Palo Alto Networks Earnings Show ARR Surge
Palo Alto Networks earnings raised near-term ARR guidance, tightening forward ARR models and prompting reweighting of ARR-focused cybersecurity positioning
KEY TAKEAWAYS
- Q3 NGS ARR guidance set to $7.9-$8.0 billion, about 56.0% year-over-year.
- Next-Generation Security ARR rose to $6.3 billion, up 33.0% year-over-year.
- Announced a $400 million acquisition of Koi to add agentic endpoint security and support platformization.
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Palo Alto Networks reported fiscal second-quarter results on Feb. 17, 2026, showing expanded Next-Generation Security annual recurring revenue (ARR) and raising near-term ARR guidance. The results highlighted platform momentum and growing demand for AI-driven security as the company disclosed a $400 million acquisition.
Quarterly Results and Metrics
The company said in a press release that fiscal second-quarter revenue reached $2.6 billion, a 15% increase year-over-year for the period ended Jan. 31, 2026. Next-Generation Security ARR rose 33% to $6.3 billion, while remaining performance obligation (RPO) grew 23% to $16.0 billion. Adjusted earnings per share of $1.03 exceeded the FactSet consensus estimate of $0.94.
Guidance and Strategic Moves
Palo Alto Networks set third-quarter Next-Generation Security ARR guidance between $7.94 billion and $7.96 billion, representing about 56% year-over-year growth. It projected RPO for the quarter at $17.85 billion to $17.95 billion, up roughly 32% to 33% from a year earlier. For fiscal 2026, the company forecast Next-Generation Security ARR of $8.52 billion to $8.62 billion and RPO of $20.2 billion to $20.3 billion. Management also aims to achieve a 40% adjusted free-cash-flow margin by fiscal 2028.
Hours before the earnings release, Palo Alto Networks announced the acquisition of Koi, an Israeli startup specializing in agentic endpoint security. The deal was valued at $400 million. The company referenced recent larger acquisitions, including CyberArk and Chronosphere, valued at $25 billion and $3.35 billion, respectively.
Management attributed the raised guidance to platform consolidation and accelerating AI adoption. Nikesh Arora, chairman and chief executive, said, "We saw continued strength in platformizations, a trend that is accelerating due to AI—customers are keen to both modernize and normalize their cybersecurity stack, aligning them to our approach. We also saw steady and strong adoption of AI security, which we expect will be a long term trend."
Together, the guidance and contract metrics signal a material acceleration in the company’s near-term ARR trajectory and support its longer-term free-cash-flow targets.
