What was Palo Alto Networks' revenue in Q3?

Revenue reached $2.1 billion, up 18% year-over-year.

Why did PANW stock drop after earnings?

The stock fell due to rising operating costs that squeezed margins and a lowered full-year operating margin forecast.

What is Palo Alto Networks' guidance for Q4?

The company expects revenue between $2.15B and $2.20B, with EPS of $1.40–$1.45.

How did Palo Alto's SASE segment perform?

SASE revenue grew 45% year-over-year, driven by cloud migration.

Palo Alto Networks Falls 8.5% on Q3 Results: Revenue Up but Costs Bite

Palo Alto Networks (PANW) shares fell 8.5% after reporting Q3 fiscal 2026 results, with revenue hitting a record $2.1 billion but operating margins shrinking due to higher costs. The cybersecurity firm saw strong SASE growth and major enterprise deals, but cost pressures weighed on investor sentiment.

Palo Alto Networks (NASDAQ: PANW) shares declined 8.5% in after-hours trading following the release of its fiscal third-quarter 2026 results, ended April 30, 2026. The company posted record revenue of $2.1 billion, up 18% year-over-year, but rising operating costs squeezed margins.

Key Financial Results

Metric	Q3 2026	Q3 2025	Change
Revenue	$2.1B	$1.78B	+18%
EPS	$1.38	$1.25	+10.4%
Operating Margin	22.5%	24.1%	-1.6 pp

Highlights from the Report

SASE Growth: Secure Access Service Edge (SASE) revenue surged 45% YoY, driven by cloud migration.
Large Deals: Won multiple contracts exceeding $10 million each, indicating strong enterprise demand.
Cost Pressures: R&D and sales expenses rose 22% due to investments in AI and cybersecurity.

Guidance

Palo Alto Networks expects Q4 revenue between $2.15B and $2.20B, with EPS of $1.40–$1.45. The company lowered its full-year operating margin forecast to 23% from 24%.

Impact on Stock

The 8.5% drop erased about $12 billion in market cap, though the stock remains up 15% year-to-date. The decline reflects investor concerns over margin compression.

What This Means for Investors

Despite cost headwinds, strong revenue growth and leadership in cybersecurity segments like SASE provide a solid foundation. The pullback may offer a buying opportunity for long-term investors, but margin trends warrant close monitoring.