01—Abstract
Summary
Summary of the 10-Q filed February 18, 2026. Cited figures are marked; the original filing is the authoritative source.
Palo Alto Networks Inc. (PANW) reported strong revenue growth of 15% year-over-year for the six months ended January 31, 2026, reaching $5.1 billiona.
This growth was primarily driven by an increase in subscription and support revenue, which now constitutes 81.3% of total revenue, alongside a healthy 22% rise in product revenue. The company also saw a significant increase in operating income to $706 millionb for the six-month period, up from $527 million in the prior year, contributing to an improved operating margin of 13.9%. The company completed two significant acquisitions during this period: Chronosphere, Inc. for $3.0 billion, bolstering its observability platform, and CyberArk Software Ltd. for $2.3 billion in cash and stock, strengthening its identity security offerings.
These strategic moves are expected to expand PANW's platform capabilities and market reach. Despite substantial investments in growth, including R&D and sales and marketing, the company maintained a solid gross margin of 73.9% for the six months. Liquidity remains strong with over $7.8 billionc in cash, cash equivalents, and investments as of January 31, 2026.
02—Key points
Key Highlights
- Total revenue for the six months ended January 31, 2026, increased by 15% year-over-year to $5.1 billion.
- Subscription and support revenue grew by 14% to $4.1 billion, now representing 81.3% of total revenue.
- Product revenue increased by 22% to $948 million, indicating strong demand for hardware and software licenses.
- Operating income more than doubled to $706 million for the six-month period, with operating margin improving to 13.9% from 12.0%.
- The company completed two significant acquisitions: Chronosphere, Inc. for $3.0 billion and CyberArk Software Ltd. for $2.3 billion, significantly expanding its platform capabilities.
- Gross margin remained strong at 73.9% for the six-month period.
- Cash, cash equivalents, and investments stood at $7.9 billion as of January 31, 2026, demonstrating robust liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Palo Alto Networks Inc kept $0.17.
- Revenue$2.59B100.0%
- Cost of revenue−$685.0M26.4%
- Gross profit$1.91B73.6%
- Operating costs−$1.51B58.3%
- Operating income$397.0M15.3%
- Interest, other & tax$35.0M1.3%
- Net income$432.0M16.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed February 18, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $2.59B$2.26B | +14.9% |
| Cost of Revenue | $685.00M$599.00M | +14.4% |
| Gross Profit | $1.91B$1.66B | +15.1% |
| R&D Expenses | $511.00M$505.00M | +1.2% |
| Operating Expenses | $1.51B$1.42B | +6.7% |
| Operating Income | $397.00M$241.00M | +64.7% |
| Net Income | $432.00M$267.00M | +61.8% |
| EPS (Basic) | $0.61$0.41 | +48.8% |
| EPS (Diluted) | $0.61$0.38 | +60.5% |
| Shares Outstanding (Basic) | 704.00M659.00M | +6.8% |
| Shares Outstanding (Diluted) | 711.00M709.00M | +0.3% |
05—Questions
Frequently Asked Questions
How did Palo Alto Networks perform financially in the first half of fiscal year 2026?
Palo Alto Networks demonstrated strong financial performance in the first half of fiscal year 2026, with total revenue growing 15% year-over-year to $5.1 billion. This growth was driven by robust subscription and support revenue and a significant increase in product revenue. The company also saw substantial improvement in operating income, reaching $706 million, and maintained a healthy gross margin of 73.9%.
What are the key strategic acquisitions made by Palo Alto Networks during this period and their expected impact?
Palo Alto Networks completed two significant acquisitions: Chronosphere, Inc. for $3.0 billion to enhance its observability platform and CyberArk Software Ltd. for $2.3 billion in cash and stock to bolster its identity security offerings. These acquisitions are expected to expand the company's comprehensive cybersecurity platform, integrate new technologies, and create cross-selling opportunities, ultimately strengthening its market position.
How has the revenue mix shifted, and what is the outlook for subscription and support revenue?
The company continues to see a favorable shift towards recurring revenue streams. Subscription and support revenue grew 14% to $4.1 billion for the six months ended January 31, 2026, now representing 81.3% of total revenue. This trend highlights the increasing adoption of Palo Alto Networks' cloud-delivered security services and ongoing customer commitment to its platform, suggesting continued revenue predictability and growth.
What is the company's liquidity position and its plans for capital deployment?
Palo Alto Networks maintains a strong liquidity position, with over $7.8 billion in cash, cash equivalents, and investments as of January 31, 2026. The company has a remaining authorization of $1.0 billion for share repurchases under its existing program. The robust cash position, coupled with strong operating cash flow, provides flexibility for continued strategic investments in R&D, sales, marketing, and potential future acquisitions.
06—Continue