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Investing.com -- Palo Alto Networks shares extended their premarket rally on Tuesday, with the shares up more than 6% premarket.
The company reported earnings after the close on Monday, with Q4 EPS of $0.95, $0.06 better than the analyst estimate of $0.89. Revenue for the quarter came in at $2.5 billion versus the consensus estimate of $2.5 billion.
Looking ahead, Palo Alto Networks (NASDAQ:PANW) expects FY2026 EPS to be between $3.75 and $3.85, compared to the consensus estimate of $3.69. FY2026 revenue is expected to be between $10.475 billion and $ 10.525 billion, compared to the consensus of $10.44 billion.
Following the report, Bank of America upgraded the stock to Buy, citing strong results and an attractive long-term growth profile.
BofA said Palo Alto delivered “impressive performance on all fronts,” with next-generation security annual recurring revenue rising 32.2% year over year, remaining performance obligations up 24.4%, and product revenues climbing 19.4%.
Operating margin came in 160 basis points ahead of expectations, while free cash flow margin reached 37%. Guidance was also described as “generally above expectations.”
“At a high level, the company’s strategy appears to be working well, with 1400 platform deals, and software is driving up growth, accounting now for 56% of product revenues vs. 44% last year,” BofA wrote.
The firm raised its rating from Neutral to Buy and maintained its $215 price objective, which implies 22% upside potential.
BofA highlighted broad-based momentum across Palo Alto’s business lines. Platform deals posted a 120% net revenue retention rate, while Cortex and Prisma Cloud annual recurring revenue grew 25% year over year.
The company also benefited from strength in virtual firewalls and firewall-as-a-service, where it holds nearly 50% share in segments expanding more than 20% annually.
However, BofA said risks remain around valuation and margins. “The risks to our rating are mainly around concerns we’ve highlighted in the past regarding peaking margins and valuation limitation,” BofA said, noting the stock trades at about 46 times 2026 earnings with an additional 15% stock-based compensation impact.