Palo Alto Networks beats quarterly estimates on AI demand, continues acquisition spree

Palo Alto Networks surpassed fiscal fourth-quarter estimates as mounting artificial intelligence risks boost demand for its cybersecurity tools.

Shares fell about 2% in extended trading, following a 5% drop during regular trading.

Here's how the company did versus LSEG estimates:

• Earnings per share: $1.02 adjusted vs. 98 cents expected
• Revenue: $3.41 billion vs. $3.35 billion expected.

Revenue jumped 34% during the quarter from $2.54 billion a year ago, the company said. Palo Alto reported a net loss of $282 million, a loss of 35 cents per share, down from net income of $254 million, or 36 cents per share, a year ago.

The acceleration of AI attacks is forcing customers to build better and faster cyber defenses, CEO Nikesh Arora told CNBC. Those concerns have already moved the needle, but the long-term growth runway is still in the early stages.

"This is a long-term tailwind, and it will not happen in one quarter. It will not happen in two, but it just underpins the long-term duration from a growth rate perspective for our business," Arora said.

Shares of Palo Alto Networks have nearly doubled this year as the rise of highly capable AI models like Anthropic's Mythos spurs demand for newer security tools to detect and respond to agentic cyberattacks.

Those concerns have accelerated as breaches, like the OpenAI-Hugging Face hack, prove that agents can increasingly plan and orchestrate attacks autonomously.

Palo Alto Networks stock chart.

Arora said the company has held over 2,000 customer briefings, up from the roughly 1,200 it disclosed last quarter, in the wake of the Anthropic Mythos launch.

Palo Alto also said it plans to buy agentic AI startup Console as it deepens its AI security offerings. In just over a year, Arora has accelerated an aggressive dealmaking push, which included a mega $25 billion deal for identity security firm CyberArk and the acquisition of Chronosphere for $3.4 billion.

"I see the cyber startup ecosystem as a large lab where people are trying different things," Arora said, adding that Palo can look to acquire from the space if its internal approach isn't working.

Palo Alto issued upbeat guidance, expecting $3.30 billion to $3.31 billion in revenue for the first quarter, topping an analyst estimate of $3.22 billion.

For the full year, the company forecasted between $14.10 billion and $14.20 billion in revenue and adjusted EPS of $4.16 to $4.19. That surpassed the $13.79 billion revenue and $4.11 EPS forecast.