Palo Alto Networks' stock slides as underwhelming outlook overshadows AI messaging

By Hannah Pedone

The cybersecurity company says it's poised to benefit as AI creates 'new classes of risks'

Palo Alto Networks posted adjusted earnings per share of $1.03, beating analysts' estimates.

Palo Alto Networks came up well short on its profit guidance for the current quarter, outweighing stronger-than-expected performance in the most recent quarter.

The cybersecurity company is looking for 78 cents to 80 cents in adjusted earnings per share for the fiscal third quarter, whereas the FactSet consensus was for 92 cents.

Shares slid more than 8% in Tuesday's extended session.

Palo Alto Networks' (PANW) earnings for the latest quarter proved more upbeat. The company posted adjusted earnings per share of $1.03, while analysts tracked by FactSet expected 94 cents.

Revenue amounted to $2.6 billion for the fiscal second quarter, up 15% from a year before, essentially matching analysts' estimates.

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Palo Alto Networks' remaining performance obligations, a measure of its backlog, totaled $16.0 billion for the fiscal second quarter, up 23% from a year earlier, while analysts were expecting $15.78 billion.

The company is targeting $17.85 billion to $17.95 billion in remaining performance obligations for the fiscal third quarter, while analysts had been looking for $16.27 billion.

Heading into the report, Palo Alto Networks' shares were off 9.4% on the year, dragged down by a software selloff that has swept up most cybersecurity companies. The Amplify Cybersecurity exchange-traded fund (HACK), a proxy for cybersecurity stocks, is down 5.7% so far this year.

Yet analysts have been excited about the future growth of Palo Alto Networks, due to recent deals that they believe will be a catalyst for the company.

Earlier this month, Palo Alto Networks closed its acquisition of the security provider CyberArk. And in January, the company closed the acquisition of Chronosphere, a cybersecurity company focused on observability tools.

On Tuesday, Palo Alto Networks also announced that it acquired Koi, an Israeli cybersecurity firm.

Nikesh Arora, the Palo Alto Networks CEO, said on the company's earnings call: "It's clear the market has been waiting for a comprehensive platform to secure AI."

As AI becomes more pervasive, it increases vulnerabilities for enterprises, he added.

"More agents, more infrastructure, more machine-to-machine activity, and new classes of risks that simply did not exist before in that environment," he said.

Arora also noted that AI will not only create new risks, but it also will create better security platforms.

He said that as AI agents become "autonomous employees," the company has adapted to meet the change for customers.

"The old security playbook is not just slow, it's obsolete," he said.

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-Hannah Pedone

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02-17-26 2114ET