Why Palo Alto Networks Stock Moved Lower Today
Key Points
Palo Alto Networks stock fell in response to Zscaler's post-earnings valuation move today.
Zscaler's quarterly results didn't look bad, but the stock got hit with a massive sell-off.
Some investors are worried that Zscaler could see a similar pullback even if it delivers solid quarterly results early next month.
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Palo Alto Networks (NASDAQ: PANW) stock lost ground in Wednesday's trading. The company's share price closed out the daily session down 3.2% and had been down as much as 5.3% earlier in the session.
While there wasn't any business-specific news dragging Palo Alto Networks stock lower today, its valuation moved lower in response to an earnings report from another player in the cybersecurity industry. Despite the sell-off, Palo Alto is still up roughly 35% across 2026's trading.
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Zscaler's quarterly report spurred sell-offs for Palo Alto
Zscaler published its latest quarterly results after the market closed yesterday, and its share price fell 31.5% in today's trading. The company's report had spillover valuation impacts for Palo Alto Networks.
Zscaler's non-GAAP (adjusted) earnings of $1.08 per share and revenue of $850.48 million last quarter actually beat the average Wall Street estimate's call for adjusted earnings per share of $1.01 and revenue of $835.66 million. The company also issued a narrow increase for its full-year sales guidance, but Wall Street was expecting a much stronger outlook. With a weaker-than-anticipated expansion forecast, some investors are wondering whether other cybersecurity plays may be overvalued.
What's next for Palo Alto Networks?
After the market closes on June 2, Palo Alto is set to publish results for the third quarter of its 2026 fiscal year -- which ended April 30. Expectations are high.
With its last quarterly update, Palo Alto guided for sales between $2.941 billion and $2.945 billion -- suggesting growth of roughly 28.5% year over year. Meanwhile, adjusted earnings are projected to be between $0.78 and $0.80. Zscaler's post-earnings sell-off doesn't mean that Palo Alto Networks will face a similar post-earnings valuation contraction, but investors are understandably showing some concerns that Palo Alto could post significant sales and earnings beats in fiscal Q3 and still get hit with a pullback.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zscaler. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
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