Palo Alto Networks (PANW) Q3 2026 earnings summary

Executive summary

• Fiscal Q3 2026 revenue rose 31% year-over-year to $3.0 billion, driven by strong organic growth, AI-driven cybersecurity demand, and contributions from recent acquisitions including CyberArk, Chronosphere, and Koi Security.

• Next-Generation Security (NGS) ARR surged 60% year-over-year to $8.13 billion, with $1.6 billion from acquired entities and RPO at $18.4 billion, up 36%.

• Major acquisitions expanded the platform in identity security, observability, and endpoint security, with integration ahead of synergy targets and a workforce increase of over 4,000 employees.

• Platformization momentum reflected in 2,280 total platformized customers and a 120% net retention rate.

• AI and platformization strategies are driving customer wins, expanding the addressable market, and accelerating demand for real-time, unified cybersecurity solutions.

Financial highlights

• Q3 2026 total revenue was $3.0 billion, up 31% year-over-year; product revenue $594 million and subscription/support revenue $2.4 billion, both up 31%.

• NGS ARR reached $8.13 billion, up 60% year-over-year, with organic NGS ARR up 28% and $1.6 billion from acquisitions.

• Gross margin for Q3 was 75.8% non-GAAP and 67.6% GAAP, with product gross margin at 78.8%.

• Adjusted free cash flow for Q3 was $910 million, up 57% year-over-year; trailing 12-month adjusted free cash flow margin at 38.5%.

• Non-GAAP operating margin was 21.3–27.1% for Q3; GAAP operating margin was -6.1%.

• Diluted non-GAAP EPS was $0.85, $0.05 above guidance; GAAP net loss per share was $0.22 due to acquisition costs.

Outlook and guidance

• Raised FY26 guidance: NGS ARR of $8.90–$8.95 billion (59–60% growth), RPO of $20.9–$21.0 billion (32–33% growth), revenue of $11.415–$11.425 billion (24% growth).

• Q4 2026 revenue expected at $3.345–$3.355 billion (32% growth); non-GAAP EPS $0.96–$0.98.

• FY26 non-GAAP operating margin expected at 28.9–29.2%; adjusted free cash flow margin at 37.5%.

• Confident in reaching 40% free cash flow margin by fiscal 2028.

• Guidance includes expectations for increased operating expenses and integration costs in the near term.