Shares of Palo Alto Networks (PANW) are down in after-hours trading after the cybersecurity company reported earnings for its first quarter of Fiscal Year 2026. Earnings per share came in at $0.93, which beat analysts’ consensus estimate of $0.89 per share. In addition, sales increased by 15.4% year-over-year, with revenue hitting $2.47 billion. This also beat analysts’ expectations of $2.46 billion.
Meet Your ETF AI Analyst
The company’s Q1 results were driven by the success of its platformization strategy, according to CEO Nikesh Arora, which is a strategy that involves creating a central platform that integrates multiple products and services into a seamless customer experience. This led to $5.9 billion in Next-Generation Security Annual Recurring Revenue and Remaining Performance Obligations of $15.5 billion.
Moreover, Subscription revenue rose from $1.78 billion to $2.04 billion on a year-over-year basis. As shown in the image below, subscriptions have been steadily increasing over the past several years and account for the bulk of Palo Alto’s sales.
PANW’s Guidance for 2026
Looking forward, management now expects revenue and adjusted earnings per share for Q2 2026 to be in the ranges of $2.57 billion to $2.59 billion and $0.93 to $0.95, respectively. For reference, analysts were expecting $2.58 billion in revenue along with an adjusted EPS of $0.93.
For Fiscal Year 2026, revenue is expected to land between $10.50 billion and $10.54 billion, compared to estimates of $10.52 billion. Furthermore, the firm anticipates earnings per share of $3.80 to $3.90, versus expectations of $3.80 per share.
Although Palo Alto’s earnings and EPS guidance exceeded expectations, the reason why shares saw a decline in after-hours trading is likely due to the company’s valuation. Indeed, it is likely that its current price-to-earnings ratio of 127x was already pricing in a beat. As a result, the in-line revenue guidance probably disappointed investors.
What Is the Price Target for PANW?
Turning to Wall Street, analysts have a Strong Buy consensus rating on PANW stock based on 25 Buys, three Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average PANW price target of $237.52 per share implies 18.7% upside potential. However, it’s worth noting that estimates will change following today’s earnings report.
See more PANW analyst ratings
Disclaimer & DisclosureReport an Issue
