01—Abstract
Summary
Summary of the 10-Q filed June 3, 2026. Cited figures are marked; the original filing is the authoritative source.
Palo Alto Networks, Inc. reported solid revenue growth for the third quarter of fiscal year 2026, with total revenue reaching $3.0 billiona, a 31% increase year-over-year.
This growth was driven by strong performance across both product and subscription and support segments, with subscription and support revenue now constituting 80.2% of total revenue. The company's strategic focus on platformization, evident in its network security, security operations, observability, and identity security platforms, continues to resonate with customers, as indicated by the substantial remaining performance obligations of $18.4 billionb. Despite the robust revenue growth, the company reported a net loss of $177 million for the quarter, a shift from the net income of $262 million in the prior year's comparable period.
This loss is largely attributable to significant investments and expenses related to recent large-scale acquisitions, notably CyberArk Software Ltd., which was completed in February 2026. The company's balance sheet reflects a substantial increase in goodwill and intangible assets due to these acquisitions. While operating expenses, particularly in sales and marketing and R&D, have increased, the company generated positive operating cash flow of $3.2 billionc for the nine months ended April 30, 2026, indicating underlying operational strength.
02—Key points
Key Highlights
- Total revenue for Q3 FY2026 was $3.0 billion, a 31% increase year-over-year.
- Subscription and support revenue grew 31% year-over-year to $2.4 billion, now representing 80.2% of total revenue.
- Remaining performance obligations stood at $18.4 billion as of April 30, 2026, indicating strong future revenue visibility.
- The company reported a net loss of $177 million for the quarter, compared to a net income of $262 million in the prior year, largely due to acquisition-related expenses.
- Goodwill and intangible assets significantly increased due to the CyberArk acquisition, totaling $21.9 billion and $7.3 billion respectively at the end of the quarter.
- Operating expenses increased by 52% year-over-year, driven by higher R&D, sales & marketing, and general & administrative costs, partly due to recent acquisitions.
- Net cash provided by operating activities was $3.2 billion for the nine months ended April 30, 2026.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2026, Palo Alto Networks Inc lost $0.06.
- Revenue$3.00B100.0%
- Cost of revenue−$974.0M32.4%
- Gross profit$2.03B67.6%
- Operating costs−$2.21B73.7%
- Operating income−$183.0M6.1%
- Interest, other & tax$6.0M0.2%
- Net income−$177.0M5.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2026filed June 3, 2026Financial Statements
Q3 FY2026 against Q3 FY2025
| Line item | Q3 FY2026Q3 FY2025 | Change |
|---|---|---|
| Revenue | $3.00B$2.29B | +31.1% |
| Cost of Revenue | $974.00M$619.00M | +57.4% |
| Gross Profit | $2.03B$1.67B | +21.4% |
| R&D Expenses | $734.00M$494.00M | +48.6% |
| Operating Expenses | $2.21B$1.45B | +52.4% |
| Operating Income | -$183.00M$219.00M | −183.6% |
| Net Income | -$177.00M$262.00M | −167.6% |
| EPS (Basic) | $-0.22$0.39 | −156.4% |
| EPS (Diluted) | $-0.22$0.37 | −159.5% |
| Shares Outstanding (Basic) | 801.00M665.00M | +20.5% |
| Shares Outstanding (Diluted) | 801.00M707.00M | +13.3% |
05—Questions
Frequently Asked Questions
What is the primary driver of Palo Alto Networks' revenue growth?
Palo Alto Networks' revenue growth is primarily driven by its subscription and support offerings, which have shown strong year-over-year growth and now constitute the majority of its total revenue. The company's platformization strategy, encompassing network security, security operations, observability, and identity security, is key to this growth, leading to increased adoption and expansion with existing customers.
Why did the company report a net loss in the current quarter despite strong revenue growth?
The net loss of $177 million in the current quarter, compared to a net income in the prior year, is primarily due to significant expenses and integration costs associated with recent large-scale acquisitions, most notably the acquisition of CyberArk Software Ltd. These integration efforts and associated accounting adjustments impact profitability in the short term, even as the underlying business demonstrates strong revenue performance.
What is the significance of the remaining performance obligations (RPO)?
The remaining performance obligations (RPO) of $18.4 billion as of April 30, 2026, represent the total amount of revenue that the company expects to recognize in the future from existing contracts. This figure is a key indicator of future revenue visibility and the company's ability to sustain its growth trajectory.
How have recent acquisitions impacted the company's balance sheet?
Recent acquisitions, particularly CyberArk, have significantly impacted the balance sheet. There has been a substantial increase in goodwill, reflecting the premium paid over the fair value of acquired net assets, and a significant rise in intangible assets related to acquired technologies and customer relationships. These acquisitions also led to an increase in both short-term and long-term debt and deferred revenue.
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