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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with record high revenue growth in key areas like software and services, a significant operating margin expansion, and a robust free cash flow margin. The Q&A section reinforces this with strategic insights into security consolidation, market share gains, and durable growth drivers. Despite some evasive responses, the overall sentiment is positive, driven by innovation, strategic partnerships, and optimistic guidance. The company's market cap isn't provided, but the positive indicators suggest a likely stock price increase in the 2% to 8% range.
Total Revenue $2.54 billion, grew 16% year-over-year. Growth driven by product revenue (19%) and services revenue (15%).
Product Revenue Grew 19% year-over-year, driven by growth in software form factors. 56% of product revenue was from software form factors.
Services Revenue Grew 15% year-over-year. Subscription revenue grew 17%, and support revenue rose 11%.
Remaining Performance Obligation (RPO) Grew 24% year-over-year to $15.8 billion. Current RPO grew 17% year-over-year to $7.0 billion.
Next-Generation Security ARR $5.58 billion, grew 32% year-over-year. Net new ARR for the quarter was up 12% year-over-year. Growth driven by software firewalls, SASE, and XSIAM.
Operating Margin Expanded by 340 basis points, achieving over 30% for the first time in the company's history.
Free Cash Flow Margin 38% for the third consecutive year. Visibility to go even higher in the future.
Geographic Growth Americas grew 15%, EMEA grew 19%, and JPAC grew 13% year-over-year.
AI ARR Approximately $545 million, up over 2.5x year-over-year.
Product Gross Margin 76.8%. Fiscal year 2026 expected to increase to high 70s or low 80s.
Prisma AIRS: Introduced as the industry's most comprehensive AI security platform, providing end-to-end security for AI apps, agents, models, and datasets. It addresses critical blind spots and ensures compliance.
PAN-OS 12.1 Orion: Launched with new appliances designed for quantum readiness and multicloud security, anticipating future threats.
Cortex Cloud: Delivered new capabilities like Application Security Posture Management (ASPM) to secure the AI developer lifecycle and address vulnerabilities.
Platformization: Achieved record-breaking platformization deals, with customers increasingly consolidating their security needs with Palo Alto Networks. Large deals included a $100 million contract with a global consulting firm and a $60 million deal with a European bank.
SASE Growth: SASE ARR grew 35% year-over-year, with notable deals including a $60 million contract covering 200,000 seats. The company displaced competitors in over 70 accounts, exceeding $200 million in total contract value.
Next-Generation Security ARR: Grew 32% year-over-year, driven by strong contributions from SASE, XSIAM, and software firewalls. The company aims to achieve $15 billion in ARR by FY '30.
Free Cash Flow Margins: Maintained 38%+ free cash flow margins for the third consecutive year, with visibility to further improvements.
CyberArk Acquisition: Announced the acquisition of CyberArk to expand into the identity security market, aiming to integrate identity security with AI-powered platforms.
AI Security Focus: Positioned AI security as a key growth area, with Prisma AIRS and AI access solutions addressing the growing AI attack surface.
Market Conditions: The rapid adoption of AI and GenAI has created a new and complex attack surface, increasing the risk of data security incidents. Additionally, the cybersecurity market is evolving quickly, requiring constant innovation to stay competitive.
Regulatory Hurdles: The company faces potential challenges related to compliance with evolving regulations, especially in the context of AI and cloud security. The need for FedRAMP high authorization for public sector customers highlights regulatory complexities.
Supply Chain Disruptions: The company has taken steps to mitigate potential supply chain risks by transitioning its manufacturing and fulfillment center to a facility in Texas. However, any disruptions in this transition or in the broader supply chain could impact operations.
Economic Uncertainties: The company is navigating economic uncertainties, including customer demand for cost optimization and deferred payment plans, which could impact cash flow and revenue predictability.
Strategic Execution Risks: The proposed acquisition of CyberArk introduces integration risks, including aligning go-to-market strategies and achieving anticipated synergies. Additionally, the company’s strategy to expand into the identity market could face challenges from established competitors.
Revenue Growth: For fiscal year 2026, revenue is expected to be in the range of $10.47 billion to $10.525 billion, representing a 14% increase.
Next-Generation Security ARR: Expected to reach $7.0 billion to $7.10 billion in fiscal year 2026, an increase of 26% to 27%.
Operating Margins: Projected to be in the range of 29.2% to 29.7% for fiscal year 2026.
Free Cash Flow Margin: Anticipated to be in the range of 38% to 39% for fiscal year 2026.
Product Revenue Growth: Expected to grow approximately 20% in Q1 2026 and in the low teens for fiscal year 2026, driven by software form factors.
CyberArk Acquisition Impact: The combined company is targeting adjusted free cash flow of 40%+ in fiscal year 2028, the first full year post-integration.
Platformization Strategy: The company aims to more than double the number of platformized customers in the next 5 years, supporting a target of $15 billion in Next-Generation Security ARR by FY 2030.
AI and Cloud Security: Strong pipeline for AI security offerings, including Prisma AIRS, with expectations for it to become a growing contributor in the next 5 years.
SASE Growth: SASE ARR grew 35% year-over-year, and the company expects continued strong growth in this segment.
Identity Market Entry: The company anticipates the identity market will inflect in the next 12 to 24 months, with plans to leverage the CyberArk acquisition to expand in this area.
Buyback Strategy: We did not repurchase any shares in Q4, and our buyback strategy remains opportunistic. We have $1 billion in authorization remaining through December 2025.
The earnings call indicates strong financial performance and strategic growth plans, including AI and quantum preparedness, SASE growth, and impactful acquisitions like Chronosphere and CyberArk. Despite some lack of detailed guidance, the optimistic outlook on revenue growth, next-gen security ARR, and strategic acquisitions suggest a positive sentiment. The Q&A section supports this with management addressing key growth drivers and strategic initiatives, aligning with the positive sentiment from the earnings summary.
The earnings call reveals strong financial performance with record high revenue growth in key areas like software and services, a significant operating margin expansion, and a robust free cash flow margin. The Q&A section reinforces this with strategic insights into security consolidation, market share gains, and durable growth drivers. Despite some evasive responses, the overall sentiment is positive, driven by innovation, strategic partnerships, and optimistic guidance. The company's market cap isn't provided, but the positive indicators suggest a likely stock price increase in the 2% to 8% range.
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