Palo Alto Networks, Inc. Q2 FY2026 earnings call

• Delivered strong Q2 with robust demand for cybersecurity and platformization strategy, NGS ARR up 28% and revenue growth 15% excluding Chronosphere impact. • Achieved 30%+ operating margin for third consecutive quarter. • Closed CyberArk and Chronosphere acquisitions, both delivering record numbers. • Platformization strategy driving success with ~110 net new platformizations in Q2, total ~1,550, net retention rate 119% for platformized customers. • Examples of large customer transformations with over $50M, $40M deals. • XSIAM growth and success in AI SOC modernization, Prisma AIRS scaling with over 100 customers, AgentiX enabling autonomous AI agents, Koi acquisition for agentic endpoint security, Chronosphere's observability platform traction, CyberArk's identity security opportunity

Network Security: SASE business surpassed $1.5 billion ARR milestone, growing ~40% YOY; software firewall ARR grew ~25%; hardware revenue up nearly 10% driven by Gen 5 firewalls. Cortex: XSIAM surpassed $0.5 billion ARR milestone, welcomed ~150 new customers, over 60% of deployed customers achieve meantime remediation <10 minutes. Chronosphere: Generated ~$200 million ARR as of Q2, end-to-end observability platform getting traction. CyberArk: Closed acquisition early in Q3, ready to execute on identity security opportunity with massive potential

• Fiscal Q3 2026: NGS ARR range $7.94B - $7.96B (56% increase), remaining performance obligation range $17.85B - $17.95B (32%-33% increase), revenue range $2.941B - $2.945B (28%-29% increase), diluted non-GAAP EPS range $0.78 - $0.80. • Fiscal Year 2026: NGS ARR range $8.52B - $8.62B (53%-54% increase), remaining performance obligation range $20.2B - $20.3B (28% increase), revenue range $11.28B - $11.31B (22%-23% increase), operating margins range 28.5% - 29%, diluted non-GAAP EPS range $3.65 - $3.70 per share, adjusted free cash flow margin 37%

• Risks and uncertainties related to forward-looking statements, including factors that could cause actual results to differ from projections. • Supply chain dynamics with marginal impact on product COGS from higher memory and storage pricing, but measures in place to manage. • Integration challenges with CyberArk and Chronosphere acquisitions, including aligning go-to-market engines, product innovation roadmaps, and system transitions

Q: Robbie Owens compared AI shift to cloud shift in 2018-2019, asked about obsolescence areas and M&A as lever.

A: Nikesh Arora said market treats AI as threat to cybersecurity oddly, sees trend towards more consolidation and platformization, AI adoption faster in security than cloud.

Q: Brad Zelnick asked about LLMs killing SIEM tools.

A: Nikesh Arora said LLMs are net positive, helpful for data classification, not a threat to security products soon.

Q: Saket Kalia asked about joint pipeline opportunity with CyberArk.

A: Nikesh Arora said joint opportunities exist, teams working on overlapping pipeline, early days but real opportunity.

Q: Meta Marshall asked about SASE business strength.

A: Lee Klarich said SASE business growing due to customers moving from point products to comprehensive platform.

Q: Joshua Tilton asked about network traffic from AI adoption.

A: Nikesh Arora said early days, AI traffic not impacting network yet but will as adoption grows.

Q: John DiFucci asked about AI impact on security not showing in numbers yet.

A: Nikesh Arora said early days, piece parts being built, need to be patient.

Q: Gabriela Borges asked about CyberArk's technical lift for broader access.

A: Lee Klarich said progress on modern PAM, integrating with other products for broader adoption.

Q: Adam Tindle asked about Chronosphere's key attributes.

A: Nikesh Arora said Chronosphere's scalability and capability to displace other vendors, Lee Klarich added about complementing with AgentiX.

Q: Adam Borg asked about quantum opportunity.

A: Nikesh Arora said acquired Venafi, integrating quantum capability with feedback from customers.

Q: Gregg Moskowitz asked about keeping eye on ball with large acquisitions.

A: Nikesh Arora said acquisitions planned for months, teams informed of roles, lessons from prior acquisitions applied