- Palo Alto forecast Q3 profit that missed expectations and trimmed its 2026 profit view.
- Second-quarter results came in higher than expected.
- Stocktwits sentiment for PANW shifted to ‘neutral’ from ‘extremely bullish.’
Palo Alto Networks, Inc. stock declined 8.4% in extended trading on Tuesday, after the latest quarterly results pointed to margin pressure at the cybersecurity firm from rising memory chip costs.
Palo Alto forecast third-quarter adjusted profit between $0.78 and $0.80 per share, which fell short of analysts’ average estimate of $0.92 per share. It even adjusted its fiscal 2026 profit view to $3.65-$3.70 per share, down from a prior view of $3.80-$3.90 per share.
Memory Prices, AI Overhangs
“We observed a marginal impact on product COGS (cost of goods sold) this quarter from higher memory and storage pricing, but we believe we are well positioned to manage through these dynamics,” CFO Dipak Golechha said on the earnings call.
The issue has raised cost concerns across electronics makers such as Apple Inc. and Lenovo, as well as automakers and other industries. Memory chips and storage devices are in short supply amid surging demand from AI data centers, a fast-growing segment, prompting manufacturers to raise prices.
The forecast update comes as software stocks are being hammered amid fresh concerns that new AI tools in the market and those in development will reduce demand for niche software. Palo Alto shares had already shed over 11% year to date before the report.
Q2 Results, Forecast Update
Palo Alto said demand for its cybersecurity solutions remained healthy. “We saw continued strength in platformizations, a trend that is accelerating due to AI – customers are keen to both modernize and normalize their cybersecurity stack, aligning them to our approach,” CEO Nikesh Arora said. “We also saw steady and strong adoption of AI security, which we expect will be a long-term trend.”
Palo Alto earned $1.03 per share, on an adjusted basis, on $2.59 billion in revenue – beating analysts’ expectations of $0.94 per share profit and $2.58 billion in revenue. It even raised its full-year revenue view to $11.28 billion to $11.31 billion, up from $10.5 billion to $10.54 billion.
Retail’s Reaction
On Stocktwits, the retail sentiment for PANW flipped to ‘neutral’ as of late Wednesday, from ‘extremely bullish’ the previous day, with users debating whether the stock drop was an overreaction or a justified repricing, even as AI's evolving impact on cybersecurity demand remains a key talking point.
“Buying here big time.. This is way too cheap. I can be patient! Not going to get scared,” said a user, while another said PANW is the most overvalued cybersecurity stock and not worth buying even after the dip.
Meanwhile, Palo Alto continued its acquisition spree, saying before the bell that it agreed to buy the agent-based endpoint security company Koi, following its purchases of Chronosphere and CyberArk.
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