Palo Alto Networks Reports Strong Q2 2025 Results, Raises Outlook

Palo Alto Networks has outperformed revenue and earnings expectations for Q2 2025. The company raised its EPS guidance alongside promising free cash flow performance, suggesting a favorable outlook for investors.

Date: 14-02-2025

AI Rating: 8

Positive Financial Performance
Palo Alto Networks reported a total revenue of $2.26 billion, representing a 14% growth, exceeding the high end of guidance. This growth included a solid performance across various segments, particularly strong demand in the services sector, with subscription revenue soaring by 20%. The adjusted free cash flow was notably impressive at over $509 million.

Earnings Per Share (EPS)
The diluted non-GAAP EPS was $0.81 and the GAAP EPS was $0.38. The growth in EPS illustrates a positive trend in profitability as operating margins improved, even amid challenges in achieving scale for newer software offerings.

Net New Annual Recurring Revenue (ARR)
The NGS ARR exhibited strong growth, finishing Q2 at $4.78 billion, with a growth rate of 37%. This indicates robust underlying demand for Palo Alto's cybersecurity solutions, especially through advanced subscriptions and their cloud security offerings.

Free Cash Flow (FCF)
Palo Alto reported generating $509 million in adjusted free cash flow in Q2, reflecting improved profitability and cash management. Their free cash flow forecasts remain strong, with expectations for margins over 37% through fiscal year 2026. This metric is a crucial aspect for investors as it impacts the company's capacity to reinvest and manage debt.

Revenue Growth Expectations
For fiscal year 2025, the company anticipates revenue in the range of $9.14 billion to $9.19 billion, which illustrates a consistent growth trajectory. Similarly, NGS ARR for fiscal Q3 is expected to rise further, indicating ongoing demand in the cybersecurity sector.

Overall, Palo Alto Networks demonstrated strong execution in Q2 2025, with solid revenue growth driven by high demand for their services and products, alongside upward revisions in EPS guidance and free cash flow expectations. These points suggest a promising outlook for the company's stock performance in the near future.

Stocks: PANW