PANW·Palo Alto Networks, Inc.

Palo Alto Networks shares experienced a significant drop, with the stock falling as much as 9% due to higher memory storage costs, which are expected to negatively impact profits. This decline, coupled with a cut in the EPS forecast, signals potential challenges to profitability, despite revenue projections remaining above Wall Street estimates. The company is also making significant acquisitions, including CyberArk, Chronosphere, and Koi, to build an AI-driven security platform, which has led to a lowered annual profit forecast due to integration costs. However, the company has lifted its FY2026 revenue outlook to $11.3B, driven by AI momentum, reflecting strong Q2 results and key acquisitions. While the company's latest quarterly results exceeded expectations, a "big catch" exists, suggesting a negative factor that traders should assess. Morgan Stanley views the post-earnings selloff as overlooking the bigger picture, maintaining a positive outlook on PANW and its long-term growth potential. Jefferies analysts also express a positive outlook for PANW, despite acknowledging near-term headwinds from acquisitions, indicating confidence in the company's long-term prospects. RBC suggests PANW will benefit from the cybersecurity consolidation trend and the rise of AI in security, which could drive future growth. The tech sector shows signs of recovery, but Palo Alto Networks' cautious outlook tempers the tech rebound, suggesting uneven growth ahead.