Palo Alto Networks Stock Slides Despite Q2 Beat, Strong Guidance: Retail Not Interested In ‘Panic Selling’

CEO Nikesh Arora said the strong second-quarter performance was fueled by customers adopting technology driven by the imperative of AI, including cloud investment and infrastructure modernization.

Palo Alto Networks, Inc. (PANW) shares fell in Thursday’s after-hours session despite the cybersecurity company’s fiscal year 2025 second-quarter beat.

The Santa Clara, California-based company reported second-quarter adjusted earnings per share (EPS) of $0.81 and revenue of $2.3 billion, up 14% year over year (YoY). 

The results exceeded the consensus estimates of $0.76 and $2.27 billion, respectively. The guidance issued in late November modeled adjusted EPS of $0.77-$0.78 (split-adjusted) and revenue of $2.22 billion to $2.25 billion.

The reported net income was $1.7 billion or $2.44 per share, which included a $1.5 billion net tax benefit.

CEO Nikesh Arora said, “In Q2, our strong business performance was fueled by customers adopting technology driven by the imperative of [artificial intelligence] AI, including cloud investment and infrastructure modernization.”

He noted that platformization drew the company’s quarterly results, with strength seen in next-generation security (NGS) annual recurring revenue (ARR) and remaining performance obligations (RPO). 

NGS ARR climbed 14% YoY to $4.8 billion, exceeding the guidance of $4.70 billion to $4.75 billion. However, the growth decelerated from the 40% pace in the third quarter. RPO climbed 21% to $13 billion versus the guidance of $12.9 billion to $13 billion, with growth accelerating from the third quarter’s 20%.

Palo Alto expects third-quarter adjusted EPS of $0.76-$0.77 and revenue of $2.26 billion to $2.29 billion, compared to the consensus estimates of $0.76 and $2.27 billion.

The company guided NSG ARR growth of 33%-34% and RPO growth of 19%-20%.

The company nudged up its fiscal year 2025 revenue guidance to $9.14 billion—$9.19 billion from $9.12 billion—$9.17 billion. It also guided adjusted EPS to $3.18-$3.24.

The bottom-line guidance was above the estimated $3.17, while the revenue guidance surrounded the $9.15-billion consensus estimate.

It looked forward to NGP ARR growth of 31%-32% and RPO growth of 19%-20%.

On Stocktwits, sentiment toward Palo Alto stock remained ‘extremely bullish’ (97/100), the highest in about a year, and the message volume stayed ‘extremely high.’ The stock was among the top ten trending tickers on the platform late Thursday.

A watcher called upon fellow retailers not to resort to panic selling, calling the quarterly performance a ‘good beat.’

Another user said the post-earnings sell-off is a typical development seen after each of the past 14 prints. They see the stock rising by over 10% from the pre-earnings level.

In the after-hours session, Palo Alto stock fell 5.10% to $191.59. The stock has gained about 10% this year.

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