Analysts at Wedbush repeated their ‘Outperform’ rating and $225 price target on Palo Alto Networks Inc (NYSE:PANW, XETRA:5AP) after it reported fiscal first quarter results that modestly exceeded Wall Street expectations.
The company posted revenue of $2.47 billion, at the high end of its guidance range and slightly above the Street’s estimate of $2.46 billion.
Remaining performance obligations reached $15.50 billion, also at the top end of guidance and ahead of consensus, supported by continued strength in SASE and XSIAM.
Profitability metrics also surpassed expectations. Gross margin was 76.9%, in line with consensus, while operating margin reached 30.2% compared with the Street’s 29.1% forecast. Earnings per share were $0.93, ahead of both guidance and analysts’ $0.89 estimate.
However, investors were less enthusiastic about the narrow beat than Wedbush, sending shares of Palo Alto down 7.3% to about $185 on Thursday afternoon.
Wedbush said it would “be buyers on any knee-jerk weakness in shares,” maintaining its positive stance on the company’s long-term strategy.
The analysts noted Q1 was “another step forward on the strategic vision of Palo Alto” as the company continues to push deeper into platformization and AI-driven security offerings. “We continue to believe the platformization approach is the right move for Palo Alto,” the analysts wrote, adding that cybersecurity remains “a clear 2nd/3rd derivative play in the AI Revolution.”
Wedbush noted that net new platformizations came in around 60 for the quarter, representing a sequential slowdown but more than 30% year-over-year growth.
The firm pointed to sharp increases in large customer engagements, with 54% year-over-year growth in $5-million-plus accounts and 49% growth in accounts over $10 million. “Platformization deals are leading to an increase in average annual recurring revenue (ARR) per platformized customer,” the analysts wrote.
They also highlighted the company’s continued M&A strategy, including a newly announced $3.35 billion cash acquisition of Chronosphere, an observability provider with more than $160 million in ARR growing at triple-digit rates. “The need for convergence between security and observability continues to increase through adoption of AI,” the analysts wrote.
Palo Alto also reiterated that its planned purchase of CyberArk is expected to close in the second half of fiscal 2026.
Further, the firm noted the announcement of a joint solution with IBM aimed at accelerating quantum-safe readiness, which it described as a potentially meaningful long-term opportunity as quantum technologies evolve.