Palo Alto Networks pops as results, guidance top estimates; founder steps down

Palo Alto Networks reported strong fiscal Q4 results, with adjusted earnings per share of $0.95 and revenue of $2.5 billion, exceeding analyst expectations and reflecting a 16% year-over-year growth.

The company experienced significant increases in product revenue (up 19%) and subscription/support revenue (up 15%), with annual recurring revenue from next-generation security reaching $5.6 billion, slightly above forecasts.

Looking ahead, Palo Alto projects adjusted earnings and revenue for Q1 FY 2026 that exceed analyst estimates, including a forecast for adjusted earnings per share between $0.88 and $0.90 and a revenue range of $2.45 billion to $2.47 billion.

The company announced the retirement of founder Nir Zuk, with Chief Product Officer Lee Klarich set to succeed him, signifying a key leadership change as Palo Alto aims for sustained growth.

Recommendation Rating: Strong Buy

Palo Alto Networks (NASDAQ: PANW) experienced a 6% increase in after-hours trading on Monday, following the release of its fiscal fourth-quarter results and forecasts that outperformed analyst expectations.

For the quarter ending July 31, the company, led by CEO Nikesh Arora, reported an adjusted earnings per share of $0.95, generating $2.5 billion in revenue—an impressive 16% growth compared to the previous year. Product revenue climbed by 19% year-over-year, totaling $573.9 million, while subscription and support revenue rose 15%, reaching $1.96 billion. Notably, the annual recurring revenue from next-generation security stood at $5.6 billion, slightly exceeding the projected estimate of $5.55 billion.

At the conclusion of the quarter, Palo Alto Networks reported $6.3 billion in deferred revenue and $15.8 billion in remaining performance obligations.

Analysts had anticipated an earnings figure of $0.89 per share alongside revenue of $2.5 billion, indicating that the company's performance surpassed consensus expectations.

"Our strong execution in Q4 indicates a pivotal market shift where customers recognize that a fragmented defense is ineffective against contemporary threats. They choose to partner with us because our solutions are designed to work cohesively, providing robust operational synergies that yield superior outcomes almost in real-time, alongside the efficiency our clients require,” remarked Arora in a statement. He also noted, “We ended fiscal year 2025 with an upsurge in remaining performance obligations and successfully exceeded the $10 billion revenue run-rate milestone, positioning ourselves effectively for sustained future growth.”

Meanwhile, shares of peer companies such as CrowdStrike (CRWD), Zscaler (ZS), and Check Point (CHKP) experienced declines following Palo Alto’s announcement.

Looking ahead to the first quarter of fiscal year 2026, Palo Alto Networks projects adjusted earnings between $0.88 and $0.90, surpassing the consensus estimate of $0.86 per share. Revenue estimates fall between $2.45 billion and $2.47 billion, with the midpoint exceeding the expected $2.45 billion. For next-generation security annual recurring revenue, projections range from $7 billion to $7.1 billion, significantly higher than the estimated $5.84 billion. The forecast for remaining performance obligations is expected to be between $15.4 billion and $15.5 billion.

For the entirety of fiscal year 2026, Palo Alto anticipates adjusted earnings per share to fall between $3.75 and $3.85, with a midpoint of $3.80, also above analyst expectations of $3.69 per share. Expected sales are between $10.48 billion and $10.53 billion, surpassing the $10.44 billion estimate. Remaining performance obligations are projected at $18.6 billion to $18.7 billion, exceeding the $18.12 billion expected.

In a significant shift for the company, Palo Alto Networks announced the retirement of its founder and Chief Technology Officer, Nir Zuk, who also serves on the board of directors. Zuk will be succeeded by the company's Chief Product Officer, Lee Klarich, in both positions.

Palo Alto Networks will hold a conference call at 4:30 p.m. EST to discuss the quarterly results in more detail.