tapebrief
PANW · Q2 2026

PANW · Q3 2026 Earnings

Bullish

Palo Alto Networks

Reported June 2, 2026

30-second summary

Palo Alto printed $3.00B revenue (+31% YoY) and $0.85 Non-GAAP EPS in Q3, beating consensus by 2.1% and 6.3% respectively, with NGS ARR at $8.1B (+60% YoY) crushing the prior $7.94–7.96B guide. The bigger story is the FY26 reset in the opposite direction of last quarter: revenue raised $125M at midpoint to $11.42B (+24% YoY vs. prior 22–23%), Non-GAAP EPS raised from $3.65–3.70 to $3.77–3.79, operating margin raised 40bps to 28.9–29.2%, NGS ARR raised $360M at midpoint to $8.90–8.95B (59–60% YoY vs. prior 53–54%), and adjusted FCF margin raised 50bps to 37.5%. Last quarter's CyberArk/Chronosphere dilution fear has been replaced by accelerating organic momentum — Q3 non-GAAP operating margin held 27.1% inside the guide, adjusted FCF margin printed 30.3% in-quarter (TTM 38.5%), and the FY28 40% FCF target was explicitly reaffirmed with the trajectory now empirically inside reach.

Headline numbers

EPS

Q3 FY2026

$0.85

+6.3% vs est.

Revenue

Q3 FY2026

$3.00B

+31.0% YoY

+2.1% vs est.

Gross margin

Q3 FY2026

67.5%

Free cash flow

Q3 FY2026

$0.79B

Operating margin

Q3 FY2026

-6.1%

Key financials

Q3 FY2026
MetricQ3 FY2026Q3 FY2025YoYQ2 FY2026QoQ
Revenue$3.00B$2.29B+31.1%$2.59B+15.7%
EPS$0.85$0.80+6.2%$1.03-17.5%
Gross margin67.5%72.9%-540bps73.6%-610bps
Operating margin-6.1%9.6%-1570bps15.3%-2140bps
Free cash flow$0.79B————

Guidance

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueQ3 FY2026$2.941B to $2.945B$3.002B+$0.057B to $0.061B above guide (1.9% to 2.1% above high end)Beat
Non-GAAP EPSQ3 FY2026$0.78 to $0.80$0.85+$0.05 to $0.07 above guide (6.3% above high end)Beat
Next-Generation Security ARRQ3 FY2026$7.94B to $7.96B (56% YoY)$8.1B (60% YoY)+$0.14B to $0.16B above guide; YoY growth +4pts above guide rangeBeat
Remaining Performance ObligationQ3 FY2026$17.85B to $17.95B (32% to 33% YoY)$18.4B (36% YoY)+$0.45B to $0.55B above guide; YoY growth +3pts above guide rangeBeat

Changes to prior guidance

MetricPeriodPrior guideNew guideΔResult
Non-GAAP Operating Margin
FY2026
28.5% to 29.0%28.9% to 29.2%+0.4pts to +0.7pts (midpoint raised from 28.75% to 29.05%)Raised
Revenue
FY2026
$11.28B to $11.31B (22% to 23% YoY)$11.415B to $11.425B (24% YoY)+$0.135B to $0.145B (low-to-high raised); YoY growth raised from 22-23% to 24% (+1-2pts)Raised
Non-GAAP EPS
FY2026
$3.65 to $3.70$3.77 to $3.79+$0.07 to $0.14 (low raised $0.07, high raised $0.09; midpoint +$0.105)Raised
Next-Generation Security ARR
FY2026
$8.52B to $8.62B (53% to 54% YoY)$8.90B to $8.95B (59% to 60% YoY)+$0.28B to $0.43B (midpoint raised $0.36B); YoY growth raised from 53-54% to 59-60% (+5-7pts)Raised
Remaining Performance Obligation
FY2026
$20.2B to $20.3B (28% YoY)$20.9B to $21.0B (32% to 33% YoY)+$0.6B to $0.8B (midpoint raised $0.7B); YoY growth raised from 28% to 32-33% (+4-5pts)Raised

Reaffirmed unchanged this quarter: Adjusted Free Cash Flow Margin (37.5%)

Segment performance

Q3 FY2026
SegmentQ3 FY2026YoY
Product Revenue$0.594B+31.1%
Subscription and Support Revenue$2.408B+31.1%

Platform metrics

Q3 FY2026
SegmentQ3 FY2026Q3 FY2025YoY
Next-Generation Security ARR$8.1B$5.1 billion—
NGS ARR YoY Growth60%——
Remaining Performance Obligation$18.4B——
RPO YoY Growth36%——

Profitability

Q3 FY2026
SegmentQ3 FY2026Q3 FY2025YoY
Non-GAAP Operating Margin27.1%——
Adjusted Free Cash Flow Margin (Q3)30.3%——
Trailing 12-Month Adjusted FCF Margin38.5%——
Operating Cash Flow$0.871B——

Management tone

Transcript not yet available for this quarter; tone analysis will be updated when the call recording publishes.

The press-release narrative completes the arc from Q3 FY25 platformization-as-thesis → Q1 FY26 observability-plus-identity extension → Q2 FY26 absorbing-the-bill → Q3 FY26 the-bill-was-overstated. Last quarter's 4.5% EPS cut, 100bps margin cut, and 150bps FCF margin cut all framed CyberArk and Chronosphere as a multi-quarter margin reset. This quarter raises EPS 2.9%, raises operating margin 30–40bps, and raises adjusted FCF margin 50bps — the H2 dilution glide path is materially better than the Q2 reset implied. The qualitative press-release quotes — "accelerating organic bookings growth as customers turn to us to secure their AI deployments at scale" and "executing ahead of our M&A integration plans and improving profitability across our businesses" — explicitly frame both organic acceleration and faster-than-modeled M&A accretion as the drivers.

The FY28 40% adjusted FCF margin target was explicitly reaffirmed ("firmly on track"), reversing the Q2 read that the floor had become the ceiling. With TTM FCF margin already at 38.5% and the FY26 guide now raised to 37.5%, the target is empirically inside reach rather than aspirational.

Answers to last quarter's watch list

Organic NGS ARR ex-CyberArk/Chronosphere — the press release reports consolidated NGS ARR of $8.1B (+60% YoY), beating the $7.94–7.96B guide by $140–160M. No standalone organic figure was disclosed in the press release; the qualitative "accelerating organic bookings growth" claim from Nikesh suggests organic is running ahead, but the clean decomposition that Q2's Q&A provided is absent without the transcript. Status: Not resolved
Non-GAAP operating margin landing inside 28.5–29.0% FY guide — Q3 printed 27.1% (below 30% as expected), and the FY26 guide was raised to 28.9–29.2%. The dilution landed in Q3 as Q2 implied, but the FY guide was raised rather than reaffirmed — meaning H2 margins are tracking better than the Q2 reset modeled. Status: Resolved positively
Adjusted FCF margin print and full-year trajectory — Q3 in-quarter adjusted FCF margin printed 30.3%; TTM adjusted FCF margin printed 38.5%, ahead of the newly raised 37.5% FY26 guide. The FY28 40% target was explicitly reaffirmed ("firmly on track to achieve 40% adjusted free cash flow margin in FY28"). Status: Resolved positively
CyberArk and Chronosphere standalone ARR disclosure — the press release does not break out CyberArk or Chronosphere ARR separately. Reporting moved to consolidated NGS ARR only ($1.6B disclosed as combined CyberArk + Chronosphere NGS ARR contribution). Status: Resolved negatively
Q3 EPS at $0.78–0.80 guide vs. Q2's $1.03 print — Q3 printed $0.85, beating the high end of guide by $0.05 (6.3%). The implied sequential decline was -17% vs. the -23–24% Q2 framing implied — acquisitions are dilutive but less so than the prior guide modeled. Status: Resolved positively

What to watch into next quarter

Q4 NGS ARR add of $800–850M to hit the new $8.90–8.95B FY guide — the largest single-quarter addition in company history. Watch whether the actual lands inside the range, and whether management discloses any organic vs inorganic split. A miss would suggest the FY raise stretched too far.

Q4 non-GAAP operating margin returning above 30% — to land inside the new 28.9–29.2% FY guide with Q3 at 27.1%, Q4 needs to print ~30%+. Watch whether the H2 dilution is truly behind or if Q4 underwhelms.

CyberArk/Chronosphere disclosure framework — the standalone numbers disappeared from the Q3 press release. Watch whether next quarter's release adds them back, leaves them out, or whether the transcript Q&A re-discloses them informally.

FY28 40% FCF margin target reaffirmation in formal disclosures — Q3 included it as a qualitative line; watch whether it appears in any investor day update or formal target framework next quarter, or remains a qualitative aside.

Q1 FY27 initial guidance shape — Q4 prints typically come with FY27 framing. Watch the implied FY27 revenue growth rate vs. the +24% FY26 guide, and whether CyberArk lapping effects compress headline growth materially.

Sources

  1. Palo Alto Networks Q3 FY2026 earnings press release, filed via SEC EDGAR, June 2, 2026 — https://www.sec.gov/Archives/edgar/data/1327567/000132756726000012/ex991q326earningsrelease.htm

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