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Palo Alto Networks Inc (PANW)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 delivered solid top-line and non-GAAP profitability: revenue $2.536B (+16% YoY) and non-GAAP diluted EPS $0.95; GAAP diluted EPS was $0.36 .
  • Results beat S&P Global Wall Street consensus on both revenue and EPS; consensus EPS $0.885 and revenue $2.502B vs actual $0.95 and $2.536B; 46 EPS estimates, 44 revenue estimates. Bold beat on both metrics. Values retrieved from S&P Global.*
  • NGS ARR reached $5.6B (+32% YoY) and RPO hit $15.8B (+24% YoY), signaling strong multi-year demand and platform traction .
  • FY26 guidance introduced: revenue $10.475–$10.525B (+14% YoY), non-GAAP operating margin 29.2–29.7%, non-GAAP diluted EPS $3.75–$3.85, adjusted FCF margin 38–39%; Q1 FY26 revenue guided to $2.45–$2.47B and EPS $0.88–$0.90 .
  • Strategic developments: agreement to acquire CyberArk to add Identity Security as a core platform and retirement of founder/CTO Nir Zuk with Lee Klarich appointed CTO and to the Board—narrative catalysts highlighting AI-era platformization .

What Went Well and What Went Wrong

What Went Well

  • Strong execution with platformization driving customers to integrated outcomes; CEO: “customers understand that a fragmented defense is no defense at all… platforms are designed to work in concert” .
  • NGS ARR and RPO acceleration underpin multi-year visibility: NGS ARR $5.6B (+32% YoY) and RPO $15.8B (+24% YoY) .
  • Profitability momentum: CFO reiterated “Rule-of-50” status and focus on profitable growth; set FY26 non-GAAP operating margin at 29.2–29.7% and adjusted FCF margin at 38–39% .

What Went Wrong

  • GAAP EPS declined YoY due to tax and non-cash items: GAAP diluted EPS $0.36 vs $0.51 in Q4 2024; tax provision included a one-time deferred tax provision adjustment (“One Big Beautiful Bill”) .
  • Elevated share-based compensation and acquisition-related adjustments continue to be material recurring exclusions in non-GAAP results ($372.7M SBC in Q4) .
  • Q4 call transcript was unavailable from source due to retrieval error, limiting access to call-specific qualitative color and Q&A clarifications (see Q&A section note).

Financial Results

Revenues, EPS, Operating Results vs prior periods

MetricQ2 2025Q3 2025Q4 2025
Total Revenue ($USD Millions)$2,257.4 $2,289.0 $2,536.3
GAAP Diluted EPS ($USD)$0.38 $0.37 $0.36
Non-GAAP Diluted EPS ($USD)$0.81 $0.80 $0.95
Operating Income ($USD Millions)$240.4 $218.8 $497.2

Segment breakdown

Revenue Segment ($USD Millions)Q2 2025Q3 2025Q4 2025
Product$421.5 $452.7 $573.9
Subscription & Support$1,835.9 $1,836.3 $1,962.4
Total$2,257.4 $2,289.0 $2,536.3

KPIs

KPI ($USD Billions)Q2 2025Q3 2025Q4 2025
Next-Generation Security ARR$4.8 $5.1 $5.6
Remaining Performance Obligation (RPO)$13.0 $13.5 $15.8

Estimates vs Actuals (Q4 2025)

MetricConsensusActualSurprise
Revenue ($USD Millions)$2,501.9*$2,536.3 +$34.4*
Primary EPS ($USD)$0.8853*$0.95 +$0.0647*
# of Estimates (EPS/Revenue)46 / 44*——

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NGS ARR ($B)Q1 FY26N/A$5.82–$5.84 New
RPO ($B)Q1 FY26N/A$15.4–$15.5 New
Total Revenue ($B)Q1 FY26N/A$2.45–$2.47 New
Non-GAAP Diluted EPS ($)Q1 FY26N/A$0.88–$0.90 New
NGS ARR ($B)FY26N/A$7.00–$7.10 New
RPO ($B)FY26N/A$18.6–$18.7 New
Total Revenue ($B)FY26N/A$10.475–$10.525 New
Non-GAAP Operating Margin (%)FY26N/A29.2–29.7 New
Non-GAAP Diluted EPS ($)FY26N/A$3.75–$3.85 New
Adjusted FCF Margin (%)FY26N/A38.0–39.0 New

Note: Q3 had guided Q4 2025 revenue to $2.49–$2.51B and non-GAAP EPS to $0.87–$0.89; Q4 delivered above high end on both .

Earnings Call Themes & Trends

Note: The Q4 2025 transcript could not be retrieved from source due to a database inconsistency. Themes below reflect Q2/Q3 narratives and Q4 press-release commentary.

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/Technology initiativesQ3: AI firewall and cloud firewalls pull-through; platformization benefits; accelerated hardware-to-software shift . Q2: Precision AI across platforms; raised operating margin/EPS guidance .CEO emphasized platformization delivering near real-time outcomes and efficiency; surpassed $10B run-rate; continued AI focus .Strengthening platform + AI narrative
PlatformizationQ3: Platformization customers targeted; ARR per platform deal critical to $15B NGS ARR goal .Press release reiterates integrated platforms as differentiators and operating synergies .Consistent, gaining adoption
Product performance (Cortex/Prisma/XSIAM)Q3: Large deals and progress in XDR and SASE; NGS ARR crossed $5B .NGS ARR $5.6B; continued momentum implied in guidance .Continued growth
Identity Security & M&AIntent to acquire CyberArk; build Identity Security as core platform; secure agentic AI .Transaction highlighted during Q4 period; integration expected to enhance platformization .Strategic expansion
Regional/macro commentaryQ2/Q3: Demand across regions; consolidation cost savings; strong pipeline .RPO acceleration implies healthy backlog; guidance assumes current market conditions .Positive backlog visibility
Regulatory/taxQ2: Prior-year large tax benefit; Q3: normalized tax adjustments .Q4: One-time deferred tax provision adjustment impacting GAAP .One-off GAAP headwind

Management Commentary

  • Nikesh Arora, CEO: “Customers understand that a fragmented defense is no defense at all… platforms are designed to work in concert, creating powerful operational synergies… we… surpassed the $10 billion revenue run-rate milestone, positioning ourselves well for sustained growth ahead” .
  • Dipak Golechha, CFO: “Strong top-line… continued operating efficiency and strong free cash flow generation, making us a ‘Rule-of-50’ company for the fifth consecutive year… we will continue to execute against our profitable growth framework” .
  • Leadership transition: Nir Zuk retired; Lee Klarich appointed CTO and to the Board to continue leadership in AI and platformization .

Q&A Highlights

Q4 call transcript was unavailable from source due to a database inconsistency, so call-specific Q&A cannot be included. For thematic context from prior quarter:

  • AI security pull-through and AI firewall narrative driving software firewall adoption; commitment to runtime security and Protect AI innovation .
  • Platformization ARR math and pathway to $15B NGS ARR through 2,500–3,500 platformizations .

Estimates Context

  • Beat vs S&P Global consensus: Q4 2025 Primary EPS $0.95 vs $0.8853* and revenue $2,536.3M vs $2,501.9M*; 46 EPS and 44 revenue estimates underpinning consensus breadth. Values retrieved from S&P Global.*
  • Implication: Street likely raises FY26 EPS/margin assumptions given higher starting profitability targets (29.2–29.7% non-GAAP operating margin) and robust ARR/RPO trajectory .

Key Takeaways for Investors

  • Strong beat and raised confidence: Revenue/EPS above guidance and consensus; multi-year visibility via RPO and ARR; supports positive estimate revisions and sentiment .
  • Platformization is the core differentiator: Management messaging reinforces integrated outcomes and efficiency, likely sustaining consolidation wins vs point-product competitors .
  • FY26 guide signals margin expansion: Non-GAAP operating margin set at 29.2–29.7% and adjusted FCF margin at 38–39%—increasing cash-generation quality .
  • Identity Security push: CyberArk deal positions PANW to secure human/machine/agentic identities in AI era; a strategic pillar likely improving cross-platform attach and ARR durability once closed .
  • Leadership continuity in product/AI: CTO transition to Lee Klarich should maintain innovation velocity across platforms .
  • Near-term trading: Beat + strong FY26 framework could be a catalyst; watch regulatory timeline and integration updates on CyberArk and execution on ARR/RPO vs guidance .
  • Medium-term thesis: Data/AI-driven, multi-platform leader with expanding margins and cash flow—ARR compounding, backlog growth, and platform synergies drive durable growth .