Palo Alto Networks 2025 Q3 Earnings Beats Expectations as Net Income Hits 14-Year High
Tuesday, May 20, 2025 9:04 pm ET
57min read Palo Alto Networks (PANW), ranking 105th by market capitalization, reported its fiscal 2025 Q3 earnings on May 20th, 2025. The company exceeded expectations with third-quarter revenue of $2.29 billion, surpassing the consensus estimate of $2.28 billion. Adjusted earnings were 80 cents per share, beating analyst estimates of 77 cents. Palo Alto Networks raised its full-year 2025 guidance, projecting total revenue in the range of $9.17 billion to $9.19 billion, with diluted non-GAAP net income per share of $3.26 to $3.28. This upgrade reflects confidence in the company’s growth trajectory and strategic initiatives.
Revenue
Palo Alto Networks reported a 15.3% increase in total revenue for 2025 Q3, reaching $2.29 billion, up from $1.98 billion in 2024 Q3. The product segment contributed $452.70 million, illustrating solid demand for their offerings. Meanwhile, subscription and support services registered a substantial boost, generating $1.84 billion, showcasing the company’s robust commitment to customer engagement and service excellence.
Earnings/Net Income
Palo Alto Networks' EPS declined by 9.3% to $0.39 in 2025 Q3 from $0.43 in 2024 Q3. Concurrently, net income decreased to $262.10 million, marking a 6.0% reduction from $278.80 million in 2024 Q3. Despite the decline, the latest quarter set a record for fiscal Q3 net income, the highest in 14 years. The EPS performance indicates a careful balance between profitability and strategic investment.
Price Action
The stock price of Palo Alto Networks edged down 0.08% during the latest trading day, rose 1.29% over the past week, and surged 15.98% month-to-date, indicating a positive investor sentiment and strong market positioning.
Post-Earnings Price Action Review
The strategy of buying PANW shares when revenue beats expectations and holding for 30 days has historically delivered robust returns of 153.05%, significantly outperforming the benchmark. However, this approach comes with a high maximum drawdown of -32.87% and a Sharpe ratio of 0.66, reflecting moderate risk and returns. This analysis suggests that while the strategy has been profitable, it carries inherent volatility. Investors should consider these factors when evaluating their position in Palo Alto Networks, especially in light of current market dynamics and future growth prospects.
CEO Commentary
"In Q3, we continued to make progress on our platformization strategy and achieved an important milestone in crossing $5 billion in Next-Gen Security ARR," said Nikesh Arora, Chairman and CEO of Palo Alto Networks. He emphasized the company's scale and platform breadth, positioning it as a leading consolidator in cybersecurity. CFO Dipak Golechha highlighted strong top-line results within their profitable growth framework, expressing optimism about executing targets as they approach the end of fiscal year 2025.
Guidance
Palo Alto Networks projects fiscal Q4 2025 Next-Generation Security ARR between $5.52 billion and $5.57 billion, representing year-over-year growth of 31% to 32%. The company anticipates remaining performance obligations of $15.2 billion to $15.3 billion, reflecting 19% to 20% growth. Total revenue is expected to be between $2.49 billion and $2.51 billion, signifying growth of 14% to 15%. For the fiscal year 2025, they forecast total revenue in the range of $9.17 billion to $9.19 billion, with diluted non-GAAP net income per share of $3.26 to $3.28.
Additional News
Palo Alto Networks recently announced its intent to acquire Protect AI, an innovative leader in securing AI applications and models. This strategic acquisition aims to enhance Palo Alto Networks' capabilities in AI security, addressing vulnerabilities in AI ecosystems such as model manipulation and data poisoning. The integration of Protect AI's solutions and expertise will accelerate the development of Prisma AIRS™, Palo Alto Networks' comprehensive AI security platform. The acquisition is subject to customary closing conditions and is expected to close by the first quarter of fiscal 2026. This move underscores Palo Alto Networks' commitment to advancing cybersecurity innovation and expanding its leadership in the rapidly evolving AI security domain.
Revenue
Palo Alto Networks reported a 15.3% increase in total revenue for 2025 Q3, reaching $2.29 billion, up from $1.98 billion in 2024 Q3. The product segment contributed $452.70 million, illustrating solid demand for their offerings. Meanwhile, subscription and support services registered a substantial boost, generating $1.84 billion, showcasing the company’s robust commitment to customer engagement and service excellence.
Earnings/Net Income
Palo Alto Networks' EPS declined by 9.3% to $0.39 in 2025 Q3 from $0.43 in 2024 Q3. Concurrently, net income decreased to $262.10 million, marking a 6.0% reduction from $278.80 million in 2024 Q3. Despite the decline, the latest quarter set a record for fiscal Q3 net income, the highest in 14 years. The EPS performance indicates a careful balance between profitability and strategic investment.
Price Action
The stock price of Palo Alto Networks edged down 0.08% during the latest trading day, rose 1.29% over the past week, and surged 15.98% month-to-date, indicating a positive investor sentiment and strong market positioning.
Post-Earnings Price Action Review
The strategy of buying PANW shares when revenue beats expectations and holding for 30 days has historically delivered robust returns of 153.05%, significantly outperforming the benchmark. However, this approach comes with a high maximum drawdown of -32.87% and a Sharpe ratio of 0.66, reflecting moderate risk and returns. This analysis suggests that while the strategy has been profitable, it carries inherent volatility. Investors should consider these factors when evaluating their position in Palo Alto Networks, especially in light of current market dynamics and future growth prospects.
CEO Commentary
"In Q3, we continued to make progress on our platformization strategy and achieved an important milestone in crossing $5 billion in Next-Gen Security ARR," said Nikesh Arora, Chairman and CEO of Palo Alto Networks. He emphasized the company's scale and platform breadth, positioning it as a leading consolidator in cybersecurity. CFO Dipak Golechha highlighted strong top-line results within their profitable growth framework, expressing optimism about executing targets as they approach the end of fiscal year 2025.
Guidance
Palo Alto Networks projects fiscal Q4 2025 Next-Generation Security ARR between $5.52 billion and $5.57 billion, representing year-over-year growth of 31% to 32%. The company anticipates remaining performance obligations of $15.2 billion to $15.3 billion, reflecting 19% to 20% growth. Total revenue is expected to be between $2.49 billion and $2.51 billion, signifying growth of 14% to 15%. For the fiscal year 2025, they forecast total revenue in the range of $9.17 billion to $9.19 billion, with diluted non-GAAP net income per share of $3.26 to $3.28.
Additional News
Palo Alto Networks recently announced its intent to acquire Protect AI, an innovative leader in securing AI applications and models. This strategic acquisition aims to enhance Palo Alto Networks' capabilities in AI security, addressing vulnerabilities in AI ecosystems such as model manipulation and data poisoning. The integration of Protect AI's solutions and expertise will accelerate the development of Prisma AIRS™, Palo Alto Networks' comprehensive AI security platform. The acquisition is subject to customary closing conditions and is expected to close by the first quarter of fiscal 2026. This move underscores Palo Alto Networks' commitment to advancing cybersecurity innovation and expanding its leadership in the rapidly evolving AI security domain.
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