Palo Alto Networks (PANW) Q2 2026 earnings summary

Executive summary

• Q2 FY2026 revenue grew 15% year-over-year to $2.6 billion, driven by strong product, subscription, and Next-Gen Security ARR growth, and robust platformization momentum.

• Non-GAAP operating margin exceeded 30% for the third consecutive quarter, with non-GAAP EPS at $1.03 and GAAP net income at $432 million, up 62% year-over-year.

• Adjusted free cash flow for the trailing twelve months was $3.75 billion, with strong cash and equivalents position post-acquisitions.

• Completed major acquisitions of Chronosphere and CyberArk, expanding observability and identity security platforms and driving future growth.

• Continued innovation in AI-driven security and platformization, with Prisma AIRS and Cortex AgentiX gaining traction.

Financial highlights

• Total revenue was $2.59–$2.6 billion, up 15% year-over-year; Next-Gen Security ARR reached $6.3–$6.33 billion, up 33%.

• Product revenue grew 22% to $514 million; subscription and support revenue was $2.08 billion, up 13–14%.

• Gross margin was 73.6–76.1%; product gross margin 78.2%, services gross margin 75.6%.

• Diluted non-GAAP EPS was $1.03; GAAP EPS was $0.61; adjusted free cash flow for Q2 was $502 million.

• Cash and equivalents at $7.9 billion after acquisitions; cash flow from operations for six months was $2.3 billion.

Outlook and guidance

• Q3 2026: Revenue expected at $2.941–$2.945 billion (+28–29%), Next-Gen Security ARR at $7.94–$7.96 billion (+56%), non-GAAP EPS $0.78–$0.80.

• FY26: Revenue guidance $11.28–$11.31 billion (+22–23%), Next-Gen Security ARR $8.52–$8.62 billion (+53–54%), non-GAAP operating margin 28.5–29%, adjusted free cash flow margin 37%.

• Targeting 40% free cash flow margin by FY28 and $20 billion Next-Gen Security ARR by FY30.

• Management expects sufficient liquidity to meet cash needs for at least the next 12 months.