Palo Alto Networks stock dips despite quarterly beat, raised profit outlook
Investing.com -- Cybersecurity giant Palo Alto Networks reported upbeat fiscal third-quarter 2026 results and raised its full-year profit outlook, driven by surging demand for AI-focused security solutions and contributions from recent acquisitions.
Shares in the company initially rose sharply but later reversed course to trade down 4.5% in premarket trading Wednesday by 04:31 ET.
Palo Alto Networks has been expanding beyond traditional network security into AI, cloud, identity security, and observability, while integrating recent acquisitions to strengthen its platform-based cybersecurity offering.
The company recorded revenue of $3.0 billion in the third quarter, up 31% year-over-year, and beating Wall Street estimates of $2.94 billion. Its key growth metric, Next-Generation Security Annual Recurring Revenue (ARR), climbed 60% to $8.1 billion, reflecting strong adoption of its cloud, AI, identity, and security operations platforms.
While the print was broadly stronger than expected, it highlighted "a number of moving pieces from recent M&A that will no longer be disclosed," Raymond James analysts said.
"This point is likely to rub investors the wrong way considering management seems intent upon continuing M&A, but disclosures are constantly changing (re-segmentation coming in FY27) and make it difficult to assess core business trends," they added.
Chief Executive Officer Nikesh Arora said the rapid evolution of artificial intelligence has heightened cybersecurity concerns, prompting enterprises to seek large-scale security solutions. The company reported accelerating organic bookings growth as customers increasingly secure AI deployments through its platforms.
Palo Alto Networks reported adjusted net income of $684 million, or $0.85 per diluted share, from $561 million or $0.80 per diluted share a year ago.
Palo Alto Networks forecast continued momentum in the fourth quarter. The company expects revenue between $3.345 billion and $3.355 billion, representing approximately 32% annual growth, and projects Next-Generation Security ARR to reach as much as $8.95 billion.
For the full fiscal year 2026, the company raised its adjusted earnings per share outlook for fiscal 2026 to a range of $3.77 to $3.79, up from a prior forecast of $3.65 to $3.70. It expects revenue of $11.42 billion to $11.43 billion versus the consensus of $11.29 billion.
Truist Securities analysts raised their price target on Palo Alto shares to $375 from $275, arguing that the company remains a "core cyber holding" that "should benefit from rising need for real-time inspection, AI- driven SOC automation, identity security and platformized defenses."