Palo Alto Networks, Inc. (PANW) shares slipped in premarket trading Wednesday, and CEO Nikesh Arora wants everyone to know he thinks the market's got this one backwards.
The cybersecurity giant delivered a mixed bag on Tuesday: solid quarterly results paired with a guidance cut that sent investors heading for the exits. But Arora is pushing back hard, arguing that Wall Street is missing the forest for the trees when it comes to understanding the company's actual trajectory.
Here's what happened: Palo Alto lowered its full-year adjusted earnings guidance from a range of $3.80 to $3.90 per share down to $3.65 to $3.70 per share. That's below the $3.86 per share analysts were expecting, which never makes for a great headline.
But the quarterly numbers themselves looked pretty good. The company reported fiscal second-quarter revenue of $2.59 billion, edging past analyst estimates of $2.58 billion. Adjusted earnings came in at $1.03 per share for the quarter, handily beating the 94 cent consensus.
The growth story looks solid too. Total revenue climbed 15% year-over-year, while remaining performance obligations jumped 23% to $16 billion. Next-generation security annual recurring revenue increased 33% year-over-year to $6.3 billion. The company ended the quarter with approximately $4.16 billion in cash and cash equivalents.
Why the CEO Thinks Everyone's Confused
In an interview with Bloomberg Television, Arora didn't mince words: "I think the market is not paying attention to our numbers carefully."
His main point? The revised guidance for the next two quarters now includes CyberArk, which the company recently acquired. During the earnings call, Arora said the team was excited to head into the second half after closing both the CyberArk and Chronosphere acquisitions, welcoming both teams to the fold.
"If you take the consensus of CyberArk and ours, you're actually guiding above the collective consensus," Arora explained. He emphasized that the market hasn't properly understood the dilution of shares from these deals. "So I think they have it wrong."
Adding to his optimism, Arora revealed that after closing the Chronosphere acquisition, the company signed a multi-year, nine-figure expansion deal with a leading AI model provider in the second quarter. That's the kind of AI-driven demand that management is clearly betting big on.
And it's not like the company is being conservative everywhere. Palo Alto actually raised its fiscal 2026 revenue guidance, now expecting full-year revenue of $11.28 billion to $11.31 billion, up from prior guidance of $10.50 billion to $10.54 billion. For context, analysts were only expecting $10.55 billion.
What the Analysts Think
Wall Street analysts seem somewhat torn. BTIG analyst Gray Powell reiterated a Buy rating on the stock while maintaining a $200 price forecast. Needham analyst Mike Cikos also kept his Buy rating but lowered his price target from $230 to $200.
PANW Price Action: Palo Alto Networks shares were down 7.22% at $151.69 during premarket trading on Wednesday.
