Palo Alto Networks 2026 Q1 Earnings Revenue Surpasses Guidance as Net Income Declines

Palo Alto Networks (PANW) reported fiscal 2026 Q1 earnings on Nov 20, 2025, with revenue rising 15.7% year-over-year to $2.47 billion, exceeding guidance by $4 million. The company raised its full-year outlook by $20 million amid strong performance in platformization deals and recurring revenue streams.

Revenue

Palo Alto Networks’ total revenue reached $2.47 billion in Q1 2026, reflecting a 15.7% year-over-year increase. Product revenue amounted to $434 million, while subscription and support revenue totaled $2.04 billion, underscoring the company’s shift toward recurring revenue models. These figures highlight the growing contribution of platformization strategies, particularly in SASE and XSIAM solutions.

Earnings/Net Income

Net income declined to $334 million in Q1 2026, a 4.8% decrease from $351 million in the prior year. GAAP EPS fell 9.3% to $0.49, while non-GAAP EPS rose to $0.93, surpassing the $0.89 consensus estimate. The disparity reflects robust operational efficiency, though GAAP metrics show margin pressures.

Post-Earnings Price Action Review

Following the earnings release, Palo Alto Networks’ stock declined 6.59% in the latest trading day, 9.62% over the past week, and 13.68% month-to-date. Analysts attributed the pullback to valuation concerns despite strong revenue performance. Bernstein raised its price target to $210, while Citizens and Cantor Fitzgerald maintained $250 and $230 targets, respectively, citing confidence in platformization and AI-driven growth. The stock’s post-earnings volatility reflects mixed investor sentiment between near-term valuation skepticism and long-term strategic optimism.

CEO Commentary

CEO Nikesh Arora emphasized Q1’s 24% RPO growth and 29% NGS ARR expansion, driven by SASE, XSIAM, and Prisma AIRS. Strategic acquisitions of CyberArk and Chronosphere aim to solidify leadership in identity and observability markets. Arora projected 40%+ free cash flow margins by FY’28, leveraging operating leverage and AI innovation to address evolving threats.

Guidance

The company raised its FY 2026 revenue guidance to $10.5–$10.54 billion, with Q2 revenue projected at $2.57–$2.59 billion. Non-GAAP EPS guidance for Q2 stands at $0.93–$0.95, aligning with market expectations.

Additional News

Palo Alto Networks announced a $3.35 billion acquisition of observability platform Chronosphere, expanding into a $32 billion TAM. This follows its $25 billion CyberArk deal, positioning the firm as a leader in identity and AI readiness. The company also partnered with IBM to develop quantum-safe security solutions, addressing future threats. CEO Nikesh Arora highlighted these moves as pivotal for capturing AI-driven growth, though analysts like UBS tempered optimism with a $220 price target amid valuation concerns.

Additional News (Expanded)

1. M&A Activity: The $3.35 billion Chronosphere acquisition, expected to close in late FY 2026, marks Palo Alto’s entry into the observability market. This follows the $25 billion CyberArk deal, both aimed at enhancing identity and AI capabilities.

2. Strategic Partnerships: A collaboration with IBM to launch quantum-safe security solutions underscores Palo Alto’s focus on future-proofing enterprise infrastructure.

3. Board Changes: Mark Goodburn replaced Mary Pat McCarthy as Audit Committee chair, though no material operational impact is expected in the short term.

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