Key Stats for PANW Stock
- Pre-market Price Change for PANW stock: -4%
- $PANW Share Price as of Nov. 19: $200
- 52-Week High: $224
- $PANW Stock Price Target: $225
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What Happened?
Palo Alto Networks (PANW) stock is down almost 4% in pre-market despite the cybersecurity giant reporting fiscal first-quarter results that beat Wall Street expectations.
It reported posted adjusted earnings of $0.93 per share on revenue of $2.47 billion, topping estimates of $0.89 per share on $2.46 billion in sales.
Revenue grew 16% year over year, and remaining performance obligations surged 24% to $15.5 billion, signaling strong future revenue visibility.
Next-generation security annual recurring revenue jumped 29% to $5.85 billion, exceeding guidance. The company’s SASE business crossed $1.3 billion in ARR, growing 34%, making Palo Alto the fastest-growing SASE provider at scale.
The selloff came after Palo Alto announced plans to acquire cloud observability platform Chronosphere for $3.35 billion in cash and stock.
The deal surprised investors, given that the company is already in the middle of acquiring Israeli identity security firm CyberArk for $25 billion, with the deal expected to close in fiscal Q3.
CEO Nikesh Arora defended the timing, telling analysts that AI is moving faster than expected and enterprises need real-time observability at scale.
He said Chronosphere can deliver comprehensive observability at one-third the cost of competing solutions, addressing a critical gap as companies build out AI infrastructure.
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What the Market Is Telling Us About PANW Stock
The 3% decline in PANW stock reflects investor concern about capital allocation as the company pursues two major acquisitions simultaneously.
While Palo Alto’s core business is firing on all cylinders, adding a $3.35 billion deal on top of the massive CyberArk transaction raises questions about integration complexity and near-term margin pressure.
Management sought to ease concerns by reiterating its target of 40%+ free cash flow margins by fiscal 2028, including acquisitions.
CFO Dipak Golechha said PANW expects to maintain at least 37% free cash flow margins in fiscal 2026 even with both deals closed, demonstrating confidence in the business model.
Arora emphasized that Chronosphere fits the company’s tuck-in acquisition playbook at just 2.5% of Palo Alto’s market cap.
The observability platform has over $160 million in ARR with triple-digit growth and a customer base focused on large AI-native companies, including two of the top five frontier model providers.
PANW stock has climbed just 10% year to date as the company executes its platformization strategy. The quarter included a $100 million deal with a major U.S. telecom provider featuring an $85 million commitment to XSIAM, the company’s largest XSIAM deal ever.
Palo Alto now has roughly 470 XSIAM customers with an average ARR exceeding $1 million.
The company raised its fiscal 2030 NGS ARR target from $15 billion to $20 billion, reflecting confidence that CyberArk, Chronosphere, and organic growth in software firewalls will drive significant expansion.
Software firewalls now account for 44% of product revenue, up from 38% last year, as cloud workloads accelerate.
Operating margin expanded 140 basis points year-over-year to 30.2%, marking the second consecutive quarter above 30%. The company is leveraging AI across its operations, deploying automation in customer support that has reduced case volumes for three straight quarters.
Management also highlighted emerging opportunities in AI security and quantum-safe cryptography. The company launched Prisma AIRS 2.0 to secure AI agents and models, and AI deals more than doubled quarter over quarter.
On quantum, Palo Alto introduced new fifth-generation firewalls optimized for post-quantum cryptography and partnered with IBM on quantum readiness services.
For the second quarter, PANW stock investors should expect revenue of $2.57 billion to $2.59 billion and adjusted EPS of $0.93 to $0.95. Full-year guidance calls for revenue of $10.50 billion to $10.54 billion, operating margins of 29.5% to 30%, and adjusted EPS of $3.80 to $3.90.
The Chronosphere deal is expected to close in the second half of fiscal 2026. Arora said the observability platform will remain largely standalone in the near term to balance integration timelines with the CyberArk acquisition.
The company plans to combine Chronosphere’s capabilities with its new AgentiX platform to deliver automated remediation agents that can detect and fix infrastructure issues in real time.
PANW stock remains well-positioned despite the pre-market pullback. The company is executing on platformization, driving 60 net new platformizations in the quarter with customers consolidating multiple point products onto Palo Alto’s unified platform.
With $10 billion in cash on the balance sheet and strong free cash flow generation, the company has ample resources to fund both acquisitions while maintaining shareholder returns.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
