Palo Alto Networks (PANW, Financial) has revealed plans to acquire Protect AI, a company recognized for its expertise in safeguarding Artificial Intelligence (AI) and Machine Learning (ML) applications. This acquisition is a strategic move aimed at bolstering Palo Alto Networks' position in cutting-edge cybersecurity solutions and addressing the emerging threats linked with AI advancements.
With this acquisition, Palo Alto Networks is poised to strengthen its arsenal against the novel threats posed by the rapid integration of AI technologies. Protect AI's team, including its CEO, founders, and employees, are expected to join Palo Alto Networks following the completion of the deal.
The transaction is contingent upon standard closing conditions, such as obtaining necessary regulatory approvals. Palo Alto Networks anticipates finalizing the acquisition by the end of its first fiscal quarter in 2026.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 48 analysts, the average target price for Palo Alto Networks Inc (PANW, Financial) is $209.39 with a high estimate of $235.00 and a low estimate of $123.00. The average target implies an upside of 16.99% from the current price of $178.98. More detailed estimate data can be found on the Palo Alto Networks Inc (PANW) Forecast page.
Based on the consensus recommendation from 54 brokerage firms, Palo Alto Networks Inc's (PANW, Financial) average brokerage recommendation is currently 2.1, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Palo Alto Networks Inc (PANW, Financial) in one year is $176.98, suggesting a downside of 1.12% from the current price of $178.98. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Palo Alto Networks Inc (PANW) Summary page.
PANW Key Business Developments
Release Date: February 13, 2025
- Total Revenue: $2.26 billion, grew 14% year-over-year.
- Product Revenue Growth: 8% increase.
- Services Revenue Growth: 16% increase, with subscription revenue up 20% and support revenue up 8%.
- Geographical Revenue Growth: Americas up 13%, EMEA up 18%, JPAC up 17%.
- Gross Margin: 76.6%.
- Operating Margin: Ahead of internal targets, guidance raised for the year.
- Non-GAAP EPS: $0.81.
- GAAP EPS: $0.38.
- Adjusted Free Cash Flow: Over $509 million.
- Remaining Performance Obligation (RPO): $13 billion, grew 21%.
- Current RPO: $6.1 billion, grew 17%.
- Next-Generation Security Annual Recurring Revenue (NGS ARR): $4.78 billion, grew 37%.
- Large Deals: 74 accounts with transactions over $5 million, 32 accounts with transactions over $10 million.
- Guidance for Fiscal Year 2025: Revenue $9.14 billion to $9.19 billion, NGS ARR $5.52 billion to $5.57 billion, Operating Margin 28% to 28.5%, Non-GAAP EPS $3.18 to $3.24, Free Cash Flow Margin 37% to 38%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Palo Alto Networks Inc (PANW, Financial) outperformed both top and bottom-line expectations for Q2 2025, with strong revenue and operating margin results.
- The company saw broad growth across its portfolio, with significant contributions from large international deals and strong performance in SASE, software firewalls, and XIM.
- Efficiency initiatives, including AI contributions, have allowed PANW to raise its operating margin and EPS guidance for the year.
- The company achieved a 37% growth in NGS ARR, driven by strength across advanced subscriptions, SASE, and Cortex.
- Palo Alto Networks Inc (PANW) has made significant progress in its platformization strategy, with a notable increase in large platformization deals and customer adoption.
Negative Points
- Gross margins were slightly down due to the impact of newer SaaS offerings and one-time inventory costs.
- There was a noted decline in net new ARR growth over the last two quarters, despite positive trends in large platformization deals.
- The company faces challenges in managing deferred payments, which have increased significantly over the past few years.
- Some of the newer SaaS offerings have yet to achieve scale, impacting overall profitability.
- The transition to deferred payments in larger transactions poses a challenge in balancing cash flow optimization.
