Why Is Palo Alto (PANW) Up 10.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Palo Alto Networks (PANW). Shares have added about 10.9% in that time frame, outperforming 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? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Palo Alto Networks, Inc. before we dive into how investors and analysts have reacted as of late.

Palo Alto Networks Q2 Earnings and Revenues Surpass Estimates

Palo Alto Networks delivered second-quarter fiscal 2026 non-GAAP earnings of $1.03 per share, which beat the Zacks Consensus Estimate by 10.8%. The figure improved 27.2% year over year.

PANW’s second-quarter fiscal 2026 revenues of $2.59 billion surpassed the Zacks Consensus Estimate by 0.50%. This compares to the year-ago revenues of $2.26 billion.

Palo Alto Networks’ Q2 2026 Details

Product revenues rose 22.1% year over year to $514 million, accounting for 19.8% of total revenues. Subscription and Support revenues, which represented 80.2% of total revenues, grew 13.3% year over year to $2.08 billion, driven by continued momentum across SASE, Software Firewalls and XSIAM offerings.

PANW’s Remaining Performance Obligation stood at $16 billion, up 23% year over year. Next-Generation Security annualized recurring revenues reached $6.33 billion, representing 33% year-over-year growth.

Non-GAAP gross profit grew to $1.98 billion, with the non-GAAP gross margin at 76.1%. Non-GAAP operating income increased to $785 million, while the non-GAAP operating margin held strong at 30.3%, marking continued profitability strength.

PANW’s Balance Sheet & Cash Flow

As of Jan. 31, 2026, Palo Alto Networks had $4.54 billion in cash and cash equivalents and short-term investments.

The company generated $3.75 billion in trailing 12-month adjusted free cash flow, reflecting strong cash generation in the second quarter of fiscal 2026.

Palo Alto Networks' FY26 Guidance

For fiscal 2026, Palo Alto Networks now expects revenues in the range of $11.28 billion to $11.31 billion, suggesting year-over-year growth of 22-23%.

Remaining Performance Obligations are projected to be in the range of $20.2-$20.3 billion, while Next-Gen Security ARR is forecasted between $8.52 billion and $8.62 billion, implying 53-54% annual growth. The company projects a non-GAAP operating margin in the range of 28.5% to 29.0% and an adjusted free cash flow margin of 37%.

PANW’s non-GAAP earnings per share are expected in the band of $3.65 to $3.70.

For the third quarter of fiscal 2026, Palo Alto Networks projects revenues between $2.941 billion and $2.945 billion, indicating year-over-year growth of 28% to 29%.

Remaining Performance Obligations are expected in the range of $17.85 billion to $17.95 billion, and Next-Gen Security ARR is forecasted between $7.94 billion and $7.96 billion, suggesting 56% growth.

Non-GAAP earnings per share for the fiscal third quarter are projected in the range of 78 cents to 80 cents.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -9.24% due to these changes.

VGM Scores

Currently, Palo Alto has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock has 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Palo Alto has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Palo Alto is part of the Zacks Security industry. Over the past month, Fortinet (FTNT), a stock from the same industry, has gained 3.4%. The company reported its results for the quarter ended December 2025 more than a month ago.

Fortinet reported revenues of $1.91 billion in the last reported quarter, representing a year-over-year change of +14.8%. EPS of $0.81 for the same period compares with $0.74 a year ago.

For the current quarter, Fortinet is expected to post earnings of $0.62 per share, indicating a change of +6.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.

Fortinet has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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