Palo Alto Is Getting Bigger. Is It Growing Faster?
The company’s AI-era acquisitions expand its reach, but the core growth rate remains steady rather than accelerating
In the hours after earnings, shares of Palo Alto Networks fell even though revenue and key growth metrics came in ahead of expectations. The company reported about $2.59 billion in revenue for the quarter ended January 31, up roughly 14.9% year over year, and beat earnings forecasts with $1.03 per share.
Despite that, Palo Alto lowered its full-year adjusted earnings guidance, citing costs tied to recent acquisitions. Shares dropped after the announcement.
On Bloomberg, Chief Executive Nikesh Arora said the market was misreading the numbers. He argued that guidance now includes the impact of CyberArk, which calculates ARR differently, and suggested early automated trading reacted before adjusting for updated guidance.
The issue is straightforward. Are investors misreading accounting details? Or are they focused on the pace of growth in the underlying business?
The Core Business Is Growing, But Not Faster
Revenue grew about 15% year over year, and Next-Generation Security ARR rose about 33%, figures that beat expectations and show continued demand for Palo Alto’s offerings.
But these growth figures are not far above recent trends. Analysts expected mid-teen revenue growth and rising ARR before results were released. Palo Alto’s core business was already growing in similar ranges in prior quarters.
Growth remains steady. It has not increased meaningfully compared with prior periods once acquisitions are included.
That matters because the company lowered its profitability outlook. When earnings guidance comes down, investors look for stronger growth to offset near-term pressure. In this case, revenue and ARR are solid but not significantly higher than before.
Recent results from other large security and cloud vendors show similar patterns of steady rather than rapidly accelerating growth, suggesting sector demand remains healthy but not booming.
There is no sign of a sharp slowdown. There is also no clear sign of re-acceleration.
The AI Expansion Raises Expectations
Over the past year, Palo Alto has expanded aggressively with acquisitions.
The roughly $25 billion CyberArk deal adds identity and privileged access management to Palo Alto’s platform. The purchase of Chronosphere (a cloud-native observability provider) adds another strategic layer. Arora said the company secured a large deal with a major large language model customer through Chronosphere, though the customer was not publicly named.
The strategy is clear. Palo Alto wants to offer identity, observability, and other security tools together as AI systems scale and enterprises build more complex infrastructure.
But expansion has costs. The company lowered its full-year earnings outlook partly because of acquisition-related expenses and integration impacts. Even though revenue forecasts were raised for the year, profit guidance lagged expectations, reflecting higher costs and near-term margin pressure.
Large acquisitions also make comparisons harder. CyberArk and Palo Alto measure ARR differently, which can muddy quarter-to-quarter comparisons and create short-term disagreement between guidance and consensus models.
Arora argues that once adjustments are made, growth looks stronger than some analysts believe. Investors appear to be waiting for that strength to show up clearly in reported results.
For now, the numbers show steady growth and higher integration costs. The platform is broader and the business is larger. The remaining question is whether that broader platform will translate into faster organic growth.
Until that appears in the numbers, investors are likely to remain cautious.