Palo Alto Networks’ third quarter saw sales growth above Wall Street’s expectations, but the market responded negatively, reflecting investor caution on the path forward. Management attributed revenue growth to broad adoption of platform solutions, particularly in areas like SASE (secure access service edge), software firewalls, and expanding demand for AI-driven security tools. CEO Nikesh Arora emphasized that customers are consolidating security vendors, opting for the company’s integrated offerings to address an increasingly complex cyber threat landscape. Arora cited several large deals, including a significant U.S. federal contract, as evidence that platformization is gaining traction across industries.
Is now the time to buy PANW? Find out in our full research report (it’s free for active Edge members).
Palo Alto Networks (PANW) Q3 CY2025 Highlights:
- Revenue: $2.47 billion vs analyst estimates of $2.46 billion (15.7% year-on-year growth, 0.5% beat)
- Adjusted EPS: $0.93 vs analyst estimates of $0.89 (4.4% beat)
- Adjusted Operating Income: $746 million vs analyst estimates of $715.7 million (30.2% margin, 4.2% beat)
- The company slightly lifted its revenue guidance for the full year to $10.52 billion at the midpoint from $10.5 billion
- Management raised its full-year Adjusted EPS guidance to $3.85 at the midpoint, a 1.3% increase
- Operating Margin: 12.5%, in line with the same quarter last year
- Billings: $1.95 billion at quarter end, up 11.4% year on year
- Market Capitalization: $129.8 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Palo Alto Networks’s Q3 Earnings Call
- Brad Zelnick (Deutsche Bank) asked how Palo Alto Networks will maintain leadership through AI and quantum cycles. CEO Nikesh Arora stressed the enduring need for network inspection and the company’s positioning in both data-driven security and observability.
- Rob Owens (Piper Sandler) questioned the rationale and customer fit for the Chronosphere acquisition. Arora explained Chronosphere’s engineering strength and the potential to serve cloud-native enterprises at scale, offering observability at significantly lower cost.
- Saket Kalia (Barclays) asked about XIM’s ability to capture incumbent spend and expand wallet share. Management noted XIM’s platform consolidates multiple products, allowing both customer savings and increased company revenue.
- Tal Liani (Bank of America) explored the margin and dilution impact of acquisitions. CFO Dipak Golechha said the company expects to maintain at least 37% free cash flow margin during integration, with a long-term goal of 40% by 2028.
- Meta Marshall (Morgan Stanley) inquired about the stage of AI adoption among customers. Management described AI security as still in early innings, with broader enterprise production deployments and security running in parallel over time.
Catalysts in Upcoming Quarters
Going forward, the StockStory team will be watching (1) the pace of customer adoption for AI and quantum-safe security offerings, (2) the integration progress and early revenue impact from CyberArk and Chronosphere acquisitions, and (3) further expansion in SASE, software firewalls, and secure browser deployments. The company’s ability to maintain platform momentum and successfully cross-sell new solutions will be key signposts for execution.
Palo Alto Networks currently trades at $186.85, down from $200.43 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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