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Palo Alto Networks (PANW +5%) is trading nicely higher after reporting a solid beat for Q4 (Jul). The cybersecurity giant posted its largest EPS beat in the past three quarters. Revenue rose 15.8% yr/yr to $2.54 bln, which just a bit better than expected. We got our first look at FY26 guidance. PANW typically guides in-line, so it was great to see upside guidance for both Q1 (Oct) and FY26. Importantly, the guidance does not include the announced CyberArk deal.

• The company saw double-digit growth across all geographies, with the Americas growing 15%, EMEA up 19%, and JAPAC growing 13%. Demand for cybersecurity remains strong as customers seek PANW out to secure their cloud and AI transformation journeys. Adoption of GenAI is happening faster than any previous technology trend.
• Next-Generation Security ARR grew 32% yr/yr to $5.60 bln vs $5.52-5.57 bln prior guidance as PANW continues to see very healthy growth. PANW had strong contributions across its portfolio, particularly SASE, XSIAM and software firewalls. PANW noted that its software firewall offerings, each with very large TAMs, continue to gain momentum and reinforce its conviction in achieving $15 bln in NGS ARR by FY30 on a standalone basis.
• RPO was another bright spot after being a letdown in Q3. It grew 24% yr/yr to $15.8 bln vs $15.2-15.3 bln prior guidance. This above range number was good to see after coming in at the low end in Q3. This was PANW's highest RPO growth in seven quarters despite being at a significantly larger scale. PANW saw customers making significant commitments in Q4 as reflected by a large deal volume, net new platformizations and RPO growth.
• During Q4, many of the deals its teams had been working on during FY25 came to fruition. PANW described its Q4 bookings growth as turning the corner as it was the highest in 2.5 years. This growth is driven by deals across its platforms and also as a result of strong renewals and upsells. It is early days, but PANW sees the quality of revenue, ARR and retention being consistently higher across its platform customers.
• PANW also provided some color on the CyberArk deal. By combining CyberArk's leadership in identity security with PANW's industry-leading security platforms, PANW is confident it will be able to offer the most complete integrated security offering on the market. PANW has nearly 10x the number of core sellers, which means it will be able to expand CyberArk's presence into PANW's much larger 75,000 customer base. PANW is targeting adjusted FCF of 40+% plus for the combined company in FY28, the first full year post-integration.

So why is the stock higher? We think a big part is the robust guidance. PANW is known for being conservative with guidance, so to guide to the upside was unusual and shows confidence. Also, sentiment has been low since the CyberArk deal was announced on July 30, leading to a pullback in the stock. Another big positive was the robust NGS ARR and RPO numbers. And finally, we think management eased some concerns about the CyberArk deal. PANW said it was making the deal from a position of strength. Given the robust guidance, we think they have a good case to make. This guidance eases concern that the deal was being made to make up for a slowdown in growth.