Palo Alto Networks Earnings Preview

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•  11 Nov 2026
 

$PANW Palo Alto Networks reports first-quarter fiscal 2027 results next week, and Bank of America is managing expectations after the stock fell about 25% from its October high. Analyst Tal Liani maintains a Buy rating and a $420 price target, 28.7% above the $326.36 share price when he wrote the report, implying roughly 30% upside. The decline has yet to lower the earnings bar enough, according to Liani. Israeli entrepreneur Nir Zuk founded the cybersecurity company.

Palo Alto Networks shares surged more than 140% in the six months before the fourth-quarter report, then fell 9% the day after the release. Even after the latest decline, the stock trades at more than twice its 52-week low of $139.60, and the company has a market capitalization of about $195 billion. Liani writes that the pullback from the peak has eased expectations slightly while the valuation remains high.

Palo Alto Networks trades at an enterprise value of 18 times expected fiscal 2027 sales, more than 2.5 times the peer median of 7 times. Liani says that multiple likely requires results to beat expectations by about 3%, along with an update to forward guidance, for the stock to respond positively. Results in line with expectations could disappoint the market.

Bank of America looks past volatility around the report and sees Palo Alto Networks as the clear leader set to benefit from security platform consolidation in the AI era. The bank projects adjusted earnings of $4.18 per share for the current fiscal year, in line with consensus, and $4.95 for the following year, about 2% above consensus. Even so, the stock trades at more than 78 times current-year adjusted earnings. On a reported basis, the bank expects a loss of $1.18 per share this year, compared with earnings of $0.40 per share last year. The report gives no breakdown of the gap.

Next-generation security annual recurring revenue, or ARR, is the key metric for the upcoming report, according to Bank of America. It captures recurring revenue from cloud, AI and newer platform products. Wall Street expects ARR to reach $9.55 billion, up 63% and in line with company guidance. That implies about $450 million in net additions for the quarter, up 68%, while consensus for the following quarter stands at $9.9 billion, up 57%. Liani says investors will look for a beat of at least 3% on both quarterly ARR figures.

Wall Street expects quarterly revenue of about $3.3 billion, up 34%, with product revenue rising 25% to $542 million. Remaining performance obligations, or signed contracts for which the company has yet to recognize revenue, are expected to rise 35% to $20.9 billion, slightly below $21.2 billion in the prior quarter. Bank of America will also track the AI security business, which reached $120 million in annual recurring revenue and 800 customers in the previous report. Liani expects gross margin to fall 2.3 percentage points to 74.6% as cloud and component costs rise.

Palo Alto Networks firewall orders rose 17% last fiscal year in one of the oldest segments of the cybersecurity industry. Bank of America sees positive signs in new cloud infrastructure, equipment replacement cycles and AI traffic that increases hardware demand. Results from Fortinet and Israeli peer Check Point show signs of slowing after a strong first half. Liani believes Palo Alto Networks is gaining market share, winning platform deals and benefiting from a replacement cycle that spans several quarters.

Bank of America will also examine acquisition integration, and Liani expects positive updates on CyberArk, the identity security company founded in Israel, and Chronosphere. He also seeks clarity on the roughly $500 million acquisition of Clutch that appeared in media reports and remains unconfirmed in the research note. Clutch focuses on nonhuman identities such as service accounts, access keys and AI agents, which are becoming a major target for attackers.

The report identifies four risks: a high valuation that leaves little room for error, pressure on gross margin, slowing firewall activity at peers and challenges integrating large acquisitions. Bank of America discloses that it does and seeks to do business with companies it covers, creating a potential conflict of interest that could affect the objectivity of its research. This article does not constitute a recommendation to buy or sell securities.

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