Palo Alto Networks on Tuesday night ended its fiscal 2026 on a high note and signaled that the good times will continue in the new year. The numbers and conference call commentary reinforce the essential role of cybersecurity in the artificial intelligence era. Revenue in the company’s fiscal fourth quarter increased 34% year over year to $3.41 billion, exceeding the Wall Street consensus estimate of $3.35 billion, according to LSEG. Adjusted earnings per share (EPS) in the May-to-July period totaled $1.02 in the quarter, ahead of the 98-cent LSEG consensus estimate. On an annual basis, adjusted EPS rose 7%. Shares were down almost 2% in extended trading, though it’s tough to say that move is purely a judgement on what Palo Alto delivered. When the earnings release first hit the tape, the stock initially moved higher by a couple of percentage points, only to reverse course before the conference call even got underway. Some of this could simply be profit-taking, considering the stock has had a massive move in recent months; after all, we took profits Monday ourselves , so we cannot fault anyone here. Another potential culprit for the reversal? OpenAI announcing that its upcoming AI model, dubbed Astra, breaches certain cybersecurity thresholds and will have throttled-back cyber capabilities when released. “We now believe Astra meets the Critical cybersecurity capability threshold under our Preparedness Framework , meaning that with the right tools and access, it can find previously unknown security flaws and develop ways to exploit them across many well-protected systems without a person guiding each step,” OpenAI said in a press release. “It is the first model we are designating at this level, and requires stronger safeguards during development and before release.” We’ve seen this song and dance already this year, where cybersecurity names get sold off on the back of a more advanced cybersecurity model. We remain undeterred, believing it is silly to think that the very companies creating AI — and the risks that come with the powerful technology — would be the ones to displace industry incumbents. It’s also fanciful to argue that the enterprise companies looking to embed AI into their workflows would risk a data breach trying to vibe code a replacement for cybersecurity platforms that took ages to build and have amassed valuable, proprietary data unavailable anywhere else. PANW YTD mountain Palo Alto Networks’ year-to-date stock performance. Bottom line Astra doesn’t change our read on Palo Alto’s results, which strengthened our conviction that cybersecurity is the software component that enables the adoption of artificial intelligence. Memory may be the hardware component that AI chips need to thrive, but cybersecurity is what allows an organization to adopt and deploy this technology securely. At the end of the day, the ability to implement is all that matters. What good is a Ferrari sitting in the driveway if you don’t have a driver’s…
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