Revenue: Q4 revenue reached $3.41 billion, up 34% year-over-year; full fiscal year 2026 revenue was $11.5 billion, up 24%.
Remaining Performance Obligations (RPO): Record RPO surpassed $20 billion for the first time, ending the year at $21.2 billion, up 34%; current RPO reached $9.3 billion, also up 34%.
Next-Generation Security (NGS) ARR: Reached $9.1 billion, up 63%, with nearly $1 billion in net new NGS ARR added in Q4 alone.
Network and AI Security Revenue: Grew 17% for the full fiscal year to $8.35 billion.
Cortex Revenue: Grew 25% in fiscal 2026 to $1.92 billion.
Idira Revenue: On a pro forma basis, reached $1.26 billion in fiscal 2026, growing 21%.
Gross Margin: Q4 total gross margin was 74.8%, down 100 basis points year-over-year; full fiscal year gross margin was 75.8%, down 60 basis points.
Operating Margin: Q4 non-GAAP operating margin was 29.6%; full fiscal year operating margin was 29.2%, an increase of 40 basis points year-over-year.
Earnings Per Share (EPS): Q4 non-GAAP EPS was $1.02, exceeding the high end of guidance by $0.04.
Adjusted Free Cash Flow: Q4 reached $1.29 billion, growing 35% year-over-year; full fiscal year was $4.41 billion, delivering a margin of 38.4%.
Cash Position: Ended fiscal 2026 with $7.9 billion in cash, cash equivalents, and short-term investments.
Prisma AIRS ARR: Surpassed $100 million in ARR within four quarters of general availability.
XSIAM ARR: Concluded the year with over $700 million in ARR, up 70%.
Observability ARR: Eclipsed the $500 million mark, more than doubling since the Chronosphere acquisition closed in Q2.
Software Firewall ARR: Reached 29% ARR growth in Q4.
SASE Bookings: Grew 40% in fiscal 2026.
Release Date: September 01, 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 ) delivered a record fiscal Q4 2026, exceeding guidance across all financial metrics with bookings momentum accelerating for the second consecutive quarter.
The company achieved record RPO surpassing $20 billion for the first time, closing the year at $21.2 billion, representing 34% growth year-over-year.
NGS ARR reached $9.1 billion, up 63%, with nearly $1 billion in net new NGS ARR added in Q4 alone, a milestone that almost doubled year-on-year.
Platformization adoption hit a record with approximately 220 net new platformizations in Q4, more than double the volume from two years ago, and the platformized cohort's NRR exceeded 120%.
Prisma AIRS surpassed $100 million in ARR within four quarters of general availability, marking the fastest scaling product in the company's history, while XSIAM ARR grew 70% to over $700 million.
The CyberArk (Idira) and Chronosphere acquisitions are exceeding expectations, with Idira revenue growing 21% pro forma and observability ARR more than doubling to surpass $500 million since the Chronosphere acquisition.
Negative Points
Total gross margin in Q4 declined 100 basis points year-over-year to 74.8%, and full-year gross margin was down 60 basis points, reflecting a mix shift towards faster-growing SaaS offerings.
The company expects rising commodity costs, particularly for memory and storage, to persist in the hardware business, which could pressure margins despite hardware being only ~10% of total revenue.
Fiscal 2027 guidance for NGS ARR growth of 22-23% represents a significant deceleration from the 63% growth in fiscal 2026, indicating a normalization of growth rates.
The fiscal 2027 outlook assumes the tail end of a nine-figure benefit from a large LLM customer migrating to Chronosphere will last only through Q1, with less net new ARR contribution than in Q4, impacting seasonality.
The company anticipates higher cost of goods sold in fiscal 2027, with cloud hosting costs expected to grow faster than total revenue due to the increasing mix of cloud and SaaS offerings.
While the company exceeded guidance, the Q1 fiscal 2027 EPS guidance of $0.96-$0.98 is below the Q4 fiscal 2026 EPS of $1.02, suggesting potential near-term margin pressure or seasonality.
Q & A Highlights
Q : How is the rise of AI-driven threats, such as the "Mythos moment," changing customer buying behavior and deal dynamics? A : Nikesh Arora, Chairman and CEO, stated that the emergence of cyber-capable models has shifted conversations from finding vulnerabilities to solving them long-term. This is driving customers toward platformization and modernization of their cyber estates, as fragmented tools are no longer viable against machine-speed attacks. He noted this is a long-term tailwind for larger players, as customers seek consolidated, unified platforms for real-time defense, reducing sensitivity to pricing in favor of a strategic, long-term approach.
Q : Can you provide more detail on the early success and integration of the CyberArk (now Idira) acquisition, particularly regarding revenue synergies and go-to-market collaboration? A : Nikesh Arora highlighted that the integration is ahead of schedule, with margins reverting to stand-alone levels within two quarters. On the revenue side, joint efforts have yielded over 400 shared leads and 200 net new logos from the Palo Alto installed base. He emphasized the launch of "Modern PAM," a new expansion category, and the strategic importance of Idira in securing machine identities for the rise of agentic AI, a field with no established leader yet.
Q : What is driving the significant acceleration in SASE displacements, and how should we interpret the jump in the total contract value of these displacements? A : Nikesh Arora explained that the displacement is driven by Palo Alto's integrated SASE and SD-WAN fabric, which is consistent with its hardware and software firewall offerings. This makes it a simpler choice for customers already using Palo Alto consoles and services to standardize on their SASE solution. CFO Dipak Golechha clarified that the figure was $200 million year-to-date at Q3 and $450 million for the full year, indicating a very strong Q4.
Q : How is Palo Alto Networks approaching M&A given the rapidly shifting AI landscape, and are there plans for more transformational acquisitions? A : Nikesh Arora stated that M&A is not a strategy but a consequence of product development. As the market shifts (e.g., from LLMs to agents to open-weight models), Palo Alto monitors the landscape for companies that have correctly anticipated technology trends. Acquisitions are made to quickly embrace these trends and provide customers with capabilities faster than building in-house, particularly in areas like securing autonomous agents and open-weight models.
Q : What is the company's long-term vision for reducing manual cybersecurity work, and how does the recent Console acquisition fit into that strategy? A : Nikesh Arora outlined a North Star of reducing human intervention in detection, prevention, and remediation. He envisions a future where Palo Alto's AI agents can understand a customer's deployment, replace products, and configure policies autonomously, leveraging learnings from thousands of deployments. The Console acquisition, which brings an AI-first approach to IT and security operations, is a step toward this autonomous security operations vision, integrating into the Cortex effort.
Q : How is Palo Alto Networks addressing the $1 trillion of cybersecurity technical debt, and what are the gating factors for customers to accelerate their modernization? A : Nikesh Arora explained that Palo Alto offers flexible commercial models, such as staggered payments, to drive faster platformization. However, the primary constraint is that customers have competing priorities, including AI transformation projects. He noted that while the desire to standardize on larger vendors is growing, transformation plans typically span one to three years, as customers balance this priority with other enterprise initiatives.
Q : What is the growth trajectory and competitive positioning of the observability business (Chronosphere) against established market leaders? A : Nikesh Arora stated that Chronosphere was designed for the AI era with a lower total cost of ownership (30-40% cheaper than incumbents). While initially focused on AI-native customers, the integration of Embrace and development of synthetics will bring it to parity with leading players, allowing Palo Alto to target the enterprise market. He expressed confidence in building a multi-billion-dollar ARR business, noting it has already crossed $500 million in ARR.
Q : How is the company thinking about its fiscal 2027 guidance, and what are the key assumptions and drivers for potential upside? A : Nikesh Arora stated that guidance is taken thoughtfully, based on underlying business plans and the ability to meet or exceed consensus. CFO Dipak Golechha added that the process involves analyzing pipeline, traction in new areas, and resource requirements. He noted that the process is well-established and has successfully captured various inflection points over the past five to six years.
Q : What is the opportunity in the operational technology (OT) space, and how does the Frontier AI Defense service address the challenges of patching vulnerabilities in these environments? A : Nikesh Arora acknowledged that OT is hard to patch, but highlighted a new capability to build signatures for OT and open-source vulnerabilities and deploy fixes in under four hours, compared to the industry standard of 55 days. He noted that the gating factor is customers taking time to understand changes, run POCs, and deploy, making this a long-term tailwind rather than an immediate, rapid-growth area.
Q : Can you elaborate on the performance of Prisma AIRS and the broader AI security strategy, particularly around securing agentic AI? A : Nikesh Arora highlighted that Prisma AIRS surpassed $100 million in ARR within four quarters of general availability, the fastest scaling product in company history. The strategy has evolved from securing chatbots to providing a comprehensive agentic security architecture, which includes securing machine identities, observing agentic footprints, and enforcing policies at an AI gateway. He noted that the endpoint is a critical inflection point, with the Koi acquisition enabling end-to-end transparency from prompt to execution.