Palo Alto Networks (PANW) Q4 2026 Financial Results Summary
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Palo Alto Networks (PANW) Q4 2026: Revenue Growth Accelerates, GAAP Losses Widen — Mixed Results
Palo Alto Networks (NASDAQ: PANW) reported its fiscal fourth quarter and full-year results for 2026, revealing a significant revenue increase but widening GAAP losses. Total revenue for Q4 2026 grew by $875 million or +34% year-over-year to $3.41 billion. However, the company also reported a GAAP net loss of $282 million, compared to a net income of $254 million in Q4 2025.
This quarter presents a mixed bag for shareholders. While the revenue growth is impressive and reflects strong demand for cybersecurity solutions, the widening losses may raise concerns about profitability and operational efficiency.
Key Financial Metrics
- Total Revenue: $3.41 billion, up $875 million or +34% YoY
- Next-Generation Security ARR: $9.10 billion, up 63% YoY
- Remaining Performance Obligations: $21.2 billion, up 34% YoY
- GAAP Operating Income: $172 million, down from $497 million YoY
- GAAP Net Loss: $282 million, or ($0.35) per diluted share, compared to a net income of $254 million, or $0.36 per diluted share, in Q4 2025
- Non-GAAP Net Income: $853 million, or $1.02 per diluted share, compared to $673 million, or $0.95 per diluted share, in Q4 2025
- Net Cash Provided by Operating Activities: $1.4 billion, up from $1.0 billion YoY
- Adjusted Free Cash Flow: $1.3 billion, compared to $954 million YoY
- Fiscal Year 2026 Adjusted Free Cash Flow Margin: 38.4%
Analyst Opinion
The results indicate a strong demand for Palo Alto Networks' cybersecurity solutions, particularly in the Next-Generation Security segment, which saw a remarkable 63% growth in ARR. However, the significant GAAP net loss raises questions about the company's cost structure and operational efficiency. The decline in GAAP operating income from $497 million to $172 million is concerning, suggesting that while revenue is growing, expenses are also rising sharply.
The non-GAAP metrics present a more favorable picture, with non-GAAP net income increasing to $853 million. This discrepancy highlights the importance of understanding the underlying factors affecting profitability. The company’s focus on AI-driven cybersecurity solutions is a positive long-term trend, but shareholders may need to brace for continued volatility in GAAP earnings as the company invests heavily in growth.
Dividend and Share Buyback
There were no announcements regarding dividends or share buybacks in this quarter's report, which may be a point of concern for income-focused investors.
Guidance and Forward Catalysts
Looking ahead, Palo Alto Networks provided guidance for Q1 2027, expecting:
- Next-Generation Security ARR: $9.54 billion to $9.56 billion, representing 63% YoY growth
- Remaining Performance Obligations: $20.8 billion to $20.9 billion, representing 34% to 35% YoY growth
- Total Revenue: $3.300 billion to $3.310 billion, representing 33% to 34% YoY growth
- Diluted Non-GAAP Net Income per Share: $0.96 to $0.98
For the full fiscal year 2027, the company anticipates:
- Next-Generation Security ARR: $11.075 billion to $11.175 billion, representing 22% to 23% YoY growth
- Total Revenue: $14.10 billion to $14.20 billion, representing 23% to 24% YoY growth
Investors should watch for the execution of these growth targets and any updates on the integration of the recently acquired Console platform, which is expected to enhance the Cortex platform's capabilities. The ongoing advancements in AI and their impact on cybersecurity demand will also be critical to monitor as the company aims for its ambitious $20 billion FY30 NGS ARR target.
In summary, while Palo Alto Networks demonstrated robust revenue growth and strong demand for its products, the widening GAAP losses and operational challenges present a mixed outlook for shareholders. Investors will need to weigh the potential for future growth against the current profitability concerns as they consider their positions in the stock.
Condensed Consolidated Statements of Income (In millions except per share data)
Note: All amounts are in millions.
| Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| July 31, 2026 | July 31, 2025 | July 31, 2026 | July 31, 2025 | |
| Product | $738 | $574 | $2,280 | $1,802 |
| Subscription | $2,672 | $1,962 | $9,200 | $7,419 |
| Total revenue | $3,410 | $2,536 | $11,480 | $9,221 |
| Cost of revenue | ||||
| Product | $197 | $136 | $568 | $413 |
| Subscription | $909 | $543 | $2,835 | $2,038 |
| Total cost of revenue | $1,106 | $679 | $3,403 | $2,451 |
| Total gross profit | $2,304 | $1,857 | $8,077 | $6,770 |
| Operating expenses | ||||
| Research and development | $779 | $504 | $2,552 | $1,984 |
| Sales and marketing | $1,127 | $829 | $3,931 | $3,100 |
| General and administrative | $226 | $27 | $899 | $443 |
| Total operating expenses | $2,132 | $1,360 | $7,382 | $5,527 |
| Operating income | $172 | $497 | $695 | $1,243 |
| Other income (expense) net | -$441 | $95 | -$159 | $353 |
| Income (loss) before income taxes | -$269 | $592 | $536 | $1,596 |
| Provision for income taxes | $13 | $338 | $229 | $462 |
| Net income (loss) | -$282 | $254 | $307 | $1,134 |
| Net income (loss) per share, basic | -$0.35 | $0.38 | $0.41 | $1.71 |
| Net income (loss) per share, diluted | -$0.35 | $0.36 | $0.40 | $1.60 |
| Weighted-average shares used to compute net income (loss) per share, basic | 817 | 669 | 749 | 663 |
| Weighted-average shares used to compute net income (loss) per share, diluted | 817 | 709 | 764 | 709 |
Preliminary Condensed Consolidated Balance Sheets (In millions)
Note: All amounts are in millions.
| Assets | July 31, 2026 (unaudited) | July 31, 2025 |
|---|---|---|
| Current assets: | ||
| Cash and cash equivalents | $2,514 | $2,269 |
| Short-term investments | $557 | $635 |
| Accounts receivable, net | $3,629 | $2,965 |
| Short-term financing receivables, net | $592 | $715 |
| Short-term deferred contract costs | $544 | $419 |
| Prepaid expenses and other current assets | $807 | $520 |
| Total current assets | $8,643 | $7,523 |
| Property and equipment, net | $523 | $387 |
| Operating lease right-of-use assets | $700 | $347 |
| Long-term investments | $4,835 | $5,555 |
| Long-term financing receivables, net | $944 | $1,002 |
| Long-term deferred contract costs | $667 | $586 |
| Goodwill | $22,010 | $4,567 |
| Intangible assets, net | $7,017 | $763 |
| Deferred tax assets | $2,443 | $2,424 |
| Other assets | $678 | $422 |
| Total assets | $48,460 | $23,576 |
| Liabilities and stockholders’ equity | ||
| Current liabilities: | ||
| Accounts payable | $290 | $232 |
| Accrued compensation | $1,048 | $608 |
| Accrued and other liabilities | $838 | $846 |
| Deferred revenue | $7,747 | $6,302 |
| Total current liabilities | $9,923 | $7,988 |
| Long-term convertible senior notes | $1,774 | — |
| Long-term deferred revenue | $7,009 | $6,450 |
| Deferred tax liabilities | $251 | $89 |
| Long-term operating lease liabilities | $726 | $338 |
| Other long-term liabilities | $1,285 | $887 |
| Total liabilities | $20,968 | $15,752 |
| Stockholders’ equity: | ||
| Preferred stock | — | — |
| Common stock and additional paid-in capital | $24,772 | $5,292 |
| Accumulated other comprehensive income (loss) | -$71 | $48 |
| Retained earnings | $2,791 | $2,484 |
| Total stockholders’ equity | $27,492 | $7,824 |
| Total liabilities and stockholders’ equity | $48,460 | $23,576 |
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