A month has gone by since the last earnings report for Palo Alto Networks (PANW). Shares have added about 0.4% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Palo Alto due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.
Palo Alto Networks Q1 Earnings and Revenues Surpass Estimates
Palo Alto Networks delivered first-quarter fiscal 2026 non-GAAP earnings of 93 cents per share, which beat the Zacks Consensus Estimate by 4.5%. The figure improved 19.2% year over year.
PANW’s first-quarter fiscal 2026 revenues of $2.47 billion surpassed the Zacks Consensus Estimate by 0.52%. This compares to the year-ago revenues of $2.14 billion.
Palo Alto Networks’ Q1 2026 Details
Product revenues rose 22.6% year over year to $434 million, accounting for 17.5% of total revenues. Subscription and Support revenues, which represented 82.5% of total revenues, grew 14.3% year over year to $2.04 billion, driven by continued momentum across SASE, Software Firewalls, and XSIAM offerings.
PANW’s Remaining Performance Obligation stood at $15.5 billion, up 24% year over year. Meanwhile, Next-Generation Security annualized recurring revenues reached $5.85 billion, representing 29% year-over-year growth.
Non-GAAP gross profit grew to $1.90 billion, with the non-GAAP gross margin expanding to 76.9%, up 110 basis points sequentially. Non-GAAP operating income increased to $746 million, while the non-GAAP operating margin held strong at 30.2%, marking 40 bps of year-over-year contraction.
PANW’s Balance Sheet & Cash Flow
As of Oct. 31, 2025, Palo Alto Networks had $3.07 billion in cash and cash equivalents, up from $2.27 billion as of July 31, 2025.
The company generated $1.77 billion in operating cash flow and reported non-GAAP adjusted free cash flow of $1.71 billion in the first quarter of fiscal 2026, reflecting a 69.2% adjusted free cash flow margin.
Palo Alto Networks' FY26 Guidance
For fiscal 2026, Palo Alto Networks now expects revenues between $10.50 billion and $10.54 billion, revised from the previously announced target of $10.48-$10.53 billion. Remaining Performance Obligations are still projected in the range of $18.6-$18.7 billion, and Next-Gen Security ARR is forecasted between $7.00 billion and $7.10 billion, implying 26-27% annual growth.
The company projects a non-GAAP operating margin of 29.5-30% and an adjusted free cash flow margin of 38-39%. PANW’s non-GAAP earnings per share are expected in the band of $3.80-$3.90, based on 710-716 million diluted shares outstanding, which is an improvement from the previously announced earnings target of $3.75-$3.85 per share.
For the second quarter of fiscal 2026, Palo Alto Networks projects revenues between $2.57 billion and $2.59 billion, indicating 14-15% year-over-year growth. RPO is expected in the range of $15.75-$15.85 billion, and Next-Gen Security ARR is forecasted between $6.11 billion and $6.14 billion, suggesting 28% growth. Non-GAAP earnings per share are projected in the range of 93 to 95 cents, indicating 15-17% year-over-year growth and using 711-715 million diluted shares.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in estimates review.
VGM Scores
At this time, Palo Alto has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for value investors.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Palo Alto has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Palo Alto belongs to the Zacks Security industry. Another stock from the same industry, CyberArk (CYBR), has gained 0.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2025.
CyberArk reported revenues of $342.84 million in the last reported quarter, representing a year-over-year change of +42.8%. EPS of $1.20 for the same period compares with $0.94 a year ago.
CyberArk is expected to post earnings of $1.13 per share for the current quarter, representing a year-over-year change of +41.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +20%.
CyberArk has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report CyberArk Software Ltd. (CYBR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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