Palo Alto Networks Posts Solid 3Q, Next Gen Security Momentum Strong Despite Macro Uncertainty

Shares of Palo Alto Networks Inc. PANW continued to slide after the company reported its fiscal third-quarter results on Tuesday.

Here are some key analyst takeaways.

Goldman Sachs On Palo Alto Networks

Analyst Gabriela Borges maintained a Buy rating while raising the price target from $215 to $231.

Palo Alto Networks reported a mixed quarter, with RPO and revenue in line with Street expectations, while EBIT margin and earnings beat estimates by 30 basis points (bps) and 3%, respectively, Borges said in a note. Management raised their full-year revenue, earnings, and margin projections to the high end of their prior guidance, she added.

The company noted that deal activity was impacted by macro uncertainty in early April, but the deal cycle normalized later in the month and into May, the analyst stated. "While we expect to see a number of next-gen vendors in AI security, we ultimately believe that this field will consolidate over time in favor of leaders such as Palo Alto, that have the ability and willingness to invest in technology leadership, outsource R&D via M&A, and realize attractive unit economics from cross sell," she further wrote.

TD Cowen On Palo Alto Networks

Analyst Shaul Eyal reiterated a Buy rating and price target of $230.

Palo Alto Networks' NGS ARR (next-generation security annual recurring revenue) grew by 34% year-on-year to $5.09 billion, exceeding the consensus of $5.06 billion, while RPO (remaining performance obligation) rose 19.5% year-on-year to $13.5 billion, almost in line with expectations, Eyal said. The company generated revenue growth of 15% year-on-year, taking its top line to $2.29 billion, above the consensus of $2.28 billion, he added.

The analyst stated that the results reflect "ongoing healthy platformization performance" and strong adoption of AI solutions in the fiscal third quarter. Palo Alto Networks has a robust pipeline for the fourth quarter, "lending itself for a strong FY25 finish," he wrote.

Piper Sandler On Palo Alto Networks

Analyst Rob Owens reaffirmed a Neutral rating and price target of $200.

Owens said Palo Alto Networks recorded operating margins of 27.4%, beating consensus by around 30 bps. This took earnings to 80 cents per share, 3 cents per share higher than the top end of its guidance range.

However, bookings growth decelerated sequentially to 9%, from 15% in the previous quarter, the analyst stated. While the company said it faced uncertainty during April due to "geopolitical shifts," this has "largely subsided since," he further wrote.

Check out other analyst stock ratings.

KeyBanc Capital Markets On Palo Alto Networks

Analyst Eric Heath maintained an Overweight rating and price target of $220.

For the fiscal fourth quarter, Palo Alto Networks guided to revenues of $2.49-$2.51 billion, representing 14%-15% year-on-year growth, almost in line with consensus, Heath said. Its RPO guidance of $15.2-$15.3 billion incorporates 20% year-on-year growth, similar to the previous quarter, he added.

The analyst stated that the company raised its revenue guidance for the full year by $15 million to $9.17-$9.19 billion, up 14% and beating the consensus of $9.166 billion. NSG momentum remained robust, with "notable strength" from XSIAM (extended security intelligence and automation management).

JMP Securities On Palo Alto Networks

Analyst Trevor Walsh reiterated a Market Outperform rating and a price target of $212.

Palo Alto Networks reported its quarterly results modestly better than expected, Walsh said. The company guided to non-GAAP earnings of 87-89 cents per share for the fiscal fourth quarter, above consensus of 86 cents per share, he added.

Management indicated that "rapid and widespread" AI adoption was not only driving "the need to secure AI-specific resources but also further accelerating broader IT transformations, such as the transition to the cloud," the analyst further wrote.

Guggenheim Securities On Palo Alto Networks

Analyst John DiFucci reaffirmed a Sell rating and price target of $130.

Palo Alto Networks' results were mixed, "with revenue about a half percent above the consensus number, driven by Product outperformance and partially offset by subscription underperformance," DiFucci said. The company maintained its full-year NGS ARR and RPO guidance, indicating growth between 31%-32% and 19%-20%, respectively, he added.

"Management acknowledged April weakness post Liberation Day, though this has leveled out, but not before resulting in dampened F3Q25 results, which carried over to mixed F4Q25 guidance (that may include some acquired Protect AI contribution that should close by F1Q)," the analyst wrote.

RBC Capital Markets On Palo Alto Networks

Analyst Matthew Hedberg maintained an Outperform rating and a price target of $232.

Palo Alto Networks reported solid results, despite some tariff related macro disruption in the quarter, Hedberg said. He added, however, that the macro environment normalized into May.

The company generated an AI ARR of $400 million, up from $250 million in the first quarter, and recorded an average ARR per customer of more than $1 million for XSIAM, the analyst stated. "Overall, we like the large-deal and newer product momentum fueling NGS ARR growth."

PANW Price Action: At the time of publication on Wednesday, shares of Palo Alto Networks had declined by 5.99% to $182.83.

Read More: T-Mobile, Palo Alto Partner To Enhance 5G Cybersecurity For US Businesses

Photo: Shutterstock