Palo Alto Networks shares jumped Monday night after the cybersecurity agency posted a better-than-expected quarter and supplied a primary take a look at steerage for its subsequent fiscal yr. These robust outcomes ought to ease issues that the $25 billion CyberArk deal was masking a slowdown within the core enterprise. Income for the corporate’s fiscal 2025 fourth quarter elevated 16% yr over yr to $2.54 billion, exceeding the Wall Road consensus estimate of $2.5 billion, in line with LSEG. Adjusted earnings per share (EPS) elevated 27% to 95 cents within the quarter, forward of the 88-cent LSEG consensus estimate. PANW YTD mountain Palo Alto Networks YTD Shares rose about 5% in after-hours buying and selling to about $185. The transfer would put the inventory again in optimistic territory for 2025, although the inventory was nonetheless down from $204 when the corporate’s curiosity in CyberArk was first reported. Backside line It has been a rocky earnings season to this point for the cybersecurity shares, with Fortinet and Test Level getting hammered after reporting, and Cisco Techniques’ safety income considerably lacking its consensus estimate. However Palo Alto Networks is a best-of-breed firm, and it proved why Monday night time with strong beats throughout all the important thing metrics: income, adjusted EPS, adjusted free money circulate margin, next-generation safety annual recurring income (ARR), and whole remaining efficiency obligation (RPO). The corporate additionally issued upside steerage for its fiscal yr 2026. Now that we have seen the quarter and upbeat outlook, the CyberArk acquisition — which despatched Palo Alto shares from $204.50 earlier than the deal was introduced to a low of about $167 about one week in the past — should not be perceived as a defensive transfer to assist a struggling core enterprise. Palo Alto is enjoying offense by including a pacesetter in Identification safety to its portfolio at a time when administration believes the market will inflect within the subsequent 12 to 24 months as a result of emergence of agentic AI. “In the event you imagine that we’ve got been in a position to establish inflections in a great way at Palo Alto Networks, it will be significant so that you can imagine that we’ve got this one proper as properly,” CEO Nikesh Arora stated on the earnings name. Why we personal it We imagine cybersecurity is a secular progress market, as dangerous actors are relentless and firms merely can’t afford to not put money into protection. It’s a endless arms race. We imagine Palo Alto Networks, specifically, is uniquely positioned to thrive as a result of its best-in-class instruments and a broad product portfolio that permits it to offer an all-encompassing “platform” resolution to cybersecurity. Opponents : CrowdStrike (additionally a Membership inventory), Fortinet , Cisco Techniques Final purchase : Aug. 11, 2025 Initiation : Feb. 15, 2023 Any deal of this dimension comes with execution danger, creating an overhang on the inventory till administration proves in any other case. Nonetheless, we’ve got nice confidence in Arora’s skill to ship, given his intensive background in deal-making. That is an enormous cause why we upgraded the inventory to our 1 ranking when Arora defined the deal on CNBC and added to our place final Monday. We’re reiterating our buy-equivalent 1 ranking and our $225 worth goal. Commentary Palo Alto Networks and the time period “platformization” have now grow to be synonymous. It has been about 18 months because the firm introduced a strategic shift towards accelerated “platformization” of its cybersecurity choices. This technique is all about getting clients to purchase complete suites of merchandise and consolidate their cybersecurity spending with Palo Alto. It is a change from the previous approach shopper firms used to purchase particular person merchandise from completely different cybersecurity distributors. By accelerating a platform technique, Palo Alto has stated it will result in extra market share, greater offers, and better ARR per buyer, in addition to higher safety outcomes and decrease churn charges. Palo Alto Networks set a brand new file for platformization within the quarter, bringing the whole depend to 1,400. That is up from 1,000 one yr in the past and retains the corporate on monitor to succeed in 2,500 to three,500 whole platformizations by fiscal yr 2030. “The record-breaking variety of platformization offers this quarter demonstrates that clients should not simply shopping for merchandise, they’re shopping for right into a strategic partnership,” Arora defined on the earnings name. “We imagine that built-in best-to-beat platforms ship superior safety outcomes, and our clients are validating this conviction by making bigger, extra strategic commitments with us than ever earlier than.” We’re inspired by how the corporate is seeing robust progress from its largest clients. It had 156 clients with over $5 million in next-gen safety ARR within the fourth quarter, up 51% yr over yr. It had 51 clients with over $10 million in next-gen safety ARR, up 50% yr over yr. One of many massive wins within the quarter was a $111 million cope with a number one international consulting agency. One other massive transaction was a $61 million cope with a world monetary providers agency. A 3rd massive win was a $33 million cope with a big U.S. insurance coverage supplier. Palo Alto doesn’t disclose the names of its purchasers. Steerage For Palo Alto’s full-year fiscal 2026, this is what the corporate expects. All estimates are sourced from FactSet. Complete income within the vary of $10.48 billion to $10.53 billion. This midpoint of $10.5 billion is above the consensus estimate of $10.42 billion. Non-GAAP earnings per share (EPS) within the vary of $3.75 to $3.85, which on the midpoint of $3.80 enormously exceeds the $3.67 consensus estimate. GAAP stands for usually accepted accounting ideas. Adjusted free money circulate margin within the vary of 38% to 39%. This means adjusted free money circulate of about $4 billion, which is above the consensus estimate of $3.9 billion. The adjusted free money circulate margin is calculated by dividing adjusted free money circulate by income. RPO of $18.6 billion to $18.7 billion, which is properly above the consensus estimate of $18.12 billion. Subsequent-generation safety ARR of $7 billion to $7.1 billion, which is a beat versus the $6.94 billion consensus estimate. The corporate’s outlook for the fiscal 2026 first quarter was in line/higher than anticipated throughout each main line merchandise. Right here administration expects. Income within the vary of $2.45 billion to $2.47 billion. Adjusted EPS within the vary of 88 cents to 90 cents. Subsequent-gen safety ARR of $5.82 billion to $5.84 billion. RPO of $15.4 billion to $15.5 billion. (Jim Cramer’s Charitable Belief is lengthy PANW, CSCO. See right here for a full checklist of the shares.) As a subscriber to the CNBC Investing Membership with Jim Cramer, you’ll obtain a commerce alert earlier than Jim makes a commerce. 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