Summary
Palo Alto Networks closed fiscal 2026 with a $3.41 billion fourth quarter, up 34.5% year over year. Full-year revenue reached $11.48 billion, up 24.5%. The company said it added nearly $1 billion of net new Next-Generation Security ARR in the quarter and ended with NGS ARR of $9.10 billion, up 63%. Remaining performance obligations rose 34.2% to $21.2 billion. Current deferred revenue rose 22.9% to $7.75 billion. Those metrics point to a still-strong demand pipeline even as the income statement absorbed heavy acquisition and compensation costs.
The GAAP profit picture weakened sharply. Fourth-quarter operating income fell 65.4% to $172 million. Full-year operating income was $695 million, down 44.1%. Gross margin for the quarter was 67.6%, down 5.7 percentage points, and full-year gross margin was 70.4%, down 3.1 percentage points. Operating margin in the quarter was 5.0%, down 14.6 percentage points, while the full-year operating margin was 6.1%, down 7.4 percentage points. The quarter produced a GAAP net loss of $282 million, a swing to a loss from the prior-year quarter. Full-year net income was $307 million, down 72.9%. Full-year diluted earnings per share was $0.40, down 75.0%. Non-GAAP results looked different: quarterly non-GAAP operating income was $1.0 billion, and non-GAAP net income was $853 million, or $1.02 per diluted share. Management pointed to share-based compensation, acquisition-related costs, amortization of acquired intangibles, and convertible note fair value moves as the main reconciling items.
Cash generation remained a bright spot. Fourth-quarter operating cash flow rose 32.9% to $1.36 billion. Full-year operating cash flow rose 22.5% to $4.55 billion. Capital expenditures rose 18.4% in the quarter to $103 million, and full-year capital expenditures rose 78.1% to $440 million. Adjusted free cash flow, a non-GAAP measure, was $1.3 billion in the quarter compared with $954 million a year earlier. Fiscal 2026 adjusted free cash flow margin was 38.4%. The company also stayed active on acquisitions, with Chronosphere, CyberArk, Koi, Portkey, Embrace, and Console. CyberArk formed the identity security platform, while Console is expected to deepen agentic capabilities in Cortex.
For the fiscal first quarter of 2027, Palo Alto Networks guided to NGS ARR of $9.54 billion to $9.56 billion, up 63%, RPO of $20.8 billion to $20.9 billion, up 34% to 35%, revenue growth of 33% to 34%, and diluted non-GAAP net income per share of $0.96 to $0.98. For the full fiscal year 2027, the company guided to NGS ARR of $11.075 billion to $11.175 billion, up 22% to 23%, RPO of $25.2 billion to $25.4 billion, up 19% to 20%, revenue growth of 23% to 24%, non-GAAP operating margin of 29.5%, diluted non-GAAP net income per share of $4.16 to $4.19, and adjusted free cash flow margin of 38.0%. The company also pointed to a $20 billion FY30 NGS ARR target and a 40% adjusted free cash flow margin target for FY28.
Risks remain material. The company cites unfavorable economic and market conditions, geopolitical uncertainty, tariffs and trade disputes, supply chain disruptions including memory and storage component shortages, intense competition, customer vendor consolidation, AI development and deployment risks, acquisition integration risk, and the complexity of its convertible notes. The gap between GAAP and non-GAAP profitability is wide, and stock-based compensation plus acquisition amortization will keep pressure on reported earnings. Cash flow and ARR are holding up, but the fiscal 2026 results show a business digesting large deals while trying to defend margins.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2026 | Q3 FY2026 | QoQ | Q4 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.41B | $3.00B | +13.6% | $2.54B | +34.4% |
| Gross profit | $2.30B | $2.03B | +13.6% | $1.86B | +24.1% |
| Gross margin | 67.6% | 67.5% | +0.0 pp | 73.2% | -5.7 pp |
| Research & development | $779.0M | $734.0M | +6.1% | $503.5M | +54.7% |
| Sales & marketing | $1.13B | $1.16B | -2.9% | $829.3M | +35.9% |
| General & administrative | $226.0M | $316.0M | -28.5% | $27.3M | +727.8% |
| Total operating expenses | $2.13B | $2.21B | -3.6% | $1.36B | +56.8% |
| Operating income (loss) | $172.0M | -$183.0M | +194.0% | $497.2M | -65.4% |
| Operating margin | 5.0% | -6.1% | +11.1 pp | 19.6% | -14.6 pp |
| Net income (loss) | -$282.0M | -$177.0M | -59.3% | $253.8M | -211.1% |
| Net margin | -8.3% | -5.9% | -2.4 pp | 10.0% | -18.3 pp |
| Diluted EPS | -$0.37 | -$0.22 | -$0.15 | $0.36 | -$0.73 |
Risks
Gross margin fell to 67.6% in FY2026 Q4, down 5.7 pp versus the prior-year quarter, and operating margin fell to 5.0%, down 14.6 pp, driven by amortization of intangibles from the CyberArk and Chronosphere acquisitions, higher cloud hosting costs, and supply chain cost pressure. FY2026 net income was $307 million, down 72.9% year to date, and Q4 swung to a net loss of $282 million.
Cloud infrastructure providers and frontier AI model companies increasingly bundle native security, identity, and observability capabilities at low or no incremental cost, and may design them to integrate better with their own platforms than third-party offerings. The filing also flags that failure to execute on AI-native platforms could materially harm gross margin and competitive position.
Headcount grew from 16,068 at the end of fiscal 2025 to 21,921 at the end of fiscal 2026, including roughly 4,223 from CyberArk, with additional acquisitions (Chronosphere, Koi, Portkey, Embrace, Console) closing during and after the year. Integrating these businesses has driven general and administrative expense up 103% for fiscal 2026 and may fail to deliver expected synergies.
Two distributors each represented 10% or more of total revenue in fiscal 2026 and 30% in aggregate, and as of July 31, 2026 one distributor represented 19% of gross accounts receivable. Channel partner agreements can generally be terminated with advance notice before each annual renewal date.
In May 2026 the company disclosed an authentication bypass vulnerability in certain versions of PAN-OS software, issuing a security advisory and remediation efforts. As a well-known security vendor, the company remains an attractive target and the filing notes prior unauthorized access to information on its or its third-party providers' networks.
A growing portion of revenue comes from consumption or usage-based offerings, including observability and AI-related products, exposing the company to customer optimization behavior where rapidly scaled usage is subsequently reduced or reconfigured to lower costs, a dynamic observed among cloud-native and AI-native customers.
After $153 million of principal conversions settled for $160 million in cash during fiscal 2026, $1.1 billion of CyberArk's 0.0% Convertible Senior Notes due 2030 remains outstanding and is now exchangeable into the company's common stock and cash. Holders may convert in a future quarter, obligating cash settlement of principal plus any excess conversion obligation.
The effective tax rate rose to 42.7% for fiscal 2026 from 28.9% for fiscal 2025, primarily due to non-deductible changes in the fair value of the 2030 Notes and Capped Calls and share-based compensation. The company also cites uncertainty around Pillar Two global minimum tax implementation and the new Israeli R&D Law credit.
The company states that its growth and success depend on attracting, retaining, and motivating key technical, sales, and management personnel, and that failure to do so could harm the business. General and administrative expense growth was partly driven by accelerated equity vesting and severance tied to the CyberArk acquisition, indicating integration-related retention pressure.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Total customers
Summary, forecast, risks and KPIs are extracted from Palo Alto Networks Inc's SEC filings for Q4 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.