Palo Alto Networks 2025 Q4 Earnings Modest Revenue Growth Despite Earnings Decline

Palo Alto Networks reported mixed results in its fiscal 2025 Q4 earnings, with revenue growth outpacing expectations but earnings showing a notable decline. While the company posted a strong 15.8% year-over-year revenue increase, net income and EPS fell short, reflecting ongoing cost pressures. The earnings miss was partially offset by long-term strategic momentum and a record quarterly net income in 14 years.

Revenue
Palo Alto Networks’ total revenue reached $2.54 billion in fiscal 2025 Q4, a 15.8% increase compared to $2.19 billion in the same period a year ago. The growth was driven by robust performance in both product and subscription and support segments, with product revenue amounting to $573.90 million and subscription and support revenue hitting $1.96 billion. The subscription and support segment accounted for the majority of the company’s revenue, underscoring its shift toward recurring revenue streams.

Earnings/Net Income
Palo Alto Networks saw a decline in earnings, with EPS dropping 30.9% to $0.38 in fiscal 2025 Q4 from $0.55 in fiscal 2024 Q4. Similarly, net income decreased by 29.0% to $253.80 million from $357.70 million. Despite the decline, the company set a record high for Q4 net income in 14 years, indicating operational resilience. The drop in EPS and net income highlights the challenges in maintaining profit margins amid rising expenses.

Price Action
The stock price of Palo Alto Networks edged down 1.06% during the latest trading day, climbed 4.76% during the most recent full trading week, but tumbled 10.25% month-to-date, reflecting mixed investor sentiment in the short term.

Post-Earnings Price Action Review
The strategy of buying Palo Alto Networks shares after a revenue increase quarter-over-quarter on the earnings release date and holding for 30 days yielded a 17.39% return over the past three years. However, this underperformed the benchmark return of 52.81%. The Sharpe ratio of 0.28 indicates a reasonable risk-adjusted return, while the maximum drawdown of 0.00% suggests the strategy faced no significant losses during the backtested period.

CEO Commentary
Nikesh Arora, Chairman and CEO of Palo Alto Networks, highlighted a strong fiscal year driven by platformization, AI security, and strategic acquisitions like ProtectAI. He noted that bookings growth was the highest in two and a half years, with strong renewals and upsells. Arora emphasized the company’s shift toward integrated best-of-breed platforms, with Q4 seeing 24% year-over-year RPO growth and 32% NGS ARR growth. Looking ahead, he expressed optimism about reaching a $15 billion NGS ARR by FY30 and underscored the importance of AI and quantum-ready innovations.

Guidance
For fiscal 2026, Palo Alto Networks expects NGS ARR to grow to $7–7.1 billion (a 26–27% increase), RPO to reach $18.6–18.7 billion (a 17–18% increase), and total revenue between $10.475–10.525 billion (a 14% increase). Operating margins are projected to range between 29.2% and 29.7%, with diluted non-GAAP EPS expected to be between $3.75–$3.85 (a 12–15% increase). For Q1 FY26, product revenue growth is anticipated to be approximately 20%, with fiscal year product revenue growth in the low teens. Arora also mentioned a long-term target of over 40% adjusted free cash flow margins for the combined company with CyberArk post-integration.

Additional News
In the three weeks following Palo Alto Networks’ earnings release, several significant business and geopolitical developments occurred. Google agreed to pay a $36 million fine in Australia over anticompetitive search deals, while French President Macron issued a strong warning against trusting Russian President Putin. In Nigeria, the Kaduna State chapter of the Peoples Democratic Party rejected by-election results, citing allegations of abduction and vote-buying. Meanwhile, geopolitical tensions continued to dominate news, with a man executed in Iran for murdering four family members and Nigeria’s security agencies commended for capturing top terrorist leaders. These events highlight a period of regulatory scrutiny, political instability, and continued security challenges across global markets.