Palo Alto Networks reported fiscal second‑quarter 2026 revenue of $2.60 billion, a 15% year‑over‑year increase, and non‑GAAP earnings per share of $1.03, beating the consensus estimate of $0.94 by $0.09. GAAP net income reached $432 million, or $0.61 per diluted share, while non‑GAAP net income totaled $732 million, or $1.03 per diluted share.
Revenue growth was driven by a 22.1% rise in product revenue to $514 million and a 13.3% increase in subscription and support revenue to $2.08 billion. Next‑Generation Security (NGS) annual recurring revenue grew 28% to $6.3 billion, reflecting strong demand for AI‑enabled security services across SASE, software firewalls, XSIAM, and Prisma AIRS.
Operating margin expanded to 30.5% from 29.8% in the prior year, supported by higher‑margin AI and observability contracts and disciplined cost management. However, deal‑related costs more than doubled year‑over‑year, partially offsetting margin gains and prompting a reduction in the full‑year adjusted earnings per share forecast.
Management raised the full‑year revenue outlook to $11.28‑$11.31 billion from $10.50‑$10.54 billion, citing continued momentum in platformization and AI security adoption. For the third quarter, the company now expects revenue of $2.94 billion, a 28% year‑over‑year increase, and adjusted EPS of $0.78‑$0.80, below the Street estimate of $0.92.
After the release, the market reacted with a decline in after‑hours trading, driven by the softer Q3 EPS guidance and the increased deal‑related costs associated with the recent CyberArk and Chronosphere acquisitions.
"We saw continued strength in platformizations, a trend that is accelerating due to AI – customers are keen to both modernize and normalize their cybersecurity stack, aligning them to our approach. We also saw steady and strong adoption of AI security, which we expect to be a long‑term trend," said Nikesh Arora, chairman and CEO of Palo Alto Networks.
"We once again delivered strong top‑line growth, complimented by operating efficiency, with our third straight quarter of 30%-plus non‑GAAP operating margins," said Dipak Golechha, chief financial officer of Palo Alto Networks.
"We delivered a strong Q2 fueled by robust demand for cybersecurity and continued execution against our platformization strategy. This led to strong organic results in Q2 with NGS ARR up 28% and revenue growth of 15%, excluding the impact of recently closed Chronosphere. We saw broad‑based strength across our products from SASE, software firewalls and XSIAM to our emerging leadership in AI security with Prisma AIRS," said Nikesh Arora, chairman and CEO, during the earnings call.
"AI security without deep observability is blind; this acquisition delivers the essential context across models, prompts, users, and performance to move from manual guessing to autonomous remediation," Palo Alto Networks said regarding the Chronosphere acquisition.
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