Palo Alto Networks, Inc. · Q4 FY2026 call

We exceeded our guidance across every financial metric in Q4, with bookings momentum accelerating for the second straight quarter.

We achieved record RPO, surpassing the $20 billion threshold for the first time to close the year at $21.2 billion, representing a growth rate of 34%. NGS ARR reached $9.1 billion, up 63%, enabling us to report one of our most substantial Next-Generation Security ARR outperformance to date. Most notably, we added nearly $1 billion in net new NGS ARR this quarter alone.

Prisma AIRS achieved a significant milestone, surpassing $100 million in ARR within four quarters of general availability. This represents the fastest-scaling product in the history of Palo Alto Networks.

During the fourth quarter, we achieved approximately 220 net new platformizations, surpassing our prior record and representing more than twice the volume for when we initiated this metric two years ago.

Fiscal 2026 has emerged as a landmark period in the rapid evolution of AI, marked by three distinct inflections over the last six months.

The impact on our SASE platform is already evident, where agentic traffic has surged 9x over the last nine months.

Since finalizing the Chronosphere acquisition in Q2, our observability ARR has more than doubled, eclipsing the $500 million mark. This performance has significantly outperformed our initial targets and represents the most rapid post-acquisition scaling in our history.

There is approximately $1 trillion of global cybersecurity debt that must be modernized to defend against automated threats.

To provide more visibility into our growth drivers, we are introducing new revenue disclosure by platform, as I previewed last quarter. Those three platforms are Network & AI Security, Cortex, and Idira.

Our revenue here grew 17% for the full fiscal 2026, reaching $8.35 billion in revenue. […] Turning to Cortex, which includes our security operations and observability platform, revenue grew 25% in fiscal year 2026 to $1.92 billion in revenue. […] On a pro forma basis, Idira revenue reached $1.26 billion in fiscal year 2026 and grew 21%.

Keep in mind, as we noted last quarter, our Q4 net new ARR includes a nine-figure benefit from a large LLM customer migrating to Chronosphere from an incumbent vendor.

Turning to the supply chain, we expect rising commodity costs to persist in our hardware business, particularly as it relates to memory and storage.

Our focus on operating leverage drove Q4 non-GAAP EPS of $1.02, exceeding the high end of our guided range by $0.04.

Adjusted free cash flow margin has been 38% or better in each of the last four years, and we sustained the strong cash flow generation even while absorbing the impacts of large M&A

We expect 60%-61% of the net new NGS ARR to fall in the second half of fiscal year 2027.

For fiscal year 2027, we expect Network & AI Security revenue growth of low double digits year-over-year. We expect Cortex revenue up approximately 30% year-over-year, and we expect Idira revenue of approximately $1.5 billion, representing pro forma growth of high teens to 20% year-over-year.

As I've always maintained that M&A is not a strategy. M&A is a consequence of stuff that we do from a product development perspective.

To be able to transform a large company like CyberArk in nine months and get their margins up by 1,000 basis points or more is already good work on the cost side. But like you said, we didn't buy it because we had cost synergy.

we have a short window by when to get all the cybersecurity technical debt, which hasn't been paid over many years, back up to the mark. I suspect there will be some major breaches over the coming years because customers have not been able to get their transformation act in place, and that's generally going to be a tailwind for all of us in this space.

Michael, we take the guidance very thoughtfully, and we look at where you are from a consensus perspective. […] We are delighted to see that we expect with our execution and the tailwinds, we are going to be able to exceed your consensus, and that is how we guide.

We ingest 19 petabytes a day in the same product already, and we have just barely north of 1,000 customers. […] Our aspiration is to reduce the amount of human intervention in the act of detection, prevention, and remediation in the cyberspace.