Palo Alto Networks Beats Wall Street Estimates on AI-Driven Cybersecurity Demand

Palo Alto Networks surpassed Wall Street's fiscal third-quarter results as artificial intelligence threats drive demand for sophisticated cybersecurity tools.

Shares rose as much as 12% in after-hours trading, but later pulled back.

Here's how the company did versus LSEG estimates:

Earnings per share: 85 cents adjusted vs. 80 cents expected

Revenue: $3.00 billion vs. $2.94 billion expected

Revenue grew 31% from a year ago, including $388 million from its recent CyberArk and Chronosphere acquisitions, the cybersecurity company said. The company reported a net loss of $177 million, a loss of 22 cents per share, down from net income of $262 million, or 37 cents per share, a year ago.

The beat comes on lowered expectations, after the company gave disappointing guidance in February that fell short of analyst estimates.

Palo Alto issued stronger-than-expected guidance for the fourth quarter. The company expects revenue to range between $3.35 billion and $ 3.36 billion, versus a $3.28 billion estimate. Full-year guidance was also lifted, coming in at $11.42 billion to $11.43 billion.

"The latest advancements at the AI frontier have increased the level of urgency around cybersecurity, and redefined the shape of the industry for the coming years," CEO Nikesh Arora said in a release.

Palo Alto shares have rallied more than 60% this year and over 80% this quarter as sophisticated cyber tools, capable of exposing software flaws, force companies to invest in cyber tools.

Earlier in the year, the sector sold off on worries that AI would massively disrupt software, including cybersecurity.

Over 1,200 customers have reached out to Palo Alto in the wake of Mythos, and the company has held 800 meetings over the last six weeks, Nikesh told analysts on Tuesday.

Both Palo Alto and its competitors are leaning into more AI acquisitions to beef up their suite of tools as the agentic revolution paves the way for attackers to carry out quicker and faster cyberattacks. Within the last year, the company bought Israeli identity security platform CyberArk for $25 billion.

Other significant acquisitions include KOI Security, AI observability platform Chronosphere and Protect AI.

Palo Alto is an early participant in Anthropic's Project Glasswing, which is aimed at testing the potential cybersecurity ramifications of its powerful Mythos model.

The model, which spiked concerns that hackers could use the tool to accelerate attacks, opened to 150 more partners for testing on Tuesday.