The stock rose about 4 percent today to hit a new record high, marking its second straight day of gains in a month where it has climbed 18 percent. We think this is mostly about strong demand for AI security tools, which helped the stock climb today even as the broader market and other tech companies fell.
Our view
The business is performing well and successfully moving customers toward its all-in-one software platform. However, the price has run up so far that it's hard to justify starting a new position here, so existing owners should just sit tight.
China launches security review of Palo Alto Networks products
China's cyberspace regulator has started a review of the company's products, citing concerns about risks to the country's critical computer networks. This follows a pattern of Chinese officials scrutinizing American technology firms that provide essential security and infrastructure services.
While Palo Alto Networks earns most of its money in the U.S. and Europe, this move could make it harder for the company to sell to large organizations in China. For a business that relies on being the trusted gatekeeper for corporate networks, these kinds of regulatory hurdles can slow down growth in international markets.
New AI platform aims to fix security flaws in hours
The company is launching a new platform that uses artificial intelligence to find security holes and fix them in hours. This is a major change from the weeks it usually takes for security teams to handle these tasks manually.
This launch supports the company's goal of becoming the central platform for all of a business's security needs. By using AI to automate the boring and slow parts of defense, Palo Alto makes its software more essential to customers who are already dealing with faster, AI-powered attacks.
Oppenheimer raised its price target to $400, which is about 10 percent higher than where the stock is trading now. This move reflects growing confidence that the company's strategy of selling a full suite of security tools is winning over large customers. It is one of the more optimistic views on the stock, as the average analyst target sits lower at $346.
Palo Alto Networks finished a technical link between its Strata Cloud Manager and FireMon, a tool that helps companies manage their firewall rules. This makes it easier for large businesses to keep their security settings consistent across their own servers and the cloud. While this is a routine technical update, it helps keep Palo Alto's platform at the center of how big companies manage their networks.
The company scheduled its next earnings report for September 1. This will be an important update for seeing if the shift toward software-based security is still growing at a fast pace. We will be looking for updates on annual recurring revenue, which tracks the steady, predictable income from its subscription products.
Analysts have recently issued a flurry of price target increases following the company's strong growth and new AI security initiatives. Most analysts, 66 of 89, rate the stock a buy, though the average target of $346 is 10% below today's price.
Average target$345.91-10%vs $385.04 today
TodayAvg price
Low $209High $430
Strong Buy89 analysts
2Bearish
21Neutral
66Bullish
FirmRatingPrice TargetDate
Oppenheimer
Outperform
$350→$400
8/4/2026
Argus Research
—
$320→$425
7/21/2026
Morgan Stanley
Overweight
$387
7/21/2026
Capital One Financial
Overweight
$421
7/16/2026
Tigress Financial
Buy
$430
7/15/2026
Evercore ISI
Outperform
$415
7/8/2026
Evercore ISI
Outperform
$375→$320
7/8/2026
Needham
Buy
$425
7/7/2026
BTIG
Buy
$333→$380
7/1/2026
Wells Fargo
Overweight
$420
7/1/2026
Goldman Sachs
—
$224→$330
6/3/2026
Northland Securities
—
$190→$302
6/3/2026
Palo Alto Networks earnings
The company has a consistent habit of beating its own targets, having cleared the bar in six of the last eight quarters while growing revenue by 31 percent.
Earnings history
EstimateBeatMiss
Palo Alto Networks past earnings results
Expected
Actual
Surprise
EPS
$0.79
$0.85
+7.2%
Revenue
$2.94B
$3.00B
+2.0%
Key highlights
Next generation revenue surging: Annual recurring revenue for next generation security products, which are the modern software tools the company is prioritizing, grew 60% to $8.1 billion as customers expanded their AI protections. Even without the $1.6 billion added by recent acquisitions, this core part of the business grew significantly faster than the overall company.
Backlog hits new high: The remaining performance obligation, which represents the total value of signed contracts waiting to be billed, grew 36% to $18.4 billion. This large backlog provides a predictable cushion for future sales and includes $1.8 billion brought in through the CyberArk and Chronosphere deals.
Cash flow efficiency improving: The adjusted free cash flow margin, a measure of how much cash is left over after paying for operations and equipment, reached 38.5% over the last twelve months. This is an increase from 34.2% a year ago and keeps the company on its path toward a 40% margin goal by 2028.
Acquisitions impacting profits: The company reported a GAAP operating loss, which is the money lost running the business under standard accounting rules, of $183 million compared to a profit of $219 million last year. This swing was driven by $478 million in combined costs for integrating new acquisitions and the related write down of intangible assets.
Positive full year outlook: Management expects total revenue for the full year to reach between $11.415 billion and $11.425 billion, which would be a 24% increase over last year. They also projected that the final adjusted free cash flow margin for the year will be 37.5%.
Our take: A strong quarter that shows the company's aggressive shift toward modern software is paying off. The 60% growth in next generation recurring revenue is the standout figure, proving that customers are committing to the platform even as the company absorbs large acquisitions. This momentum strengthens the case for its long term leadership in AI security.
Palo Alto Networks’s next earnings date
Q4 2026
SEP
1
Expectation
EPS
$0.98
Revenue
$3.35B
Metrics we are tracking
Metric
Expectations
Status
Next-Gen Security ARR
Growing above 50% year over year
$8.1B in Q3 FY2026
Remaining Performance Obligation
Staying above $18 billion with 30%+ growth
$18.4B in Q3 FY2026
Adjusted FCF Margin
Maintaining a threshold of 37% or higher
38.5% TTM Q3 FY2026
Large Deal Count
Number of customers spending over $5M annually increasing
none on file
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