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Investing.com - Palo Alto Networks (NASDAQ:PANW) is expected to report its third-quarter earnings on Wednesday after market close, with Morgan Stanley maintaining an Overweight rating and $228 price target on the cybersecurity provider. Currently trading at $201.01, PANW has a market capitalization of $136.42 billion and carries a strong analyst consensus recommendation of 1.7 (Buy), according to InvestingPro data.
Morgan Stanley analysts expressed optimism based on "incrementally positive channel checks and reseller survey results," suggesting strong momentum and solid pipeline development for the quarter. The firm noted Palo Alto Networks is gaining market share across multiple security categories beyond its traditional firewall business, including SASE (Prisma Access), EDR/SIEM (Cortex XSIAM), and AI security. This market expansion aligns with InvestingPro’s assessment of PANW as a "prominent player in the Software industry" with an overall Financial Health score rated as "GREAT."
From a financial perspective, Morgan Stanley anticipates first-quarter RPO (Remaining Performance Obligation) to exceed the midpoint of guidance, projecting approximately 23% year-over-year growth, which implies roughly 17% year-over-year cRPO (current RPO) growth. This optimism comes as Palo Alto Networks has demonstrated solid revenue growth of 14.87% over the last twelve months, with total revenue reaching $9.22 billion.
The firm expects Palo Alto Networks’ product revenue to surpass the company’s guidance of approximately 20% year-over-year growth, citing strong product revenue performance from industry peers Check Point and Fortinet. Morgan Stanley also sees potential for better-than-expected first-quarter operating margins due to improved revenue performance and enhanced sales productivity from larger deals. The company maintains a gross profit margin of 73.41% and operates with a moderate level of debt, with cash flows that can sufficiently cover interest payments.
For the forward outlook, Morgan Stanley analysts predict management will raise the fiscal year revenue and NGS ARR (Next-Generation Security Annual Recurring Revenue) guidance proportionate to the first-quarter beat, with second-quarter RPO growth aligning with consensus expectations of 20-21% year-over-year. InvestingPro analysis indicates PANW is currently trading slightly above its Fair Value, with 12+ additional ProTips available to subscribers. Investors looking for deeper insights into Palo Alto Networks’ financial health and growth prospects can access the comprehensive Pro Research Report, available for this and 1,400+ other US equities.
In other recent news, Palo Alto Networks has announced a collaboration with IBM to launch a Quantum-Safe Readiness solution. This initiative aims to prepare enterprises for the security challenges posed by quantum computing by combining IBM’s Quantum Safe Transformation services with Palo Alto Networks’ cryptographic intelligence. Additionally, Palo Alto Networks has introduced new native integrations of its Prisma AIRS security platform with AI agent platforms such as Factory, Glean, IBM, and ServiceNow. These integrations are designed to enhance real-time protection against various security threats as AI adoption grows.
On the analyst front, BMO Capital has raised its price target for Palo Alto Networks to $230, maintaining an Outperform rating, citing the cybersecurity sector as a compelling investment area. Similarly, DA Davidson increased its price target to $240, maintaining a Buy rating, and anticipates strong results in the upcoming earnings report, particularly in Next-Generation Security Annual Recurring Revenue and Remaining Performance Obligations. Meanwhile, KeyBanc has maintained a Sector Weight rating, expecting Palo Alto Networks to meet expectations for its first-quarter earnings and fiscal year 2026 guidance. These developments highlight the company’s strategic initiatives and the positive outlook from analysts.
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