Palo Alto Networks reported fiscal third-quarter earnings and revenue that edged by Wall Street's targets amid its push into cloud-based cybersecurity services. Guidance for Palo Alto stock met expectations. Shares pulled back on the news.
The Palo Alto earnings report came in after the market close on Tuesday. On the stock market today, Palo Alto stock fell 6.7% to 181.44 in early trading.
"Q3 results were mixed, with annual recurring revenue coming in $10 million above the high end of guidance and revenues near the high end of guidance, but with remaining performance obligations growth of 19% near the low end of guidance, and free cash flow below street expectations," said UBS analyst Roger Boyd in a report.
In the quarter ended March 31, Palo Alto earnings rose 21% to 80 cents per share on an adjusted basis. Further, revenue for Palo Alto stock climbed 15% to $2.3 billion, including acquisitions.
Analysts had expected earnings of 77 cents a share on sales of $2.28 billion.
Palo Alto Stock: Key Growth Metrics
In fiscal Q3, Palo Alto said remaining performance obligations, or RPO, rose 19% to $13.50 billion, slightly below estimates of $13.54 billion.
Next-generation annual recurring revenue from subscription-based cloud products rose 34% to $5.09 billion, topping consensus estimates of $5.06 billion.
"Palo Alto delivered a solid quarter exceeding expectations across revenue, EPS, and next-generation ARR while falling shy on RPO, but seeing little impact from tariffs and macro-related disruption," said Jonathan Ho, a William Blair analyst in a report.
"The company saw very strong performance from (security operations center management) of over 200% ARR growth. We continue to view this as a linchpin solution for Palo Alto given the need to be the centralized repository for security data powering next-generation security operations."
Also, Palo Alto said ARR from artificial intelligence products rose to $400 million in fiscal Q3, up from $250 million in the previous quarter.
For the current quarter ending in July, the cybersecurity firm forecast revenue of $2.5 billion at the midpoint of guidance, in line with estimates.
Palo Alto said it expects remaining performance obligations of $15.25 billion, also roughly in-line with estimates.
The company said it expects next generation ARR of $5.545 billion at the midpoint of guidance, once again roughly in-line with views.
Network Firewall Market
Meanwhile, sales for firewall network appliances have slowed. Firewall appliances protect computer networks by blocking online intrusions and monitoring Web-based apps.
However, Palo Alto has built a broad cloud-based security platform through acquisitions. Cloud software revenue is becoming a larger part of overall sales.
Heading into the Palo Alto earnings report, PANW stock had climbed 6% in 2025.
Palo Alto stock holds an IBD Composite Rating of 97 out of 99, according to IBD Stock Checkup. Meanwhile, Palo Alto Networks is among the top artificial intelligence stocks to watch.
Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
