Shares of Palo Alto Networks (PANW) experienced a dip in after-hours trading following the release of their earnings report for the first quarter of Fiscal Year 2026. The cybersecurity firm reported earnings per share (EPS) of $0.93, surpassing the analysts’ consensus estimate of $0.89 per share. Additionally, revenue for the quarter was recorded at $2.47 billion, marking a 15.4% increase from the previous year and also exceeding analysts’ expectations of $2.46 billion.
Palo Alto Networks Q1 Performance Highlights
- Earnings per Share: $0.93 (expected: $0.89)
- Quarterly Revenue: $2.47 billion (expected: $2.46 billion)
- Year-over-Year Revenue Growth: 15.4%
CEO Nikesh Arora attributed this positive performance to the company’s platformization strategy. This multifaceted approach seeks to unify various products and services into a cohesive customer experience. The strategy significantly contributed to $5.9 billion in annual recurring revenue from Next-Generation Security. Additionally, Remaining Performance Obligations stood at $15.5 billion.
Subscription Revenue Growth
In the last year, subscription revenue rose from $1.78 billion to $2.04 billion, demonstrating significant growth. Subscriptions now constitute the majority of Palo Alto’s overall sales, indicating a strong demand for their services.
Guidance for the Upcoming Quarter
Looking ahead, Palo Alto Networks provided guidance for the second quarter of Fiscal Year 2026, projecting revenue between $2.57 billion and $2.59 billion, with EPS expected in the range of $0.93 to $0.95. Analysts had anticipated revenue of $2.58 billion and an adjusted EPS of $0.93. For the entirety of Fiscal Year 2026, the company forecasts revenue between $10.50 billion and $10.54 billion, slightly below the average analyst estimate of $10.52 billion. Furthermore, the expected EPS for the year is between $3.80 to $3.90, aligning with analyst expectations.
Market Reactions and Valuation Concerns
Despite the positive earnings and EPS guidance, shares of Palo Alto Networks fell in after-hours trading. Analysts suggest that the decline may stem from the firm’s current high price-to-earnings (P/E) ratio of 127x, which implies that investors had already factored in a performance beat, leading to disappointment with the forward guidance.
Analyst Ratings and Price Target
In the investment community, PANW maintains a Strong Buy consensus rating. This rating is backed by 25 Buy ratings, three Holds, and no Sell ratings issued over the last three months. The average price target for PANW is $237.52 per share, suggesting an upside potential of approximately 18.7%. However, market estimates are likely to shift in response to today’s earnings announcement.
