Core Viewpoint - Palo Alto Networks (PANW) has shown a slight increase in share price but has underperformed compared to the S&P 500, raising questions about future performance leading up to the next earnings report [1] Financial Performance - For Q1 fiscal 2026, PANW reported non-GAAP earnings of 93 cents per share, exceeding estimates by 4.5% and reflecting a 19.2% year-over-year increase [2] - Revenues for the same quarter reached $2.47 billion, surpassing estimates by 0.52% and up from $2.14 billion year-over-year [2] Revenue Breakdown - Product revenues increased by 22.6% year-over-year to $434 million, making up 17.5% of total revenues [3] - Subscription and Support revenues, which accounted for 82.5% of total revenues, grew 14.3% year-over-year to $2.04 billion, driven by SASE, Software Firewalls, and XSIAM offerings [3] Key Metrics - Remaining Performance Obligation (RPO) stood at $15.5 billion, a 24% increase year-over-year [4] - Next-Generation Security annualized recurring revenues reached $5.85 billion, representing a 29% year-over-year growth [4] - Non-GAAP gross profit was $1.90 billion, with a gross margin of 76.9%, up 110 basis points sequentially [4] Cash Flow and Balance Sheet - As of October 31, 2025, PANW had $3.07 billion in cash and cash equivalents, an increase from $2.27 billion as of July 31, 2025 [5] - The company generated $1.77 billion in operating cash flow and reported non-GAAP adjusted free cash flow of $1.71 billion, reflecting a 69.2% adjusted free cash flow margin [5] Fiscal Guidance - For fiscal 2026, PANW expects revenues between $10.50 billion and $10.54 billion, revised from a previous target of $10.48-$10.53 billion [6] - Remaining Performance Obligations are projected between $18.6 billion and $18.7 billion, with Next-Gen Security ARR forecasted between $7.00 billion and $7.10 billion, implying 26-27% annual growth [6] Q2 Projections - For Q2 fiscal 2026, revenues are projected between $2.57 billion and $2.59 billion, indicating 14-15% year-over-year growth [8] - RPO is expected in the range of $15.75 billion to $15.85 billion, and Next-Gen Security ARR is forecasted between $6.11 billion and $6.14 billion, suggesting 28% growth [8] - Non-GAAP earnings per share are projected between 93 to 95 cents, indicating 15-17% year-over-year growth [8] Market Position and Estimates - Estimates for PANW have been trending upward, although the stock currently holds a Zacks Rank 4 (Sell), indicating expectations of below-average returns in the coming months [12] - The company has a strong Growth Score of A but lags in Momentum with a D, resulting in an aggregate VGM Score of C [11]

Core Insights - Palo Alto Networks (PANW) reported first-quarter fiscal 2026 non-GAAP earnings of 93 cents per share, exceeding the Zacks Consensus Estimate by 4.5% and reflecting a 19.2% year-over-year improvement [1] - The company's revenues for the first quarter reached $2.47 billion, surpassing the Zacks Consensus Estimate by 0.52% and increasing from $2.14 billion in the previous year [1] Revenue Breakdown - Product revenues increased by 22.6% year over year to $434 million, making up 17.5% of total revenues [2] - Subscription and Support revenues, which accounted for 82.5% of total revenues, grew 14.3% year over year to $2.04 billion, driven by strong performance in SASE, Software Firewalls, and XSIAM offerings [2] Performance Metrics - Remaining Performance Obligation (RPO) was reported at $15.5 billion, up 24% year over year [3] - Next-Generation Security (NGS) annualized recurring revenues reached $5.85 billion, representing a 29% year-over-year growth [3] - Non-GAAP gross profit increased to $1.90 billion, with a gross margin of 76.9%, up 110 basis points sequentially [3] - Non-GAAP operating income rose to $746 million, maintaining a non-GAAP operating margin of 30.2%, despite a 40 basis points year-over-year contraction [3] Financial Position - As of October 31, 2025, the company had $3.07 billion in cash and cash equivalents, an increase from $2.27 billion as of July 31, 2025 [4] - Operating cash flow for the quarter was $1.77 billion, with non-GAAP adjusted free cash flow of $1.71 billion, reflecting a 69.2% adjusted free cash flow margin [4] Fiscal 2026 Guidance - For fiscal 2026, PANW expects revenues between $10.50 billion and $10.54 billion, revised from a previous range of $10.48-$10.53 billion [5] - The Zacks Consensus Estimate for fiscal 2026 revenues is $10.42 billion, indicating a 13% increase [5] - Remaining Performance Obligations are projected between $18.6 billion and $18.7 billion, with Next-Gen Security ARR forecasted between $7.00 billion and $7.10 billion, suggesting 26-27% annual growth [6] - The company anticipates a non-GAAP operating margin of 29.5-30% and an adjusted free cash flow margin of 38-39% [6] Earnings Projections - Non-GAAP earnings per share are expected to be in the range of $3.80-$3.90, an improvement from the previous target of $3.75-$3.85 per share [7] - The Zacks Consensus Estimate for fiscal 2026 earnings is $3.79, indicating a 13.6% increase [7] Q2 Fiscal 2026 Outlook - For the second quarter of fiscal 2026, revenues are projected between $2.57 billion and $2.59 billion, reflecting 14-15% year-over-year growth [8] - Non-GAAP earnings per share for Q2 are projected in the range of 93 to 95 cents, indicating 15-17% year-over-year growth [10]