PANW Earnings: Can Cyber’s Bellwether Reignite the Rally?

Palo Alto Networks (PANW) is scheduled to report its fiscal Q3 2025 earnings after the market close on Tuesday, and the results will serve as a key barometer for the cybersecurity sector. With heightened macro uncertainty, cautious enterprise spending, and geopolitical developments including U.S.-China tensions and tariff concerns, investors are closely watching whether PANW can deliver a steady performance and reaffirm its full-year guidance.

The primary drivers to watch in this quarter’s report are new product traction, subscription revenue growth, and updates to guidance for remaining performance obligations (RPO). Analysts are paying particular attention to PANW’s expansion in AI-driven security, including Cortex Cloud and its Secure Web Browser, as well as the recently announced acquisition of Protect AI. These initiatives reflect management’s longer-term push toward platformization and expanding wallet share among enterprise clients.

Analyst checks ahead of the report suggest mixed results but generally stable momentum. According to Stifel, six cybersecurity VARs/SIs expressed a range of outcomes, with most reporting in-line performance but some citing macro-related volatility. Cantor Fitzgerald sees potential upside in Next-Gen Security ARR (NGS ARR), noting that consensus estimates of ~$260 million may be too conservative. Meanwhile, Barclays remains confident that Q3 RPO bookings and ARR can meet expectations, although the firm expects guidance to lean cautious given the macro backdrop.

From a fundamental standpoint, Wall Street is expecting earnings per share (EPS) of $0.77 on revenue of $2.28 billion, representing year-over-year revenue growth of 15.2%. The company guided for revenue between $2.26 billion and $2.29 billion. Historically, PANW has a solid earnings track record, beating EPS estimates 100% of the time and revenue 88% of the time over the last two years. The company also has a 70% chance of posting a positive one-day return post-earnings, with a historical median return of 7.4%.

Key metrics to watch include:

• Revenue from Product: Expected to reach $418.98 million (+7.2% YoY)
• Revenue from Subscription and Support: Estimated at $1.86 billion (+16.4% YoY)
• RPO: Forecasted to come in around $13.54 billion, up from $11.3 billion in the same period last year
• Gross Profit (Non-GAAP): Product gross profit expected at $329.84 million vs. $316.6 million YoY; Subscription and support gross profit expected at $1.43 billion vs. $1.22 billion YoY

On the technical side, PANW stock has been trending lower since February 2025, though it recently formed a bullish cup-with-handle pattern. Currently trading around $194 per share, the stock sits approximately 7% below its record high of $208.39. Historically, PANW has shown strong post-earnings volatility, meaning any surprise in results or guidance could spark a significant move in either direction.

Despite some caution in the broader IT and public sector demand environment, cybersecurity is still viewed as a "must-have" category. HSBC, which recently upgraded PANW to Hold, emphasized the resiliency of cybersecurity spending amid macro stress and believes over 60% of PANW’s next twelve-month revenue is effectively locked in via existing RPO contracts. Meanwhile, Keybanks April security software preview indicated solid—if somewhat moderated—checks for PANW, suggesting the potential for an in-line report.

Looking forward, investors will want to see if PANW reaffirms its FY25 guidance, particularly around NGS ARR and RPO. Management commentary on macro trends, AI integration, deal pacing, and international demand—particularly in light of tariffs and China-related geopolitical concerns—will be heavily scrutinized.

In sum, while this quarter's results may not show breakout growth, solid execution, reaffirmed guidance, and continued traction in key product lines could be enough to support the stock's recent base and provide upward momentum into the second half of the year. Conversely, any disappointment in RPO or commentary signaling a weaker fiscal Q4 could weigh on shares, especially given PANW's relatively rich valuation with a forward P/E of 52.1x.