Palo Alto raises outlook after beat; shares fall on acquisitions

Palo Alto Networks reported fiscal third-quarter results that topped analysts’ estimates and raised revenue guidance, but shares slipped about 4% on Wednesday as investors concentrated on acquisition-driven growth. The stock had initially ticked up in after-hours trading after the release.

The company posted adjusted earnings of $0.85 per share versus the $0.80 consensus and revenue of $3.0 billion, up 31% from a year earlier and above the $2.94 billion forecast. Backlog rose 36% year over year to $18.4 billion.

Palo Alto reported roughly $388 million of quarterly revenue from the CyberArk and Chronosphere acquisitions. Excluding those deals, organic revenue increased 14%.

The firm recorded a net loss of $177 million, or $0.22 per share, compared with net income of $262 million, or $0.37 per share, in the same period a year earlier.

Management raised fourth-quarter revenue guidance to a range of $3.35 billion to $3.36 billion, above consensus estimates, and lifted full-year revenue guidance to $11.42 billion to $11.43 billion.

Chief Executive Officer Nikesh Arora described the quarter as having “surpassed every guided metric,” citing stronger organic bookings, progress on the company platform strategy and rising demand for cybersecurity as artificial intelligence moves into broader enterprise use. He characterized fears of a major disruption to the cybersecurity market as a “SaaSpocalypse” that is “dead.”

Analysts welcomed the revenue beat but flagged uncertainty about the sustainability of growth driven by acquisitions. Loop Capital raised its price target to $290 from $160 while maintaining a Hold rating, noting that much of the quarter’s upside came from the acquired businesses and that the company provided limited long-term detail on those assets. The firm also pointed to strength in the hardware firewall business.

Palo Alto has expanded into identity security and cloud observability through its acquisitions of CyberArk, valued at about $25 billion, and Chronosphere. Investors will look to upcoming quarters for clearer visibility on underlying organic trends and progress integrating the acquired operations.