It has been about a month since the last earnings report for Palo Alto Networks (PANW). Shares have added about 25.5% 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? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important catalysts.
Palo Alto Networks Q3 Earnings and Revenues Surpass Estimates
Palo Alto Networks delivered third-quarter fiscal 2026 non-GAAP earnings of 85 cents per share, which beat the Zacks Consensus Estimate of 81 cents by 4.9%. The figure improved 6.3% year over year.
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 7.03%.
PANW reported third-quarter fiscal 2026 revenues of $3 billion, which topped the Zacks Consensus Estimate of $2.92 billion by 2%. Revenues increased 31% year over year from $2.29 billion in the year-ago quarter. Management attributed the quarter’s strength to accelerating organic bookings momentum as customers turned to the company to secure AI deployments at scale.
PANW’s Q3 in Detail
Product revenues increased to $594 million from $453 million in the year-ago quarter, accounting for 19.8% of total revenues. Subscription and support revenues, which represented 80.2% of total revenues, rose to $2.41 billion from $1.84 billion, reflecting the company’s continued shift toward recurring revenues.
Remaining performance obligation (RPO) rose to $18.4 billion, up 36% year over year, including contributions from CyberArk and Chronosphere. Next-Generation Security ARR climbed to $8.13 billion, up 60% year over year, supported by platform adoption and growth across the company’s next-generation portfolio.
Non-GAAP gross profit grew to $2.27 billion compared to a non-GAAP gross margin at 75.8%. Non-GAAP operating income increased to $814 million, while the non-GAAP operating margin remained strong at 27.1%, reflecting continued profitability strength.
PANW’s Balance Sheet & Cash Flow
As of April 30, 2026, Palo Alto Networks had $3.11 billion in cash and cash equivalents and short-term investments.
Cash generation strengthened year over year. Net cash provided by operating activities was $871 million, up from $554 million in the prior quarter. Adjusted free cash flow was $910 million compared with $502 million in the prior quarter, while the trailing 12-month adjusted free cash flow margin was 38.5%, up 430 basis points year over year.
PANW’s FY26 Guidance
For fiscal 2026, Palo Alto Networks now expects revenues in the range of $11.41 billion to $11.42 billion, suggesting year-over-year growth of 24%.
RPO is projected to be in the range of $20.9-$21.0 billion, while Next-Gen Security ARR is forecasted between $8.9 billion and $8.95 billion, implying 59-60% annual growth. The company projects a non-GAAP operating margin in the range of 28.9% to 29.2% and an adjusted free cash flow margin of 37.5%.
PANW’s non-GAAP earnings per share (EPS) are expected in the band of $3.77 to $3.79.
For the fiscal fourth quarter of 2026, Palo Alto Networks expects revenues in the range of $3.34 billion to $3.35 billion, indicating year-over-year growth of 32%.
The company also guided Next-Generation Security ARR to $8.90 billion to $8.95 billion, suggesting growth of 59% to 60%, and RPO in the range of $20.9 billion to $21.0 billion.
Non-GAAP EPS for the fiscal fourth quarter are projected in the range of 96 cents to 98 cents.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted -7.87% due to these changes.
VGM Scores
At this time, Palo Alto has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth 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 upward for the stock, and the magnitude of these revisions looks promising. 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 belongs to the Zacks Security industry. Another stock from the same industry, SentinelOne (S), has gained 7.9% over the past month. More than a month has passed since the company reported results for the quarter ended April 2026.
SentinelOne reported revenues of $276.66 million in the last reported quarter, representing a year-over-year change of +20.8%. EPS of $0.04 for the same period compares with $0.02 a year ago.
SentinelOne is expected to post earnings of $0.07 per share for the current quarter, representing a year-over-year change of +75%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for SentinelOne. Also, the stock has a VGM Score of F.
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Palo Alto Networks, Inc. (PANW): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).