TLDR

Palo Alto Networks (PANW) shares fell 6% in pre-market trading Wednesday after cutting its 2026 adjusted EPS forecast to $3.65–$3.70, down from $3.80–$3.90.
The profit cut is driven by integration costs from recent acquisitions, including the $25 billion CyberArk deal and the $3.35 billion Chronosphere acquisition.
Revenue guidance was raised to $11.28–$11.31 billion, up from $10.50–$10.54 billion.
TD Cowen maintained a Buy rating and $255 price target, representing 56% upside from ~$163.50.
Q2 results beat expectations, with next-gen security ARR up 33% and remaining performance obligations up 23%.

Palo Alto Networks (PANW) shares dropped 6% in pre-market trading Wednesday after the company trimmed its annual profit outlook, blaming rising integration costs tied to a string of recent acquisitions.

The cybersecurity firm cut its 2026 adjusted earnings per share forecast to a range of $3.65–$3.70, down from its prior guidance of $3.80–$3.90. The stock had already slipped 7% in after-hours trading the night before.

Despite the profit cut, Palo Alto raised its annual revenue forecast to $11.28–$11.31 billion, well above its earlier estimate of $10.50–$10.54 billion.

Palo Alto Networks, Inc., PANW

The main culprit behind the margin pressure is acquisition activity. Palo Alto spent $2.3 billion on CyberArk in Q3 alone, completing that deal earlier in February. It also agreed to acquire cloud monitoring firm Chronosphere for $3.35 billion, and picked up Israeli cybersecurity startup Koi.

The company has been building itself into a one-stop platform for enterprise security, leaning into AI-driven threat detection as customers increasingly look to consolidate vendors.

Acquisitions Weigh on Margins

Morningstar analyst Malik Ahmed Khan acknowledged the hit to profitability but pointed to the upside. “The profitability ‘cut’ is mostly due to the firm’s acquisitions and we see the firm being able to leverage these acquisitions by cross-selling its existing customer base,” he said.

TD Cowen reiterated its Buy rating and $255 price target after the results — that target represents a 56% upside from the current price of around $163.50. The firm noted that demand remained healthy and that AI is continuing to drive business growth.

TD Cowen also said the CyberArk and Chronosphere deals reinforce Palo Alto’s platform strategy, making identity security a central pillar and improving real-time visibility across applications, infrastructure, and AI systems.

Both acquisitions are included in the company’s adjusted free cash flow margin targets of 37% for fiscal years 2026 and 2027, and 40% for fiscal year 2028.

Q2 Results Beat Expectations

The underlying quarterly numbers were solid. Palo Alto reported 33% growth in next-generation security annual recurring revenue and 23% growth in remaining performance obligations for Q2 fiscal 2026.

The company generated $3.69 billion in levered free cash flow over the last twelve months, with a free cash flow yield of 3%, according to InvestingPro data.

Palo Alto also reaffirmed its free cash flow targets for the year, and InvestingPro noted its cash flows are sufficient to cover interest payments.

Analyst reactions were mixed but mostly constructive. Truist Securities kept its Buy rating with a $200 price target. Piper Sandler held its Overweight rating with a $265 target. BMO Capital maintained an Outperform rating, also at $200, and projected 13–15% organic growth in next-gen security revenue over the next two quarters.

Needham lowered its target to $200 from $230, citing acquisition costs. Scotiabank cut its target to $180 from $228, maintaining a Sector Outperform but flagging complexity and a lack of organic upward momentum.

Analyst consensus currently sits at 1.71, reflecting a Strong Buy.

The post Palo Alto Networks (PANW) Stock Falls After Profit Forecast Cut Despite Strong Growth appeared first on Blockonomi.

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Filed under: Bitcoin - @ February 18, 2026 2:25 pm