Palo Alto Networks Q4 Earnings Call Highlights

Palo Alto Networks exceeded fiscal Q4 guidance, with revenue up 34% to $3.41 billion, non-GAAP EPS of $1.02 and adjusted free cash flow of $1.29 billion. Full-year revenue reached $11.5 billion, while RPO rose 34% to $21.2 billion. Next-Generation Security ARR climbed 63% to $9.1 billion, with nearly $1 billion in net new NGS ARR and about 220 new platformizations during the quarter. XSIAM ARR exceeded $700 million and Prisma AIRS surpassed $100 million in ARR. Fiscal 2027 guidance calls for continued growth, including $14.1 billion-$14.2 billion in revenue and $11.075 billion-$11.175 billion in NGS ARR. Palo Alto expects some margin pressure from higher cloud-hosting, memory and storage costs as its business shifts further toward cloud and SaaS products.

Palo Alto Networks NASDAQ: PANW said it exceeded its guidance across financial metrics in the fiscal fourth quarter, closing fiscal 2026 with accelerating bookings growth, record remaining performance obligations and continued expansion in its next-generation security businesses. Chairman and Chief Executive Officer Nikesh Arora said the company’s results reflected adoption of its platformization strategy and heightened customer focus on cybersecurity as artificial intelligence expands the number and speed of potential threats. The company reported total remaining performance obligations, or RPO, of $21.2 billion, up 34% year over year, while Next-Generation Security annual recurring revenue reached $9.1 billion, up 63%.

Arora said, “Most notably, we added nearly $1 billion in net new NGS ARR this quarter alone.” He added that the company recorded about 220 net new platformizations during the quarter, exceeding its previous record. Net revenue retention for its platformized customer cohort exceeded 120% in the fourth quarter, according to the company.

Chief Financial Officer Dipak Golechha said fourth-quarter revenue rose 34% to $3.41 billion. For fiscal 2026, revenue totaled $11.5 billion, an increase of 24% from the prior year. Growth was broad-based geographically, with revenue in the Americas up 33%, EMEA up 39% and JPAC up 34%, he said.

Current RPO reached $9.3 billion, also up 34%, as contract durations remained steady from a year earlier. Fourth-quarter non-GAAP operating margin was 29.6%, while full-year non-GAAP operating margin was 29.2%, an increase of 40 basis points. The company reported fourth-quarter non-GAAP earnings per share of $1.02, above the high end of its guidance by $0.04. Adjusted free cash flow was $1.29 billion in the quarter, up 35% year over year. Full-year adjusted free cash flow was $4.41 billion, representing a 38.4% margin. Palo Alto Networks ended the fiscal year with $7.9 billion in cash equivalents and short-term investments.

Golechha said gross margin declined as the revenue mix shifted toward cloud and software-as-a-service products. Fourth-quarter gross margin was 74.8%, down 100 basis points, while full-year gross margin was 75.8%, down 60 basis points. The company expects cloud-hosting costs to grow faster than revenue in fiscal 2027 as cloud and SaaS become a larger share of its business. It also expects elevated memory and storage costs in its hardware operations, though hardware represents about 10% of total company revenue.

The company introduced revenue disclosures for three pla...