Why Palo Alto Networks Stock Is Sinking Today
Key Points
Palo Alto Networks posted sales and earnings for fiscal Q3 that beat Wall Street's expectations.
The company's forward guidance also looked strong.
Some investors were banking on even stronger results, and some bearish pressures for the broader market are also impacting the stock today.
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Palo Alto Networks (NASDAQ: PANW) stock is heading lower following the company's latest earnings report. The cybersecurity specialist's share price was down 6.8% as of 10:40 a.m. ET. The S&P 500 was down 0.4% at the same point in the daily session.
The broader market is facing some bearish pressures connected to rising oil prices and bond yields today, and that's likely having a negative impact on Palo Alto stock. Additionally, investors seem to be having a negative reaction to the company's quarterly results even though sales and earnings topped Wall Street's forecasts.
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A strong quarter hasn't been enough to prevent sell-offs
After the market closed yesterday, Palo Alto published results for the third quarter of its 2026 fiscal year -- a period that ended April 30. The business notched a non-GAAP (adjusted) profit of $0.85 per share on sales of $3 billion, beating the average analyst estimate's call for a per-share profit of $0.80 on sales of $2.94 billion. The company's sales surged 31% higher year over year, and the company closed out the quarter with remaining performance obligations of $18.4 billion -- up 36%.
What's next for Palo Alto?
For the current fiscal year, Palo Alto is targeting annual recurring revenue for its next-generation security segment between $8.90 billion and $8.95 billion -- suggesting annual growth of 59.5% at the midpoint. Meanwhile, total sales are projected to be between $11.415 billion and $11.425 billion -- topping the average analyst estimate's call for sales of $11.29 billion. Adjusted earnings per share for the year are projected to be between $3.77 and $3.79 -- a guidance range that came in significantly above the average Wall Street forecast's call for earnings of $3.69 per share.
While Palo Alto published strong fiscal Q3 results and issued strong forward guidance, some investors were apparently looking for more. On the other hand, today's pullback on strong results could be a worthwhile buying opportunity.
Should you buy stock in Palo Alto Networks right now?
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
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