Palo Alto Networks delivered a strong fiscal Q2 2026, posting $2.59 billion in revenue (+15% YoY) and non-GAAP EPS of $1.03, smashing the consensus estimate of $0.94 by nearly 10%. GAAP net income surged 62% to $432 million. However, shares fell ~6% after-hours as the company issued Q3 profit guidance of $0.78–$0.80 per share — well below the Street’s $0.92 estimate — citing acquisition-integration costs from CyberArk and Chronosphere.
About Palo Alto Networks
Palo Alto Networks (NASDAQ: PANW) is the global leader in AI-powered cybersecurity. Founded in 2005 by Nir Zuk and headquartered in Santa Clara, California, the company protects the digital infrastructure of more than 70,000 organizations worldwide through a comprehensive portfolio spanning Network Security, Cloud Security, Security Operations, AI, and Identity solutions.
As of February 18, 2026, PANW trades at approximately $149.75 per share with a market capitalization of roughly $114 billion (down from ~$132B pre-earnings). The stock carries a trailing P/E ratio of approximately 103–110x, reflecting the premium investors place on its high-growth cybersecurity franchise. The company employs over 15,000 people globally and does not currently pay a dividend. Palo Alto Networks sits at the forefront of the “platformization” mega-trend in cybersecurity, encouraging enterprises to consolidate fragmented security tools onto a single AI-driven platform.
Top Financial Highlights
- Total Revenue: $2.594 billion, up 15% year over year from $2.257 billion in Q2 FY2025.
- Product Revenue: $514 million, up 22% YoY from $421 million.
- Subscription & Support Revenue: $2.080 billion, up 13% YoY from $1.836 billion.
- GAAP Net Income: $432 million ($0.61/diluted share), up 62% from $267 million ($0.38/share) in Q2 FY2025.
- Non-GAAP Net Income: $732 million ($1.03/diluted share), up 29% from $566 million ($0.81/share) in Q2 FY2025.
- Non-GAAP Operating Income: $785 million, up 22% from $641 million, with a 30.3% non-GAAP operating margin — the third straight quarter above 30%.
- Gross Profit: $1.909 billion, up 15% YoY; gross margin approximately 73.6%.
- Next-Generation Security ARR: $6.3 billion, up 33% YoY (28% organic growth).
- Remaining Performance Obligation (RPO): $16.0 billion, up 23% YoY.
- Q2 Adjusted Free Cash Flow: $502 million; trailing 12-month adjusted FCF of $3.75 billion.
- Operating Cash Flow (Q2): Approximately $1.77 billion, up ~218% YoY.
- Cash and Equivalents: $4.158 billion (up from $2.269 billion at FY2025 year-end).
- Total Assets: $24.979 billion; total deferred revenue of $12.429 billion ($6.248B current + $6.181B long-term).
- Q3 FY2026 Revenue Guidance: $2.941–$2.945 billion (+28%–29% YoY), well above consensus of $2.60 billion.
- Full-Year FY2026 Revenue Guidance (Raised): $11.28–$11.31 billion (+22%–23% YoY), up from prior ~$10.5 billion.
Beat or Miss?
| Metric | Reported | Consensus Estimate | Difference / Analysis |
| Revenue | $2.594B | $2.58B–$2.63B | Beat low end; slight miss vs. some higher estimates |
| Non-GAAP EPS | $1.03 | $0.94–$0.96 | Beat by ~$0.07–$0.09 (~10% upside) |
| GAAP EPS | $0.61 | $0.96 (GAAP consensus) | N/A (estimates often mixed GAAP/Non-GAAP) |
| NGS ARR | $6.3B (+33% YoY) | N/A | Strong; organic +28% impressive |
| RPO | $16.0B (+23% YoY) | N/A | Signals robust contracted future revenue |
| Q3 FY26 Revenue Guidance | $2.941–$2.945B | $2.60B | Massive beat (~13% above consensus) |
| Q3 FY26 EPS Guidance | $0.78–$0.80 | $0.92 | Miss (~15% below consensus; acquisition drag) |
| FY26 Revenue Guidance | $11.28–$11.31B | $10.50B | Raised significantly (~8% above prior consensus) |
| FY26 Non-GAAP EPS Guidance | $3.65–$3.70 | $3.86 | Below expectations (lowered due to M&A costs) |
The headline numbers were strong, but the disconnect between surging revenue guidance and trimmed profit guidance is the key story. Management explicitly called out rising costs from the CyberArk and Chronosphere acquisitions and AI integration spending as the primary factors compressing near-term margins.
What Leadership Is Saying?
“We saw continued strength in platformizations, a trend that is accelerating due to AI — customers are keen to both modernize and normalize their cybersecurity stack, aligning them to our approach. We also saw steady and strong adoption of AI security, which we expect will be a long term trend. We are excited to welcome the employees of Chronosphere and CyberArk to help us drive our growth in the future.” — Nikesh Arora, Chairman and CEO
“We once again delivered strong top-line growth, complimented by operating efficiency, with our third straight quarter of 30%-plus non-GAAP operating margins. We are deploying the same playbook of operational excellence that has guided Palo Alto Networks the last several years across CyberArk and Chronosphere, and look forward to driving significant integration value post-close.” — Dipak Golechha, Chief Financial Officer
Historical Performance
Palo Alto Networks YoY
| Category | Q2 FY2026 (Jan 31, 2026) | Q2 FY2025 (Jan 31, 2025) | Change (%) |
| Total Revenue | $2,594M | $2,257M | 14.90% |
| GAAP Net Income | $432M | $267M | 61.80% |
| Non-GAAP Net Income | $732M | $566M | 29.30% |
| Non-GAAP EPS (Diluted) | $1.03 | $0.81 | 27.20% |
| Total Operating Expenses | $1,512M | $1,417M | 6.70% |
| Gross Profit | $1,909M | $1,658M | 15.10% |
| Non-GAAP Operating Margin | 30.30% | 28.40% | +190 bps |
| NGS ARR | $6,300M | $4,737M | 33.00% |
| RPO | $16,000M | $13,000M (est.) | 23.00% |
Data sourced from Palo Alto Networks’ Q2 FY2026 and Q2 FY2025 earnings press releases.
Competitor Comparison
Cybersecurity Sector Benchmarking
The table below compares the most recently reported quarterly results from four leading cybersecurity companies. Note that fiscal year-end dates differ (PANW: July; FTNT: December; CRWD: January; CHKP: December), so these are the latest available comparable quarters.
| Metric | PANW Q2 FY2026 (Jan ’26) | Fortinet Q4 CY2025 (Dec ’25) | CrowdStrike Q3 FY2026 (Oct ’25) | Check Point Q4 CY2025 (Dec ’25) |
| Revenue | $2,594M | $1,905M | $1,230M | $745M |
| Revenue YoY Growth | 15% | 15% | 22% | 6% |
| Non-GAAP EPS | $1.03 | $0.81 | $0.96 | $3.40 |
| GAAP Net Income | $432M | $506M | -$34M (loss) | $305M |
| Non-GAAP Operating Margin | 30.3% | 37.3% | 21% | 41% |
| Free Cash Flow | $502M (adj.) | $577M | $296M | ~$309M (est.) |
| Revenue Guidance (FY) | $11.28–$11.31B | $7.50–$7.70B | $4.80–$4.81B | N/A |
- PANW leads in absolute revenue scale among pure-play cybersecurity firms, but Fortinet boasts higher operating margins (37% vs 30%).
- CrowdStrike delivers the fastest revenue growth at 22% YoY but remains GAAP unprofitable.
- Check Point has the highest operating margin at 41% but the slowest growth rate at 6% YoY, reflecting its mature, cash-generative profile.
- PANW’s platformization strategy and aggressive M&A (CyberArk, Chronosphere, and the announced Koi acquisition) position it for accelerating revenue growth in H2 FY2026, though at the expense of near-term margins.
How the Market Reacted?
Despite beating on both revenue and EPS for the quarter, Palo Alto Networks shares dropped approximately 6% in after-hours trading on February 17, 2026. By the next trading session (February 18), the stock fell as low as $149.50 before stabilizing near $149.75, representing a decline of roughly 8–14% from recent highs near $174.80.
The sell-off was driven squarely by the below-consensus Q3 EPS guidance of $0.78–$0.80 versus the $0.92 Street estimate, as well as the trimmed full-year profit forecast. Analysts noted that while the massive upward revision to revenue guidance ($11.28–$11.31B vs. prior $10.5B) was bullish, investors were spooked by the near-term margin compression from acquisition-related costs. Wall Street consensus remains a “Moderate Buy” with a median price target of roughly $223, suggesting significant upside from current levels if integration execution proceeds smoothly
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