Palo Alto Networks Inc (PANW) Q2 2026 Earnings Call Highlights: Strong Revenue Growth and …

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Wed, February 18, 2026 at 2:01 PM GMT+9 4 min read

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**Revenue:** $2.59 billion, a growth of 15% year over year.

**Next Generation Security ARR:** $6.33 billion, up 33% including a $200 million contribution from Chronosphere.

**Operating Margin:** 30.3%, marking the third consecutive quarter above 30%.

**Gross Margin:** Total gross margin at 76.1%; product gross margin at 78.2%.

**Adjusted Free Cash Flow:** $502 million for Q2; $3.75 billion on a trailing 12-month basis.

**Cash and Cash Equivalents:** $7.9 billion, reflecting a $2.6 billion cash consideration for the Chronosphere acquisition.

**Net Income:** Diluted non-GAAP EPS of $1.03.

**Product Revenue Growth:** 22%, with 45% from software form factors.

**Services Revenue Growth:** Slightly above 13%, with subscription revenue up 14% and support revenue up 12%.

**Geographical Performance:** Americas grew 14%, EMEA grew 17%, and JPAC grew 17%.

**Remaining Performance Obligation (RPO):** $16.0 billion, up 23%.

**Guidance for Q3 2026:** Revenue expected between $2.941 to $2.945 billion, with diluted non-GAAP EPS between $0.78 to $0.80.

Warning! GuruFocus has detected 3 Warning Sign with PANW.

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Release Date: February 17, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Palo Alto Networks Inc (NASDAQ:PANW) reported a 28% increase in revenue growth, excluding the impact of recent acquisitions.

The company achieved a 30%+ operating margin for the third consecutive quarter, indicating strong profitability.

Palo Alto Networks Inc (NASDAQ:PANW) has successfully integrated AI security into its offerings, with Prisma AI rapidly scaling to over 100 customers.

The company's platformization strategy has led to a 35% increase in total platformization count, demonstrating strong customer retention and expansion.

Palo Alto Networks Inc (NASDAQ:PANW) has made strategic acquisitions, such as Cyber Ark and Kronos, to enhance its market position and expand its capabilities in identity security and observability.

Negative Points

The integration of recent acquisitions, Cyber Ark and Kronos, could pose challenges and potential distractions for the management team.

There is a concern about the slow adoption of AI in the enterprise sector compared to consumer applications, which may delay revenue realization from AI-related offerings.

The company's hardware segment experienced a sequential decrease in product gross margin due to a higher mix of hardware in product revenue.

Supply chain challenges, such as higher memory and storage pricing, have marginally impacted product costs.

The company's services segment saw a year-over-year decrease in gross margin, reflecting a shift towards high-growth SaaS offerings that are still scaling.

 






Story Continues  

Q & A Highlights

Q: Nikesh, looking back at 2018, 2019, there was a fear that cloud computing would render parts of the cybersecurity stack obsolete. Now, with AI, how does this shift compare, and is M&A the primary lever again? A: Nikesh Arora, CEO: In 2018-2019, we had to refactor our security services for the cloud, which was a huge opportunity. Now, AI is seen as a threat, but it actually drives more consistency in security stacks. AI adoption is slower on the enterprise side, but as it grows, it will require more security, leading to more platformization and data harmonization.

Q: Investors are concerned that LLMs might replace SIM tools. How do you view the balance of opportunity and threat from LLMs? A: Nikesh Arora, CEO: LLMs are beneficial for security, especially in data classification and offensive security. They help summarize capabilities and perform pre-work. However, they are not a threat to security products, as security requires 100% accuracy. AI will enhance security capabilities but won’t replace security products.

Q: How do you see the joint pipeline opportunity with Cyber Ark unfolding, and what ARR can we expect from Cyber Ark this year? A: Nikesh Arora, CEO: Both teams are working together to pursue joint opportunities. We’ve built a roadmap for overlapping pipelines and are seeing early momentum. Dipak Golechha, CFO: Cyber Ark’s NGS ARR was about $1.2 billion as of December 2025, and we’ve guided the total M&A contribution, providing a clear picture of the ARR.

Q: What is driving the re-acceleration in the Sassy business in fiscal Q2? A: Unidentified Company Representative: The acceleration is due to customers moving from point product adoption to a platform approach. Customers need consistent security and user experiences across different environments, which our platform provides, driving excitement and growth in the Sassy business.

Q: How do you view the quantum opportunity, and what are the early learnings from customer discussions? A: Nikesh Arora, CEO: We’ve acquired Venify and are building a Next Generation Trust subscription with quantum capabilities. We’ve received positive feedback from 100 beta customers. Our quantum capability integrates data from multiple vendors, providing comprehensive enterprise solutions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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