Palo Alto Networks, Inc. (NASDAQ: PANW) Q2 2025 Earnings | 08/19/2025

Palo Alto Networks reported a strong quarter, exceeding top and bottom-line expectations. Revenue growth was broad-based across all geographies and product platforms, driven by the company's successful "platformization" strategy and large deal momentum. The company raised its full-year guidance for revenue, operating margin, and EPS.

Key Financial Highlights:

• Revenue: $2.26 billion, up 14% year-over-year (YoY), above guidance.

• Profitability: Non-GAAP EPS of $0.81, up significantly YoY. The company raised its full-year operating margin guidance to 28% - 28.5%.

• Key Metrics:

  • Next-Generation Security (NGS) Annual Recurring Revenue (ARR): $4.78 billion, up 37% YoY.

  • Remaining Performance Obligation (RPO): $13 billion, up 21% YoY.

• Cash Flow: Generated $509 million in adjusted free cash flow. Management expressed high confidence in sustaining an adjusted free cash flow margin above 37% through fiscal 2027.

Strategic & Operational Updates:

1. Platformization Success: The core strategy of selling integrated security platforms (Network Security, Cortex, Prisma Cloud) is driving large deals. The company signed 75 new platformization deals in Q2 (up from 45 YoY), with a total of over 1,150 among its top customers. Examples included a $65M deal with an Asian bank and a $60M deal with a U.S. municipality.

2. Product Innovation & Momentum:

   • Network Security: Bookings grew 21%, with strength in SASE (bookings up >50%) and Software Firewalls (bookings up 50%), particularly for securing AI workloads.

   • Cortex (Security Operations): Bookings grew ~50%. XSIAM (AI-powered SOC platform) surpassed $1 billion in cumulative bookings.

   • Prisma Cloud (Cloud Security): Bookings grew ~50%. The company announced Cortex Cloud, a new platform integrating cloud security and SOC capabilities.

3. AI Leadership: The company is leveraging AI both to improve its own operational efficiency (e.g., AI copilots reducing support case resolution time by 50%) and to power its security products, positioning itself to secure the future "agentic" AI landscape.

4. Large Deals: The number of large transactions accelerated significantly, with 74 deals over $5M (up 25% YoY) and 32 deals over $10M (up over 50% YoY).