MW Palo Alto Networks' earnings show AI is a friend, not a foe, to revenue outlook

By Hannah Pedone

The 'latest advancements at the AI frontier have increased the level of urgency around cybersecurity,' Palo Alto Networks' CEO says

Palo Alto Networks posted revenue and earnings beats on Tuesday.

Palo Alto Networks says customers are showing heightened interest in cybersecurity offerings because of the complexities brought on by artificial intelligence - and that seems to be giving a lift to the company's financials.

However, the company's stock (PANW) fell 3% in extended trading Tuesday after Palo Alto Networks beat expectations with its latest results and offered rosy guidance.

Palo Alto Networks reported revenue of $3.0 billion for the fiscal third quarter, up 31% from a year before, while analysts tracked by FactSet were expecting $2.94 billion. For the fiscal fourth quarter, the company expects between $3.35 billion to $3.36 billion in revenue, above the $3.28 billion analysts were expecting.

CEO Nikesh Arora said in a press release that the "latest advancements at the AI frontier have increased the level of urgency around cybersecurity."

Palo Alto Networks also raised its revenue guidance for the 2026 fiscal year to a range of $11.42 billion to $11.43 billion, whereas its prior range called for $11.28 billion to $11.31 billion. Analysts were expecting $11.3 billion.

Read more: Palo Alto Networks hits a big milestone. Why cybersecurity stocks are so hot right now.

The stock has emerged as a favored cybersecurity pick among analysts assessing the software companies that seem best positioned to withstand AI disruption. Last week, Palo Alto Networks saw its market capitalization cross the $200 billion threshold for the first time, and Tuesday's after-hours action implies a valuation above $250 billion if current moves hold through Wednesday's close.

The company itself is among a small group of cybersecurity providers with access to Anthropic's powerful Mythos model, through the AI lab's Project Glasswing program. Palo Alto Networks has also benefited from a new OpenAI cybersecurity initiative, Daybreak, which combines OpenAI's Codex agent with offerings from Palo Alto Networks and several other cybersecurity providers.

Jefferies analyst Joseph Gallo wrote in a note ahead of the earnings report that the company looks set up to be the "most complete platform in cyber," noting that Palo Alto Networks benefits from the growing prevalence of AI-driven exploits.

He sees positive AI-driven catalysts for the 2027 fiscal year, especially across observability and identity. Palo Alto Networks completed the acquisition of identity-security provider CyberArk in February, which followed the close of its purchase of observability platform Chronosphere in January. Those businesses contributed $388 million to third-quarter revenue.

Palo Alto Networks reported 85 cents in adjusted earnings per share in the latest quarter, above the 79 cents analysts were expecting. The company is looking for adjusted EPS of 96 cents to 98 cents for the fiscal fourth quarter, versus the consensus analyst view of 94 cents.

The company's remaining performance obligations, a measure of its backlog, came in at $18.4 billion, while analysts had been looking for $17.9 billion.

See also: These cybersecurity stocks are poised for rapid growth through 2028, and some of them are cheap right now

-Hannah Pedone

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June 02, 2026 20:24 ET (00:24 GMT)

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