Palo Alto Networks shares fall despite second quarter beat

The cybersecurity firm's earnings and revenue exceeded expectations, but its outlook disappointed investors.

Published on Feb. 19, 2026

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Palo Alto Networks Inc. reported better-than-expected earnings and revenue for its fiscal 2026 second quarter, driven by strong growth in next-generation security annual recurring revenue and remaining performance obligations. However, the company's outlook for the current quarter and full year fell short of analyst expectations, causing its shares to fall more than 5% in late trading.

Why it matters

Palo Alto Networks is a leading provider of network security and management solutions, and its financial performance is closely watched by investors as an indicator of the broader cybersecurity market. The company's mixed results and disappointing outlook raise questions about the sustainability of its growth and the potential impact of macroeconomic factors on the industry.

The details

For the quarter that ended on Jan. 31, Palo Alto Networks reported adjusted earnings per share of $1.03, up from 81 cents per share in the same quarter of the previous fiscal year, on revenue of $2.6 billion, up 15% year-over-year. Both figures came in ahead of the 94 cents per share and revenue of $2.58 billion expected by analysts. The company also saw its next-generation security annual recurring revenue grow 33% year-over-year to $6.33 billion and its remaining performance obligations rise 23% year-over-year to $16 billion. However, Palo Alto Networks' outlook for the current quarter and full year fell short of analyst expectations, with the company forecasting adjusted earnings per share of 78 cents to 80 cents on revenue of $2.941 billion to $2.945 billion for the fiscal third quarter, and earnings of $3.65 to $3.70 on revenue of $11.28 billion to $11.31 billion for the full year.

  • The quarter that ended on Jan. 31, 2026.
  • Palo Alto Networks announced its acquisition of Chronosphere Inc. in November 2025, and the transaction was completed in late January 2026.
  • Palo Alto Networks announced a partnership with IBM Corp. to develop joint quantum-safe security solutions.

The players

Palo Alto Networks Inc.

A leading provider of network security and management solutions.

Nikesh Arora

Chairman and chief executive officer of Palo Alto Networks.

Chronosphere Inc.

A next-generation observability platform provider that Palo Alto Networks acquired for $3.35 billion.

IBM Corp.

A technology company that partnered with Palo Alto Networks to develop joint quantum-safe security solutions.

Google Cloud

A cloud computing platform that Palo Alto Networks partnered with to accelerate cloud and AI security adoption for joint customers.

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What they’re saying

“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.”

— Nikesh Arora, Chairman and chief executive officer of Palo Alto Networks (Palo Alto Networks earnings release)

The takeaway

Palo Alto Networks' mixed results highlight the challenges facing the cybersecurity industry, as companies navigate macroeconomic headwinds and seek to balance growth with profitability. The company's strategic acquisitions and partnerships, such as the Chronosphere deal and the IBM collaboration, suggest it is positioning itself to capitalize on emerging trends like cloud-native security and quantum-safe encryption.