$240 billion and climbing: Palo Alto Networks extends remarkable rally after earnings
Investors pushed shares higher after the cybersecurity group reported stronger-than-expected growth and raised confidence in its AI-driven platform strategy.
Palo Alto Networks shares continued to climb in after-hours trading after the cybersecurity giant reported quarterly results that exceeded expectations and highlighted accelerating demand from organizations seeking to secure AI deployments. Palo Alto ended the day with a valuation of approximately $240 billion, doubling its market cap in just over two months.
"Q3 was a standout quarter for Palo Alto Networks, with accelerating organic bookings growth as customers turn to us to secure their AI deployments at scale," CEO Nikesh Arora said. "The latest advancements at the AI frontier have increased the level of urgency around cybersecurity, and redefined the shape of the industry for the coming years."
The company's fiscal third-quarter revenue rose 31% year-over-year to $3 billion, ahead of Wall Street expectations of roughly $2.9 billion. Non-GAAP earnings reached $0.85 per share, compared with analyst expectations of $0.80. Revenue included $388 million from CyberArk and Chronosphere, two acquisitions that have become central to Palo Alto's strategy.
While revenue growth accelerated, the company's financial statements also reflected the cost of its acquisition campaign. Palo Alto reported a GAAP net loss of $177 million, compared with net income of $262 million a year earlier. However, adjusted profitability improved, with non-GAAP net income rising to $684 million from $561 million.
The most significant transaction in Palo Alto's recent expansion drive was the acquisition of Israeli identity-security company CyberArk in a deal valued at approximately $25 billion. The merger closed in February and immediately became a key component of Palo Alto's effort to build a broader AI security platform.
The strategic logic behind the deal is rooted in the rise of AI agents. As companies deploy autonomous systems capable of accessing sensitive data, communicating with other applications, and making decisions independently, identity management has become a critical security challenge. Securing who, or what, has access to corporate systems is increasingly viewed as one of the most important layers of AI protection.
CyberArk is only one piece of a broader acquisition strategy. Over the past year Palo Alto completed five AI-related acquisitions, while continuing a long-standing relationship with Israel's cybersecurity ecosystem. Earlier this year it finalized the acquisition of Israeli startup Koi, a company focused on securing AI-driven systems. Since 2014, Palo Alto has acquired 12 Israeli cybersecurity companies, representing half of its 24 major acquisitions worldwide.
The company's growth outlook suggests management expects momentum to continue. For the fourth quarter, Palo Alto forecast revenue of $3.345 billion to $3.355 billion, representing approximately 32% annual growth. The company also expects Next-Generation Security annual recurring revenue to reach as much as $8.95 billion.
Chief Financial Officer Dipak Golechha said Palo Alto was executing ahead of its acquisition integration plans while improving profitability, adding that the company remains on track to achieve a 40% adjusted free cash-flow margin by fiscal 2028.
