By Elias Schisgall
Palo Alto Networks reported higher revenue in the third quarter and lifted its outlook as customers continued to beef up their cybersecurity in the face of heightened threats from artificial-intelligence models.
Chief Executive Officer Nikesh Arora said the results should demonstrate that fears of a so-called "SaaS-Pocalypse," in which AI-native firms will come to displace legacy software incumbents, are misplaced as applied to the cybersecurity industry.
"Actually, the capabilities of these models, especially in the cyber space, are causing a renewed interest from our customers to go ahead and deploy much more modern solutions, acting more as a tailwind to the cybersecurity industry as opposed to the death of the cybersecurity industry," Arora said in an interview.
As advanced AI models enable cheaper and faster cyberattacks, Palo Alto has been betting that customers will want to unite fragmented cybersecurity measures into one unified platform, a process the company calls "platformization." That strategy is paying off, Arora said, with the company notching more than 110 platformizations during the quarter.
"The market was a bit skeptical, but we have steadily proven over the last two years that customers who platformize are spending more money with us and have a very high retention rate," Arora said in an interview, adding that those customers also spend more when they renew.
The development of models like Anthropic's Claude Mythos, which the company said was too powerful to release, and the ramp of AI "agents" in enterprises has prompted businesses to revisit their cybersecurity measures.
Around 1,000 companies have reached out to Palo Alto over the past two months, Arora said, "to talk about their cyber posture, cyber infrastructure, and how we can help them get through this period of living the future with frontier AI models being cyber-capable."
Palo Alto has also been preparing to meet the cybersecurity needs of customers using agentic AI. The company last month closed its acquisition of the AI cybersecurity company Portkey and reworked CyberArk, which it acquired last summer, as Idira - an identity security service focused on AI agents.
The company on Tuesday reported a third-quarter loss of $177 million, or 22 cents a share, compared with a profit of $262 million, or 37 cents a share, a year earlier. The loss was a one-time event related to costs from the company's acquisition of CyberArk, Arora said.
Stripping out those costs and other one-time items, Palo Alto reported adjusted earnings of 85 cents a share. Analysts polled by FactSet were expecting 79 cents a share.
Revenue rose to $3 billion, up from $2.29 billion a year prior. Analysts were expecting $2.94 billion in revenue.
Next-Generation Security annual recurring revenue rose 60% to $8.1 billion, including $1.6 billion from the acquisitions of CyberArk and Chronosphere. Remaining performance obligations were up 36% to $18.4 billion, including $1.8 billion from the two acquired companies.
Palo Alto lifted its forecast for the full year, projecting revenue between $11.42 billion and $11.43 billion, up from a range of $11.28 billion to $11.31 billion. Adjusted earnings are expected to be between $3.77 and $3.79 a share, up from a range of $3.65 to $3.70. Analysts are expecting full-year adjusted earnings of $3.68 on revenue of $11.3 billion.
For the current fourth quarter, Palo Alto projected adjusted earnings of 96 cents to 98 cents a share on revenue between $3.35 billion and $3.36 billion. Analysts expect 94 cents a share in adjusted earnings on $3.28 billion in revenue.
Palo Alto also said it expects to end the year with Next-Generation Security ARR between $8.9 billion and $8.95 billion and remaining performance obligations between $20.9 billion and $21 billion.
Write to Elias Schisgall at elias.schisgall@wsj.com
(END) Dow Jones Newswires
June 02, 2026 16:15 ET (20:15 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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