI era.
Looking Ahead
For the current quarter, Palo Alto expects adjusted earnings between 93 cents and 95 cents per share, roughly in line with the 93-cent consensus. Revenue guidance of $2.57 billion to $2.59 billion also matches analyst expectations at the midpoint.
More significantly, the company raised its full-year outlook. Adjusted EPS guidance moved from a range of $3.75-$3.85 to $3.80-$3.90, compared to the $3.81 consensus. Revenue guidance ticked up from $10.47-$10.52 billion to $10.50-$10.54 billion, versus the $10.51 billion estimate.
Analyst Reactions
Wall Street analysts largely maintained their bullish stance following the report. Bernstein's Peter Weed kept an Outperform rating and nudged his price target from $207 to $210. BTIG's Gray Powell reiterated a Buy rating with a $248 target. Needham's Mike Cikos stuck with his Buy rating and $230 price target. Rosenblatt's Catharine Trebnick and Cantor Fitzgerald's Jonathan Ruykhaver both maintained Buy-equivalent ratings with $250 price targets.
The Market's Verdict
Despite the solid results and raised guidance, Palo Alto shares dropped 5.79% to $188.25 Thursday. It's a reminder that beating expectations doesn't always translate to stock gains—especially when those expectations might have already been baked into the price.